Of the many ways available to invest your surplus income, property is one of the most popular. Despite the recession, the housing crisis and the aftershocks these have caused, it has firmly stood its ground as a key area for investment alongside cash, bonds and shares. At the moment, the wider availability of buy-to-let mortgages, changes in stamp duty and the pension reform are all factors encouraging a wider pool of people than ever before to take the plunge and invest in property. But why is it so enduringly popular?
Property is easy to understand
Many people prefer the stability of investing in bricks and mortar. There’s a reassuring solidity about a building, about putting your money into something you can physically see. Even the terminology is more familiar. Most people have either gone through the process of buying a property themselves or been around others who have done so. All you need to do is accumulate enough money to pay a deposit and get your sums right so you know you can make the monthly payments. Thereafter, in terms of managing your investment, there are plenty of expert brokers, letting agents and asset management property specialists ready, willing and able to look after your property on your behalf from thereon in, unless you actively want to get involved.
There will always be a demand for it
People always need housing. That’s never been truer than right now, when UK Government figures estimate that there will be 232,000 more households each year, at least up until 2033. Many thousands fewer houses than we need are being built annually; and it is still fairly hard for first-time buyers to get on the property ladder, so it stands to reason that you should theoretically be able to fill your property the majority of the time. This is very dependent on your undertaking careful research into your tenant target market before you buy, of course. Young, professional couples will be looking for one to two bedroom flats with great transport links, restaurants and other leisure facilities close by, for example. A house close to open spaces, good schools and other child-friendly amenities can be marketed effectively to those with young families.
Your tenants will pay for your mortgage
Get your maths and your research right before you buy and it is almost certain that a stable and ongoing supply of tenants will pay off your mortgage through monthly rents while at the end of it, when you are ready to retire, your investment largely remains intact at least – and hopefully even increases in value. Many investors also generate an ongoing income in addition.
You can add value to it
Unlike bonds and shares, which are at the mercy of the market, if you physically own a buy-to-let or a flat, there is nearly always some home improvement you can invest in that will increase the asking price of the property in future. Whether you are looking at renting or selling over the longer term, there is a wealth of things you can do to add value, from simply improving the kerb appeal to a large-scale refurbishment that adds an extra bathroom or an extension for example, if you have the money available.
It’s for the long term
Property investment is not about making a buck. Most people who grow rich from portfolios of buy-to-let property tend to be thinking longer-term – say 15 to 20 years into the future. So while it’s not something you can back off from quickly or without cost if the worst happens and you need to liquidise your assets, it also provides an effective method of saving for your retirement – which you may well be able to do sooner than the rest of the population, if you do your homework effectively!