The coronavirus outbreak is having a far-reaching effect on our lives as well as the property market in the UK. The situation before us in 2022 is totally unpredictable, and every single one of us will continue to be affected.
Markets do evolve and continue, even under immense stress – the UK housing market is no different. The housing market is like a river, finding ways to keep flowing through whatever’s in its way. In a world with so many unknowns, assets have tangible value.
My view after 21 years in property investment? Whatever short-term disruptions and changes the property market sees, we should look to the future where the fundamental desire for a home remains. In the UK we are still building less than 100,000 per year than what is needed.
Why Invest in Property?
The benefits of investing in property are numerous. With well-chosen assets, investors can enjoy predictable cash flow, potentially excellent returns, tax advantages, and diversification—and it’s possible to leverage real estate to build wealth.
Some Key Takeaways
- Property investors can potentially make money through rental income, appreciation, and profits generated by business activities that depend on the property.
- The benefits of investing in property include passive income, stable cash flow, tax advantages, diversification, and leverage.
- Real estate investment trusts (REITs) offer a way to invest in real estate without having to own, operate, or finance properties.
5 Reasons To Consider Investing In Property
1. Leverage
Depending on your strategy, investing in property means that you can secure leverage, a loan or mortgage in order to maximise your own investment.
2. Income
The return you receive from property investment is split into capital appreciation and cash flow.
Capital appreciation is the increase in value of the property itself and cash flow is the profit you make each month from rent. If you are investing wisely, as well as improving the value of the property over time, you should also receive a positive monthly income. Even taking into account void periods, this income is often steadier than other forms of investment.
3. Instant gain
If you purchase property at below the market value you can, in many cases, instantly add equity to your investment simply by buying cheap.
4. Increasing Value
Unlike other investment vehicles, by investing money into your property you can increase the value of the investment significantly. If you’re creative and spend wisely you could add considerably more than you spend.
5. Inflation
Investing in property is a way of hedging against inflation. With high inflation, your rental income and property value would increase significantly. As the cost of living goes up, so will your cash flow.
Sellers And Buyers
People are always trying to buy property.
Some sellers ‘must’ sell as soon as possible and it is these property owners who drive sales (and most of the market) forward in times of uncertainty and change. The reality is, in many situations, their need to sell would trump any short-term financial concern, with pace and certainty, as the big priorities for them.
In essence, the sellers are all asking themselves the same main questions; 1)How long will a sale take? 2) What kind of price is possible? 3) What kind of person is going to be buying?
The answers to all these questions are, of course, somewhat uncertain and differ at times, but 1st time buyers, house-buying companies and cash-buying investors will still be very operational in 2022.
Choosing The Best Location
Choosing the best location is the best place to start a profitable investment in property and there are a range of different methods to determine the ‘right’ place.
London has traditionally been a sure bet for many investors. House prices have risen exponentially over the last few decades, although they have slowed down in recent years.
Currently, more developers and investors, both in the United Kingdom and abroad, prefer to look at more peripheral and geographical areas of the United Kingdom. Much of this approach is focused on consistent statistics that support both higher available yields and stronger house price gains in some areas away from the capital. Though London is still a very popular investment spot, several other locations are seeing far higher returns.
Property Investment Is A Long-Term Game
Investing in commercial or residential property for rental purposes is not a way to get rich quickly. Investing in Buy to Let may have advantages over leaving money in your bank account or any other investment options, but it is not a path to fast wealth. With rental income and value appreciation, both of them together are certainly an enticing choice if you are interested in the Buy to Let market.
Generally, some people think becoming a landlord is like going for a walk in the park, buy a property and its plain sailing from there on out.
Being a landlord takes commitment, which often creates stress due to issues such as rent arrears, property damage, or the process of eviction. Your investment at some point would include maintenance, refurbishment, and you will still have to handle the tenancy. The job required to maintain your assets will be continuous, which is time-consuming, and will not provide you with a passive income stream.
A property owner with one or a thousand properties will have to invest more time and more money into managing their investment. It’s time-efficient if your properties are near to where you live.
Doing research on the tax consequences and how they could influence you could be extremely advantageous.
Boom And Busts
Boom and bust is a cycle, nothing new. The wise will make both boom and bust money. Is it worth being a landlord in these unpredictable times and where will our economy be by the end of 2022? Seasoned landlords see recessions as an opportunity to make money. Also, serious investors are scared and remain on the side-lines until the property market hits its bottom.
Should You Invest In Residential Or Commercial Property?
This question was a simple and straight-forward answer 15 years ago. Commercial properties usually offer more financial incentives than residential properties for your money. There is no question that commercial property owners have less stress in handling commercial property.
The benefits of commercial property are that maintenance responsibilities can lie with the occupant. You may not have the legal duty of homeowners under the law on housing. Commercial assets have usually been a better choice than investing in residential properties.
Residential property has been less desirable in recent years, particularly as a result of recent legislation that has had more effect on residential property than on commercial property.
Coronavirus has changed the world; even some commercial landlords are in trouble because their tenants are financially struggling. Many tenants, including major high street names, are asking landlords to write off their rent for a period of between 3 and 6 months.
Even before Coronavirus, our high streets had a growing abundance of empty units. Some landlords with commercial properties in a good location struggle to let them, and when they get a tenant on the hook, the tenants also ask for a rent-free duration.
Empty industrial properties attract full business rates. Not only does the landlord have no rent coming in, but the landlord is often hit with full business rates.
