You may be considering an investment property for a number of reasons. Firstly, as a way to secure unbeatable returns throughout some of the top locations across the UK, secondly, to diversify your holdings beyond stocks and shares and finally to earn a secure, passive income. While success stories of purchasing a home, renovating it and reselling it at a significantly larger price sound enticing for many, the real essence of property investment lies within renting developments bought by investors from the likes of rw-invest.com. Buying and selling properties can be incredibly lucrative, although over recent years the property landscape has witnessed very little house price appreciation which is why so many people are looking for opportunities within off-plan developments.
Using property instead of a pension
Properties and pensions are two entirely different entities that satisfy different people dependant on their individual needs and desired outcomes. Property can be a prosperous asset that is set to appreciate over time. However, you need to make sure it is the right investment for you by fully researching the market and all associated costs involved.
Before purchasing an investment property, you need to be sure you have enough disposable income as the initial purchase involves a higher outlay than that of a standard residential mortgage. On the other hand, pensions allow you to save for retirement over a more achievable period of steady monthly payments.
With that being said, property has proven to outperform pensions in terms of potential returns, with James Davis from letting agency stating that:
“if we assume property prices continue to increase over the next 20 years the way that they have in the past 20 years, a property of today’s average value of £235,000 will be worth £1m by 2038”.
Using this same example to illustrate pensions, he further stated that a pension during the same period would require at least a monthly contribution of £1,200 after an initial investment of £90,000 to reach the same value.
Using property for extra income
Using property as a means to earn an extra income means you can essentially become your own boss. It allows you to make your own decisions on the type of property you want to invest in, what type of tenant you wish to rent to, how much you will charge in rent and how you will manage the property. Property gives you as an investor, or landlord, the freedom to control your own income, with any money left over after paying expenses going in your back pocket.
When investing in property it is important to diversify your assets. Through diversifying it allows more scope and opportunity to maximise your returns and earn money from multiple sources, not to mention the potential to secure high capital appreciation values that can be gained from more than one investment type.
A diverse property portfolio is a great way to mitigate risk due to spreading assets across different locations or even offering a different style of property. From studio apartments, penthouse apartments, student and residential, all these properties have different target tenants, which will ultimately help to strengthen an existing property portfolio. Diversifying, however, involves higher initial costs as you need to be financially strong in order to purchase several different asset types, but if you choose to diversify, this will keep your assets safer and your monthly income higher.