Property is a hallmark trait for financial stability. It not only provides shelter, but a source of income. These days, there are never too many sources of income.
Why invest in property? This is an excellent question one should ask when looking for a solid return on investment. The main reason people consider property investment is for an alternative source of retirement income. Buying a home is a stable method of investment portfolio diversification. In fact, there are three main reasons why Britons are investing in property today.
The first is stability. Because of the tumultuous markets, investors are looking at safer commodities. One of those commodities is estate. Estate management can provide a supplemental income for busy professionals. It also provides increased cash for thriving families competing with inflation. Finally, it gives greater flexibility for those planning for their retirement. It may even help a couple retire early if they wish.
This stability can be found from an estate’s capital growth. In short, the long-term investment one gains from holding property. Historically, home prices have doubled, on average, every seven to nine years. This means a landowner is able to profit monthly from their investment, but more importantly gain a greater share of equity from its property value over a period of time.
The second reason one would invest in property is for a greater return on investment. Consider this example: An investor buys a home valued at £125,000 at a bargain for £100,000. The same investor obtains a mortgage of £75,000 to buy the property, using a savings of £25,000 as a down payment. This same investor is able to rent the property for £625 per month and net a profit after mortgage and expenses of £150 per month, or £1,800 a year. Whilst that may not seem like much, that is a six percent return on investment. That same investor would be unable to realize that type of return on any short-term investment available in today’s cautious market.
Again, the big picture is to keep in mind is that this is not a short-term investment, but an investment that is going to pay off with the valuation of the estate, as specified in the first reason to invest in property. So, in the example, after ten years of homeownership, the investor is ready to sell the property for £250,000, making ten times his initial investment from his savings.
Lastly, investment in property requires little effort and work. Whilst all properties require upkeep and management, the key is holding a property that is easy to rent. The most important step is buying a property in the right location. Choose a city and neighborhood that will grow. Properties that are close to government services, transit stations and commercial shops will motivate buyers to buy more quickly. The more amenities a property location has, the greater its return on investment in the long-term, and the easier it is to liquidate.
Hence, every property investor should want to diversity their financial portfolio with viable estate properties for retirement and for supplemental income. Buying property for investment is just one of those methods to realizing one’s financial goals.