Many people who consider investing in property in the UK find themselves unsure as to whether or not to actually go ahead with their prospective investment. Deciding to make an investment in a property, development or other building is a serious decision to make, but how do you go about it?
There are many benefits to investing in the property industry. This includes the possibilities of seeing large and continuous returns on investment as well as the reasonable stability of the market in comparison to other types of investments such as stocks and shares. There are many estate agents in London too, who are able to assist with property purchases, lettings and sales, making the process that extra bit easier.
The Least Risk Averse Option
Generally speaking, property investment is considered as one of the least volatile investment options available. According to a Times Rich list, at least 40% that featured had created their wealth through buying and investing in property. Moreover, more millionaires create their wealth through investing in the property sector.
This is in part because property investments which provide strong cash flow has the ability to help get investors through periods of instability or uncertainty that other types of investments can provide at times, for example during a financial crisis or a recession. This is in no small part due to people always looking for somewhere to live; even in periods of financial difficulty, all the meantime needing to pay for rent or buy a property.
Good Capital Growth
Capital growth when it comes to property investment is not necessarily as good as it was prior to the 2007 – 08 credit crunch. Whereas in the past, investors could expect to see as much as a staggering 20/30% increase in profits annually growth is nowadays considerably lower, with an average rate of between 3 and 5% for a property that is sold on.
The Best Performing Asset Class
A report in 2015 revealed that buy-to-let property is an assets class that performs better compared to many other potential investment options such as government bonds, stocks and shares, commercial property and cash ISAs. For example, since 1996, statistics shows that buy to let investors have received returns of up to 1,400%.
It is however worthwhile to seek out a local estate agency to help with the property acquisition or letting. For example, if you want to purchase a buy-to-let property in North London, you may look for estate agents in Edgware, Hendon or Hampstead.
One of the best things about investing in the property sector is the freedom and flexibility that you have when it comes to deciding how you buy, where you buy as well as when you decide to sell. In summary, you have much greater control than you would do when it comes to other types of investments.
Generating Extra Income Through Property
If you decide to invest in a property as a buy-to-let investment; renting out the property to tenants, you will gain additional income without having to do terribly much for it, unless there are difficulties with the tenants or the house itself. In addition, renting the property out also means that the tenants will in effect be paying the mortgage on your behalf.
You may however require a degree of property finance in the form of a mortgage or otherwise to cover at least some of the initial costs associated with a property purchase.
Offsetting Costs Against Tax
You can claim for renovation costs if you have a buy-to-let property each tax year when you fill out a Self-Assessment Tax return for HMRC.
This also works for holiday lets, this is because they are considered not as an investment but a trade. This means that you will be able to deduct mortgage interest cost from any income that you make. You will also have available to you capital allowance that tend to be more generous than the allowance that you have for wear and tear if you are less keen on the idea of typical buy to let property investments.
Good for Retirement
If you are considering the options that you have available for retirement, investing in a property could prove an attractive option, particularly in terms of the profit you could generate.
According to a recent study by The Telegraph, the way property prices currently are, a person investing in a property today worth an average of £235,000 will be worth roughly £1m by 2038.
However, over the same period of time with a pension investment, you would need to make fairly significant monthly contributions. As a result, this means that if you buy-to-let a property with the intention of seeing it as a long-term investment and assuming you manage your finances carefully and sensibly, investing in residential property can prove to be a great investment for when you retire.
Nevertheless, you will need to make sure that you have enough initial outlay to be able to invest (as well as taking into consideration the cost of things such as management fees as well as potential refurbishments and building costs) which is not required with pension payments.