Property investment returns in the UK have been quite low the last few years, just hovering between 4 and 8%. As with similar services like sell my house fast Wakefield.
That all chock-a-block goes down the drain when you hear a prospective investor ask; “what does it return if I only bought one house and rented it out?”
Let’s take a look at some property investment returns to illustrate the point;
Property Investment returns
(these example are for illustrational purposes only and should not be taken as a guide or a recommendation)
Buy a house for £120,000 with a value of £160,000
Mortgage is £100,000 @ 6%
estimated rental return 6%
Savings: £20,000Total return 0%
On the surface this sounds very negative and indeed it does.
You’d expect the best returns to come from the biggest investment land deals or from buying strategically in areas where property is in short supply. These aren’t really the best ways to start property investment (though these can certainly be strategies that deliver – shall we say).
The best returns however, come from Property Investment Trusts or Property Funds (they differ slightly but for simplicity they are similar).
Property Investment Trusts
These invest in large scale developments (usually portfolios of apartments which are rented out or shared with other investors) that may enable the astute investor to get 30% returns on his investment in as little as 3 years.
Funds – differ slightly but the global ‘investment’ fund is managed by a group of investors (usually the top 8% with all the funds managed by the same manager/trustee). The i.e. the Fire profits Unit Engines manages one of these.
Individual Property – once again managed by a property manager (this could be a sole investor or a property fund) who chooses to constant returns and looks for high yield investments.
Overall property investment returns (i.e. total return on invested capital) can be 30%+ and can be reached on a wide variety of property types ranging from Main Street to Office Buildings.
At the ‘top end’ the returns are likely to be over 30% and in fact, in some asset classes, such as large retail or mega-brokerage properties, this has been achieved recently.
One of the problems with property as an investment has always been that its perceived volatility. I much prefer the asset class that is transparent ( Liberty recently launched a UK property fund based on the Far East property market and it attracted 12%!) and verifiable (Property Yorkshire just backed up to £7 SCH Hammer – strong growth and a great asset class).
The bottom line, investment property returns in the UK are far from over – for those who really do know what they are doing and are prepared to do their homework in a detailed way, incredible rewards are possible.
Bricks and Mortar Investments – now becoming fortuitous for Property Investors
Like most money makers, most Property Investors start out as smaller scale professionals – say a director of a plumbing company and work our you get more volume and more affordable access to finance. You could say that it may be down to lack of knowledge or just lack of time,regardless it costs you a lot of money and you may be taken on by some unsGIptic property fund managers.
The biggest thing to remember about Property Investment is that you should treat it as you would any other trade, understand it in great detail, and only invest in elective participation your self!
However, there are certain simple things that you can do to make your returns more tangible – like redrawing account statements into a spreadsheet or converting a traditional tenancy into a lease agreement. Changing the relationship between tenants and landlords can make a huge difference to the returns – you need to take account of taxes, fees, charges and find the commercial cement costs (costs related to letting tenants in). Even the most astute property investor can still make mistakes if they are not held to a professional standard of knowledge and negotiating skills. There is no point in buying a property, that needs £10k’s renovation, having no money left to refurbishment – it’s time to loose the roof!
So, Property Investment still has a great future – where else in the world can you buy a property, with a guaranteed yearly return in excess of 10% – surely a place where you can still live – yes – it’s even still possible to find a property investment that offers this.
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