8 Reasons Why you should Invest in Property
8 Reasons Why you should Invest in Property
It’s been proven by many of the worlds wealthy, that investing in property is a fantastic way to create income and grow your net worth. There is only so much land and everyone needs a house to live in so demand (should) always increase. It’s not a mythical piece of paper but bricks and mortar so it is well respected in investment circles.
A lot of beginners however, are still uncertain and or uneducated and so would rather put their money in safe investments with lower returns where risk aversion is the name of the game. If, however, you are appropriately educated then the risk levels decrease. For those that are not that aware, I will cover off the basics in property investing and elaborate over the next few months in this column.
1. Opportunity to add value
Property is an investment that you can control and force appreciation or add value as a strategy to make the investment worth more. As it is your property, you have the freedom (within reason) to do what you want with it and it can be done in a number of ways. If it is in bad condition buying it at a lower price then refurbishing it will improve its market value. Or go a few steps further and turn it into something better like flats if the space allows. Other options are Houses of multiple occupation (HMO’s) as they generate more income than standard single occupant homes, or why not utilise the trend towards Airbnb, a great bed and breakfast, an apartment complex or coworking space. The possibilities are endless and if you do your numbers right the returns are fantastic – far better than leaving money in the bank.
2. Capital growth
Historically and in my experience, property has always increased in value. Sure, there have been downturns but pretty much every market has seen a steady increase in value over the long term. Some markets see prices double every 7-10 years but this is not guaranteed and personally I see this as a bonus and not the primary reason for investing. Ideally you should be forcing an increase in value or locking in a return through renting it out. Saying that though, if you hang onto it in the long run the increase in capital values should always outstrip returns in a bank as people will always need property as a place to live, a good location for their business, for parking and for leisure. There will always be a demand so it will come down to your preferred strategy and how you manage and market your investments.
3. Leverage / Gearing
Leverage/Gearing (in property) is multiplying the use of an amount of money through mortgages. Let’s say an investor has £100,000 to invest on their portfolio. They can either get one property for £100,000 or through gearing with a 25% deposit on mortgage 4 properties for £100,000 each! Compared to buying 1 property, the returns on 4 properties is obviously higher.
4. Interest rates at an all-time low
Interest rates are at one of its lowest points nowadays. This makes the cost of entering the market with a mortgage a lot less than in previous years. The logical risk averse question is ‘What if they go up?’ The simple answer is to ask your broker for a mortgage rate that’s locked in for the long-term. You may pay slightly more but that way you are protected in case they do go up.
5. Regular income through Rental
One of the most popular strategies with properties is to hold them then rent them out for a monthly income. Be aware that the level of return is dependent on area you buy in plus factors such as mortgage interest, voids, plus costs, such as agents and breakages.
6. Leverage other people’s skills
There are many aspects to handling and investing in property and even if you don’t have the skills or time you can hire or outsource most of the effort. From finding a property, managing a refurbishment and eventual letting of a property, hire a professional. It’ll save you time and money in the long run.
7. A Legacy You Can Give to Your Family
A good property portfolio should always give you financial security. You can sleep safe, knowing that if something happens to you, that your family will have a roof over their heads and dependant on your portfolio size their future will be financially secure as long as you give them enough education about the legacy that you want to leave them.
8. Tax efficiencies
I strongly recommend that you find a knowledgeable, property tax specialist to advise you in all matters. Tax rules change fast and often and the skills of a tax accountant are extremely valuable. When properly utilised, there are a lot of efficiencies you can make and maximise your returns.
In summary – You too can do it
It takes heart and soul to be a good property investor. As long as you put your mind to it, have a good strategy, educate yourself appropriately, have a healthy list of investors, and a good eye for location, you will succeed.
As everything is in life, you reap the fruits of your labour. Start investing in property today and reap long lasting rewards.