‘As safe as houses.’
Property is the go to asset class for wealthy people across the world to preserve, grow and compound their wealth. It is considered to be a safe and secure investment. This is because historically, even if houses prices dip in the short term, the medium-long term trend is for the value to go up.
Over the last 80 years, property values have increased in the UK every 7.9% per annum, which means they have doubled every 9 years (Land Registry data).
Even from 2000-2010, the decade in which we saw the biggest financial crisis in recent history, house prices increased every single year except 2008 & 2009 (total drop 8.4%), and over the decade they still doubled.
Land and property is a limited resource, and populations are growing faster than the number of houses being built. The government forecasts say property values will continue to rise in line with historical trends. It’s simple laws of demand and supply.
Nearly every single person in the top 500 of the UK’s Rich List
had property as either their primary or secondary income generating strategy.
The traditional way of investing in property
Below are the 2 most common property investment strategies. Many people have used them to become incredibly wealthy but for the reasons we discuss, we can achieve our financial and life goals even quicker and smarter:
- Buying and selling houses to make a short-term profit – also known as flipping
- Buying and renting out a property with the expectation that the property will go up in value over time
Let’s look at each in turn:
- FlippingWith the right knowledge, market conditions and action, a smart investor can make a tidy profit from flipping a property. The main downside to this, however, is that it is still a very active strategy. It doesn’t generate any passive income, and even if you have made a big lump of cash, you are going to need to come home from your sunny beach and do another deal to make more money.
- A traditional Buy-To-Let propertyMany people consider owning a buy to let property as a long-term investment. Typically the more expensive the property/location, the lower the investment return, or yield, will be. This can even mean that many who invest in expensive areas with a mortgage will have a negative net rental income from the property. i.e. they are losing money each month. They are happy to accommodate the short-term rental losses however because they expect the value of the property to increase so substantially in the medium to long-term. This type of investor typically does not have the time, desire, or expertise to generate higher returns.
We at The Property Coaching Academy, however, believe that purchasing an investment property based purely on hopeful future capital appreciation is an outdated and risky strategy. We ask ‘Why not have both capital growth AND a substantial rental income each month?