Property Investment is the preferred choice of the astute investor and has made many people wealthy.
There are other investments you can choose from, for example, stocks and shares, pensions, time shares, horse racing. However, property investment is based on solid fundamentals driven by market forces and human nature. It’s important to understand why property performs so well compared to other investments and produces the best returns.
The performance of land and property investment over time is undeniable, the figures speak for themselves.
This graph illustrates how property prices in the UK have risen steadily over the last 40 years.
Property prices are influenced by supply and demand and human nature. Shelter is a basic human need and this will never change whether we own or rent. We live on one of the most densely populated islands on the planet and as with anything else, the scarcer the commodity, the more valuable it becomes.
The population continues to increase due to immigration, rising birth rates and people living longer than before. We also have different living habits compared to 50 years ago. An increase in divorces rates and people marrying later in life increases housing demand. This all adds upward pressures on house prices.
The government identified this problem in 2004 in the Barker report. In order to deal with it, it was proposed that an extra 100,000 homes to be built on top of normal building levels. However that target has never been achieved. This created a housing shortage which has further been affected by the credit crunch. New house building has almost halted and this will result in a positive impact on house prices.
So why is property investment so effective?
As we have already seen, property prices have steadily increased in the past and will continue to perform well in the medium to long term. Capital Growth is the real way to create wealth through property investment although your strategy will depend upon your circumstances.
“Rule of ten – historically property has doubled in value on average every 7-9 years. We like to be conservative when planning so we use a 10 year assumption.”
You are in Control
Rescue my Pension consultants will help you to successfully manage your financial future. Pension companies take the control out of your hands and pay themselves handsomely for the privilege. We do not charge a performance fee and you take all the gains. Ultimately you are taking your financial future out of the hands of someone you will probably never meet and meaning you regain control of your own investments.
Leverage is using other people’s money (OPM) to maximise your returns. The use of leverage is one of the most beneficial tools available to a property investor. Property investors aim to use as little deposit as possible to maximise their returns. Let’s see why leverage is so important to a property investor.
In this example a house costs £100,000. We could buy it for cash or use a 75% mortgage meaning we only invest £25,000 of our own money.
If the property market rises 10%, our property would be now worth £110,000. On the cash purchase, our return on invest (ROI) would be 10%. But if we had invested only £25,000 by using a mortgage then our ROI is 40%. Using leverage has given us a four times greater return on our investment.
Interest rates have been low for the past 20 years, demand for rental properties is rising, and subsequently rental returns from your property investment can be very attractive. This means in the short term you are being paid for your property investment, so not only do you cash flow your mortgage and costs, you also make a profit. Although true wealth can not be sustained through rentals alone, through certain points of the market cycle the returns can be attractive.
Why you should always buy below market value
Buying below market value property is imperative if you want to build a successful property portfolio. Unlike other asset classes you can buy property at a discount meaning you strengthen your portfolio from day one. Buying below market value however is easier said than done. This is where the experience of Rescue my Pension counts as we have an experienced team sourcing the best property investment deals for you.
Why you need a strategy in order to succeed.
You can clearly see the strengths of property investment. The important thing is to make sure you don’t squander your money by purchasing property that may lose you money or not make as much as you should. That’s why before moving forward you should talk to a Rescue my Pension Asset Manager to plan out the most effective property investment strategy for you.
If you take advantage of our below market value property experience and work with an Asset manger your financial future could be exceptional.
More questions? Request a call back from a member of team and we’ll talk you through things.