What returns can I expect if I invest in property?
I once read that over 90% of millionaires have achieved financial success through investing in property. Whether this fact is 100% accurate or not is irrelevant, the point is that property investing, if executed effectively, is one of the best options to put you on the path to financial security.
To be clear, this blog gives no promises of all being millionaires in 12 months’ time. This is about making the right financial decisions, doing the right things consistently, and based on sound market research and execution. Personally, we see property as a long-term investment, and whilst people make ‘quick’ money in property on a daily basis, we view property as providing long-term financial growth and increased security, as we have covered in prior blog posts.
Our strategy with property is to build a strong, healthy portfolio of properties that are paying good monthly yields. Over the long-term, we are confident of strong capital growth based on the track record within the UK since 1952 (source: Nationwide). Our portfolio has a mixture of high-yield properties, which have a slightly lower potential for capital growth, and others that still provide a good monthly yield, but have increased our initial investment significantly (100% +) over a relatively short period of time (approx. 3-5 years) through capital growth alone. Check out some of our Case Studies to find out more.
Capital growth allows us to re-finance the property and use the released capital to purchase another property with literally none of our original capital, so using 100% profit. This strategy is only successful in areas which are more likely to gain capital growth, although there are no guarantees. Whilst we hope that we are investing in an area likely to benefit from capital growth this is treated as a ‘bonus’ and the property still has to provide a healthy return on our investment through monthly returns.
Our advice is that you should not accept a property with a yield of less than 5% and we aim to achieve double that on our investment properties. That being said, if you have done your research and the prospect of capital growth is high (although not guaranteed), a 5% monthly return on your investment could be attractive. The properties that tend to get 12+% return are usually properties where it is less likely to achieve significant capital growth in our opinion, although this is very much location and market dependant.
So, it all depends on your goals, how hands on you want to be, how much capital you have to invest, and your risk comfort level. We would go as far to say that if you are viewing property as a long-term investment, then the returns over that period are almost infinite (within reason). If you keep doing the right things, reinvesting your profits and building a healthy property portfolio, you can grow your monthly passive income, increase your potential for capital growth and benefit from what Einstein called the eighth wonder of the world – ‘compound interest’. All this in addition to the ability to finance 75% of your investment with someone else’s money (mortgage lender) – what’s not to like?!? There is no other investment like it in our opinion, and property investing remains one of the best vehicles for achieving financial success if your strategy is executed well. It brings unique opportunities that are not available to other investments, but it is important to build your knowledge, develop your strategy, do your market research, buy well and repeat.
If you would like to find out more about how to start growing your property portfolio today, then contact us for a free, no obligation 20-minute consultation to see whether we can help you on your journey to achieving your financial and lifestyle goals.