Why Invest in Property?
Property stacks up well against traditional forms of investment. Savings accounts, although secure provide very little growth, stocks and shares can be volatile and require daily management and expert advice to do well. The recent history of endowment mortgages shows us that returns on insurance are not as predictable as they once were and how to provide a decent pension is an issue that appears regularly in the press. Property is a secure investment with both capital growth and a potential income if we look at it as a medium to long term investment.
Savings accounts
These are traditionally very safe ways of investing money, however, they offer only low interest rates and as a consequence are not really a viable way to achieve wealth.
Stock market
Whilst the average return on shares continues to go up, it can be something of a roller coaster ride. The average is made up of winners and losers and even the experts do not always predict the best shares to buy.
Insurance
There has been much publicity about poor with-profits returns in recent times. Many people who depended on endowment mortgages to buy their homes have found that they didn’t get enough back to repay their mortgage and have had to add more of their own funds to make up the price of their house.
Pensions
Many people are looking long and hard at how they will make adequate provision for their later years. Reducing annuity rates, living longer in a more expensive world and lack of provision from the State, all make this an issue and people are turning to alternate investment strategies to satisfy this need.
Property
It is not only the security of bricks and mortar that make property a wise choice as an investment, but also its ability to provide both capital growth as well as an income stream that has made it the only consistent low risk performer over the last 25 years. Ward & Co brings you the discounted properties that will make your portfolio work for you.
Having looked at the historical evidence, it would only be right to project into the future and see how your financial situation can be seriously affected by the choice between savings and investment. We know that some of our members, who had been saving money to use as a deposit on an investment property, have been able to talk to our investment finance partners and release equity from other property they own; sometimes this has been from other investment properties or sometimes their home.
By rearranging their finances, lengthening the mortgage term or re-mortgaging at a better rate, some of these members have been able to raise the necessary sum to use as a deposit for a Buy to Let (BTL) property. And in some cases it has not increased their total outgoings.
What surprised many of them was that for as little as an additional £100 per month in mortgage payments, they were able to raise £24,000 to use as a deposit on their investment property. On the basis of an 85% BTL mortgage they could invest in £160,000 worth of property. To show this more graphically, we compared this investment strategy with saving a similar amount per month and receiving compound interest on that saving. The outcome is a staggering 635% of difference between the two results.
An example of the difference between savings and property
Saving
£100 per month in a savings scheme
8 years later @ 5% interest = £12,032
Profit = £12,032
Property investment
£100 per month mortgage payment
£160,000 worth of BTL property
8 years later @ 5% growth = £236,393 (assumes rental income covers mortgage repayments and costs)
Repay mortgages of £160,000
Profit = £76,393
A difference of 635%
