More and more people are beginning to understand that property investment, when approached in the correct manner, can offer short, medium and longer-term returns that far exceed any other form of investment vehicle or asset class. Pensions as a means of retirement planning have come under much scrutiny over recent years due to their poor returns and high level fees which has meant that even those who have invested over the most recent 20 years have on many occasions, received back less than they have invested over the term. Compared to property investment over the decades, there is of course no comparison. Stocks and shares share the ability to dwindle in terms of value with no tangible asset owned but even when such a vehicle performs well, there is still no comparison to property investment. It is no accident that many investors are now cashing in their stock portfolios and pension pots in favour of a more reliable asset class: property investment.
Let us have a look at a standard property purchase as compared to stocks and shares. We will use a very standard property investment which does not include the investor benefits which most of our products provide; below market value immediate equity; higher than average returns, excellent overseas finance where mortgage can be fixed from 2% for 25 years. Please contact us to discuss product specifics in the current market. Below is a comparison using a standard buy to let investment property:
Simple Example Illustrating Leverage Investment:
Let’s use an example of £50,000 when compared against stock investments.
Shares that perform well may return around 7% per annum though they often perform worse than this. A £50,000 investment after 10 years of excellent performance would see their value rise to around £100,000 creating a 100% return on the cash invested.
One of the primary benefits of property investment as opposed to other forms of investment is leverage. Leverage is the process of using one’s own capital of £50,000 to gain an asset of £200,000. This is achieved through mortgage finance and there has never been a more attractive time to take advantage with mortgage rates low in many key world locations.
A well located property investment of £200,000 history shows us, would at least double in value during the same 10 year period seen above, taking the property value to £400,000. If we use the rental income to provide income and cover mortgage interest, the mortgage would remain at £150,000 but our equity would grow to £250,000 or a return of 0ver 400% on the initial investment.
This is a standard and basic illustration of leverage. The fact is that you also make money when you purchase the property so it is important to select the right property ‘product’. The returns enjoyed can then be well in excess of those outlined above.
There’s more; in the current climate many of our products offer long-term rental guarantees by professional management companies and due to the low mortgage rates in many world locations, these rental incomes cover not only the interest on the leverage (mortgage) but also begin paying down that leverage from day one, creating an even better scenario for the educated investor where returns can be easily in excess of 500% of the same period.
For the cash investor and portfolio investor, we currently have opportunities which can offer 15% -20% NET returns on cash invested where portfolios are ready tenanted and fully managed creating similarly attractive returns which when coupled with expected capital growth forecasts create an equally appealing scenario and one which other investment vehicles are unlikely to match.
Talk to us today to discuss your investment goals and let us show you the smarter way to purchase property in the very best locations world-wide.