Over the next five years, UK property is expected to rise in price by 21.5%, which means the average UK property will rise from £322,000 to £370,000. Simply put, if you’re thinking about investing in real estate, you’re about to embark on one of the best investment journeys of your lifetime.
Many people avoid property investments because they seem complicated, you think they need a lot of money to invest. Neither is accurate, and to reassure you, SMH are with us today to help you understand why property could be your best move for 2022.
Leverage your investment
Property is one of the few investments that you can make where you can invest in assets worth more than that you have available to invest. For example, a home costs £100,000, and you put down a £25,000 deposit with a mortgage to cover the rest. So, you invest just 25% of the asset’s value and own it. Then, over the years, as you pay off the mortgage, you’ll hold more of the investment, increasing your rate of return not only by paying the mortgage down but also with the natural appreciation that property experiences.
Renovate to force appreciation
Real estate appreciates naturally, and on average, increases in value at a rate of 3% – 5% a year without you doing anything except maintaining the home. But, you can increase the rate of appreciation by making renovations or repairs. Of course, not all renovations increase a home’s value or will result in a direct return so it is always worth consulting an appraised contractor or estate agent, but even minor kitchen and bathroom renovations can drastically affect a home’s worth. Fix and flip is a great strategy for people who don’t want to manage a rental and force appreciation on undervalued properties, and you may not even need a full mortgage with bridging finance.
If you’re toying with the idea of a buy-to-let and subsequently being a landlord, let the following statistics sway you: According to the Resolution Foundation, nearly 4 out of 10 ‘millennials’ are still privately renting at age 30, while nearly a third of the wider generation are expected to be renting well into retirement. With Buy-to-Let in the UK worth over £1 trillion, research estimates that UK renters will outnumber homeowners by 2039.
If a rental portfolio is on your horizon, it may be worthwhile considering a commercial mortgage. As the business owner, you can often write off the following expenses: the mortgage interest paid on the loan, origination points paid on the loan, maintenance expenses, depreciation (spread out over 27.5 years), taxes and insurances.
Unaffected by COVID
And finally, while all sectors of the economy have been impacted by multiple lockdowns, the outlook for UK property has been incredibly positive. In the first week of April 2021 alone, the UK witnessed a record-breaking 30% increase in demand for rental property, and since then transaction levels have continued exponential growth.
Have you thought about property investment? What’s stopping you?
It’s no secret that real estate is a great way to diversify your investment portfolio, and a smaller investment now could let you enjoy rental cash flow while the home appreciates, and give you significant capital gains when you need it most – in retirement.
A mortgage, for the majority of people, is the biggest financial commitment that you will have in your lifetime so make sure you consult an authorised and regulated advisor such as SMH who will ensure you get the most suitable mortgage deal for your specific requirements, and at the best rates.