Why Invest In Property
So why should you invest in property in 2011? It may seem obvious to some of us, but not to all!
With some of the doom and gloom in the media it is easy for people to make excuses and sit on their hands, get 1% interest at the bank ie less than current inflation and cross their fingers that any pension they have will give a return in 20 or 30 years...!
I hear excuses for not investing, such as:
What happens if prices drop
My hairdresser/taxi driver says prices are still too high
I can't get finance
I read in the newspaper that everyone’s going to lose their job
There's meant to be an oversupply of rental properties
Etc etc
Let's look at some key facts:
Rents continue to rise throughout the UK.
The population continues to grow by around 400,000 per annum.
Supply of new properties is way below the targets set!
Property investing can be pretty straightforward if you get your numbers clear and correct from day one.
Let's say you believe prices will go up over the next 10 years, and have a 10 year plan:
You can buy a house now for £100k that is currently worth £125k through strong negotiating or a sourcer
You invest £25k in this and get a 75% mortgage
So on completion you have invested £25k and have £50k of equity
Your mortgage on £75k of borrowing is £3750 per annum ie 5% interest only
Your net rent ie after management and insurance is £5000 per annum
So your passive income is £1250 per annum
In 10 years this property has gone up in value to £200k
So your £25k investment in 2011 is now worth 125k
You still have £75k of borrowing as have had an interest only mortgage
So your passive income has been good for 10 years
Your net worth has gone up by 500% ie £25k is now worth 5 times as much
Let's compare keeping this £25k in the bank, perhaps because your hairdresser said prices are falling, and getting an average of 3% interest per annum...
In 10 years your £25k would be worth about £45k......and no doubt your hairdresser will still be cutting hair and your taxi driver will still be driving taxis and your journalist will still be writing for the same paper if the paper is still in existence....
A pretty powerful difference?
So watch who you take advice from, and make sure you hit your 10 year goals!
If I can buy a house for about the same cost as would be to build it ie 50-100k and get a strong rental yield I don't worry too much on the value in 3-9 months time but I can make a pretty good judgement on where the values will be in 10 years time!
So get your financial future sorted today, and look forward to 10 years time...!
Article Courtesy of Alan Forsyth @ Property Investment Deals
