7 Reasons why property is a good investment
Investing in property is one of the most successful and rewarding ways to make great returns on your capital, with investing becoming more popular than ever. Existing landlords are expanding their portfolios, whilst more and more people are turning to property to help achieve returns on their hard-earned money.
For over ten years, interest rates have been extremely low, which has been positive if you are looking to borrow money (leverage) for investments, such as property. However, for those who hold their savings in banks or building societies, it has been a time of poor returns. You only need to visit the Bank of England’s website to work out how this has impacted the value of your money (Warning…you may be disappointed). This has had a devastating impact on people’s financial planning, and especially the retirement pots of those looking to finish working. It has led to people having to work for longer and many have realised that their savings would not go as far as they had hoped. Many have taken a harder look at their investments as a result and are seeking different ways to achieve healthy returns on their hard-earned savings.
It is no coincidence that most financially astute people have property at the heart of their investment portfolios, and this is because it delivers healthy returns. There are many reasons why people don’t invest in property, such as not having the finances, perceived lack of time, lack of motivation, but for many it is because it can be quite daunting, complicated and there are many pitfalls waiting to catch out unaware investors. At Switch, our mission is to make property investing more accessible for people, and without the stress of doing it alone. There are a number of reasons why we think property is a fantastic investment, and we have captured a few of these reasons below.
- There will always be a demand for property. This is not a trend that may go out of fashion, people need shelter. It’s one of life’s necessities. There are fluctuations in people’s decisions to rent or buy property (for many reasons), but there will always been a demand for property.
- Property investing is flexible – with various strategies available to suit your personal goals. Unlike other investments, you can find a strategy for property investing that helps you to achieve your goals. You can become a landlord (Buy to Let), you can flip properties (Buy to Sell), you can rent properties to rent out (Rent to Rent), you can buy one house and rent to multiple people (Houses of Multiple Occupancy – HMO). Put simply, no matter whether you have short-term or long-term goals, property can help you achieve them.
- You can buy property with other people’s money! Name another investment where someone (e.g. a bank or a lender) will give you 75%+ of the money you need to invest out of their pocket? You can get a mortgage at 75-80% Loan To Value (LTV) ratio and as long as you pay their interest each month (1-2% approx.) you get 100% of the gains. If you went to your bank to ask for money to put into stocks and shares, what do you think the response would be? This is known as leverage, one of the most important aspects to understand when investing.
- Cash flow AND capital growth. One of our favourite things about property investing is that you can achieve monthly cash flow through rental income, and benefit from increasing property value (capital growth) over the long term. This is the equivalent of being paid and potentially getting a whopping great bonus too.
- A proven track record of going up in value over time. Ever since property prices have been tracked, they have gone up in value over the long term. Yes, there are short term dips, but this is where research, planning and a longer-term view comes in.
- Compound growth. (The average rate of growth experienced by an investment over a multi-year period). Einstein allegedly stated that “the most powerful force in the universe is compound interest.” When you buy and hold property for the long term (assuming you make good purchasing decisions) then you can benefit from compound growth from property. Visit Nationwide’s website to see how property has increased in value at an average of 7.7% per year since 1952! That is a proven track record in our books.
- You can see your investment. Unlike many investments where you may get a document to show for your capital, with property you can see, touch and feel your investment. There is something satisfying about seeing your investment and having the ability to make changes e.g. modernise it, extend it, invest in it.
These are just a few reasons why we think property is a good investment, but we will cover more reasons, and do a deep-dive into each of these reasons in future blog posts. Subscribe to our e-newsletter (scroll to the bottom of this page) and these will land directly in your email inbox once they are issued.
Property is not a get rich quick scheme, and there are no guarantees of success, as is the case with most investments. There are many risks and pitfalls to investing in property, so it is important that you seek good advice and support to ensure your investments perform over time to achieve your personal goals. This is where we come in – making your investment journey easy and successful.
Contact us for a free, no-obligation 20-minute consultation to see how we can help you get started in property investing – it could be just what you need to kick start your investment journey!