According to the Times Rich List, 40% of millionaires created their wealth in property. The other 60% all invested in property to nurture and protect wealth created in other ways. In fact, more millionaires attain their wealth through property than any other type of investment.
Without investing on taking action, most of the population will die poor; advances in medical science mean we’re living longer, thus the Government is struggling to provide for the ageing population into retirement, and many pension schemes are no longer sufficient.
Without taking action, we’ll likely have to work well past ‘normal’ retirement age, and quite possibly suffer from a poorer standard of living in our later years. To protect from this, there are steps we can take, such as:
- Launching a new business
- Investing in the stock market or Commodities
- Invest in property
WHY PROPERTY?
We have found that investing in property is by far the safest, hands free and financially secure long term option. The UK is and will always be a popular place to live, and it’s no secret that there is a housing shortage which will continue to drive the cost of property upwards.
The primary reason that investing in property is so successful, is because we are able to invest using money that’s not our own. Typically, lending takes the form of a mortgage or other lending facility, allowing us to leverage the return on our cash invested.
For example, if we have £50,000 to invest we could buy £50,000 worth of stocks and shares. Performing well, they might achieve growth of, say 7% per year, after ten reaching a value of £98,358. If we said £100,000, that would be a 100% return on investment.
If you invested the same £50,000 with Property Smith Developments we could buy a property worth about £160,000, using a mortgage. Let’s assume the property market also increases by 7% per year (though it usually increases at a higher rate), after ten years the property has increased in value from £160,000 to £314,744, say £315,000. Our original investment of £50,000 is now worth more than £265,000. That is a return on our investment of over 500%!
Of course this doesn’t account for the mortgage payments during that time, but that’s covered by tenants renting the property, and there will almost certainly be a surplus income.
In many cases, and if invested correctly using one of the current many strategies we use as experts, this surplus can be significant and can generate passive income too enabling us to live the life we want.
EXAMPLE
Let’s take the example of a £100,000 single buy to let property, for which we look for a minimum yield of 8% – which equates to an annual rent of £8,000 (£667pcm).
Most BTL mortgages require a 30% deposit (£30,000), meaning we need to borrow £70,000, typically at an interest rate of 5% per year – thus £3,500pa, or £292pcm.
Monthly rental income (£667), less mortgage payment (£292), equals £375, less, say £75 of monthly costs, leaves a healthy net income of £300pcm per house – excluding the capital growth noted above.