Investing in Property

A lot of wealthy people have made their money through investing in property. But how have they done this and can anyone invest in property?

Historically buying property has been very lucrative because property generally goes up in value especially in the UK. There are always local factors that can affect property prices, whether that be political, economical or geographical. Then there are things like the global recession in 2008 which hit the property market around the world and some places took years to recover. Some are still recovering, but these are the exception to the general rule of property always increases in the long run.

If you are renting somewhere to live that money is going to someone else and you are essentially buying that property for your landlord. So it almost always pays to buy your own house and then benefit from any increase in value. If it goes down in value it doesn’t make much difference if you are living in it, it only matters when you come to sell.

If you are purchasing a property as an investment you not only gain from the increase in value (capital gains) when you sell but there is the additional benefit of rental income (cash flow) which is a great source of passive income. So if the mortgage on the property is £500 a month and you are renting it out for £800 a month, you make £300 profit (pre tax). You have some legal obligations if you are going to be a landlord. You can either rent the whole property or on a room by room basis. These are called House in Multiple Occupation (HMO) and you can get a far greater rental income but you will need a licence for large HMO’s. The way people become wealthy through property investing is by then using the money they make from one property to buy additional property and then keep repeating.

To purchase in the UK you need to save a deposit of at least 5% for a residential property and 20% for a buy to let property (as of December 2018). However the more money you can put into the deposit, the lower the interest rate on your mortgage. There are a number of ways you can save a deposit including purchasing with someone else, moving back in with parents, using the ways to make money on this site, or using a Help to Buy schemes in the UK.

If you can purchase a property that needs renovation or buy at below market value then you can increase the value in a short period of time by carrying out the work necessary and selling it on. This is known as flipping a property. It is a good way to make money quickly but you need to have enough funds to pay for the renovation costs. If you have enough cash you can purchase properties cheap at auction and then either rent it out or sell it on.

If none of these above options are available to you then there is the option of investing in property through peer 2 peer (P2P). This means you can lend money that is secured against a property or some funds offer you the ability to purchase a property with a group of individuals and take a percentage of the overall returns.

Recommended Reading

The Complete Guide to Property Investment by Rob Dix – How to survive & thrive in the new world of buy-to-let.

Buy Low Rent High by Samuel Leeds – How anyone can be financially free in the next 12 months by investing in property

Sites to use

Renting a property out – Government informational site about renting property out.

Help to Buy – Government funded schemes to help you purchase property.