Why Property Investment?

People often ask us, “Why property investment?” We simply answer that we believe property investment offers the best long-term return on our investment.

According to the Sunday Times Rich List 2018 23 per cent of the 100 richest people made their money through property. Many more use property as a way of growing and keeping their wealth.

Investing so much money in property seems risky to most people. But really, in the grand scheme of things it isn’t that risky. If you are thinking long-term, you can usually ride through the market’s changes. See more about this in an earlier blog post.

Other Options

There are other options of course.

You could run your own businesses. Doing what you love and getting paid for it sounds idyllic but it is very hard work. We have tried it and being a landlord that uses a letting agent is far less stressful and gives us far more free time.

You could put the money in a savings account. However, interest rates are so low at the moment that you are unlikely to see any significant return on your money.

Careful investment in the stock market, especially over time, may see you make a significant return on your investment but even that will not be as large as the return you will see from investing in property.

For example, if you had £25,000 to invest, you could purchase £25,000 worth of shares. If your shares performed averagely and you reinvested your dividends you could double your money to £50,000 in around 10 years.

However, if you invested that same £25,000 in property you could make a lot more. For example, if you put £20,000 down as a 25 per cent deposit on a property that costs £80,000. You could then raise another £60,000 or 75 per cent with a buy-to-let mortgage. You could use the additional £5,000 for purchase costs and minor improvements. 

Then if house prices went up by 5 per cent each year, in ten years time this house would be worth more than £130,000. That is an impressive increase in equity of more than £50,000 from the initial investment of £25,000. Of course there are more factors to consider depending on your investment strategy. And your return will be larger when you take account of any money earned through rental income. But from this example you can get an idea of the returns possible from property investment.

Using mortgages to help you purchase investment properties is called gearing. By using other people’s money (i.e. a mortgage) you are able to significantly increase your own investment returns.