Investing in buy-to-let property is different from investing in the stock market or depositing your hard-earned cash in the building society. When you invest your money in the building society, this is considered by many as the ‘safe option’, but the returns you can achieve are woefully low (the best 2-year bond rate from Nationwide is a miserly 0.75% pa!).
Another investment is the stock market, which can give good returns, but unless you are on the phone every day to your stockbroker, most people invest in stock market funds making the investment quite hands off and limiting personal involvement or control.
However, with buy-to-let the investment can be more hands on. One of the things many landlords like is the tactile nature of property; the fact that you can touch the bricks and mortar. It is for this reason why many landlords are attracted in the first place. They are making their own decisions rather than entrusting them to city whizz kids.
I like to consider property investment as a long-term game. When you invest in the property market, you can earn from your investment in 2 ways. When a property increases in value over time, it is known as 'capital growth'. Capital growth, also known as capital appreciation, has been strong in recent times in Oakham, but the value of property does go up as well as down just like shares do but the initial purchase price rarely decreases. ' Rental income' is what the tenant pays you - hopefully this will also grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your yield, or annual return.
So, over the last 5 years, an average Oakham property has risen by £74,400 (equivalent to £40.77 a day), taking it to a current average value of £346,000. Typically, yields range from 4.5%-5% a year and can reach double digit percentages (although to achieve those sorts of returns, the risks are higher).
However, something I haven’t spoken of before is the more specialist area of ‘flipping’ property to make money, which is the process of buying a property, carrying out some minor cosmetics and re-selling it quickly.
I have seen several investors recently who have made decent returns from this strategy.
For example …
One Oakham investor paid £85,000 for a 2 bed terrace on 'Briggins Walk, Langham' in April 2015. It appears some cosmetic work was done to the property and it was resold a few months ago (October 2016) for £128,000 … 50.59% return before costs (or compound annual return equivalent of 31.48% AER).
This demonstrates how the property market has not only provided very strong returns for the average investor over the last 5 years but how it has permitted a group of motivated buy-to-let landlords and investors to become particularly wealthy.
As my article mentioned a few weeks ago, more and more people may be giving up on owning their own home and are instead accepting long term renting whilst buy-to-let lending continues to grow from strength to strength.
If you would like a FREE VALUATION of your own home or property investment for either sales or rental purposes, please get in touch. We are here to help you.
David Crooke
david@upp-property.co.uk
Owner and managing director
Understanding People & Property
SALES & LETTING AGENTS
Stamford: 01780 484 554 Rutland: 01572 725 825
No comments:
Post a Comment