Why invest in Residential Property? A personal opinion from Director Chris Kelly as to why property investment is a solid bet
1. Capital Appreciation
When I bought my first house on Gawber Road in Barnsley, South Yorkshire for £90,000 in summer 2005 with nothing more than an array of ‘maxed out’ credit cards and a 90% LTV mortgage I was nervous to say the very least. Until the day came I stumbled across a piece of paper which was signed in 1965 by the lady I was buying the property from which said staggering £600 for the property. At that point my anxiety passed due to the fact that the kitchen I was about to fit cost more than double that amount.
Once finishing, I had no hesitation in refinancing and moving onto the next house, until I’d built a portfolio of properties worth £1.2m before I left university. The point of this story is that if you are willing to think long term, saving some totally unpredictable disaster you should not ever lose in property anywhere in the world as ultimately prices appreciate with time.
It was the oil tycoon and at the time richest man in the world J.Paul Getty which once said;
‘The seasoned investor does not allow temporary fluctuations in market prices to influence his decisions to any great extent. Usually he waits for prices to wait to return to approximately the levels at which he wants to buy or sell. He’s not impatient, nor in a great hurry, for he is an investor – not a gambler or speculator. History shows that the overall trend of prices – like the overall trend of living costs, wages and almost everything else – is up. Naturally there have been some dips, slumps, recessions and even depressions, but these are followed by recoveries which carry most prices to new highs. Concentrate on the overall trends and don’t worry about the tremors in between’
2. Rental Yield
A key area of any property investment strategy is also the amount of rent that returned to the investor annually against the initial investment sum, simply put, yield is the rental return on your investment expressed as a percentage of what you put in. For example, if you invest £100,000 and you receive £5,000 income per year your yield is 5%. Naturally many investors simply look at yield and yield alone because they want the most rental return possible on a monthly rental basis for their initial investment. 4sale2U generally can find yields of around 10% in the UK and 20% in the USA.