I’ve recently spoken about alternative property investments- which you can FIND HERE– which can no doubt prove excellent when diversifying a Buy to Let property portfolio. However, when you are looking for an investment that provides all of the basic fundamentals of investing, the BTL residential model still rules supreme.
In todays article, I will look at why that is, and why this looks set to continue for the foreseeable future.
There are two main goals that any investor looks to achieve when it comes to purchasing a BTL property- rental income and capital gains. When it comes to securing the latter, buying residential property for investment is your best bet. This is because of the huge supply and demand disparity in the UK, which invariably pushes prices up on property, the majority of which is residential houses and apartments.
The supply and demand gap applies to various property sectors, but none more so than residential property because the demand is higher for it than commercial or student property. For those investors looking primarily for capital growth on their investment, residential BTLs is the best way to go.
Residential property is seen as one of the safest avenues you can put your money into, and not just amongst other property investments either. History shows that stock markets are notoriously volatile and can fluctuate at any given time. This can prove lucrative for some but it’s not nearly as reliable as a property investment- certainly not a residential one.
Another bonus of investing in a residential property is that it’s a tangible asset. Companies go bust, and their shares become worthless every day of the week and many clients are left with a massive loss. I’m not saying that property is totally immune from these events, but they’re far less common if you invest well in a good location. This leads me onto my next point…
If you do your due diligence beforehand, buying a good residential BTL will not just earn you money in the short-term, but over the course of several years and even decades if you do it right.
As I’ve mentioned, the demand for residential property is rising all the time, so if you buy in a location which will always have a high demand for tenants i.e. a city centre, then you will keep your property occupied and earn a regular and sustainable income long-term. That fulfils the other half of your property investment goals alongside capital growth.
Buy-to-let returns can be more reliable and offer much higher yields than cash sitting in a bank account, as well as achieving 7% pa capital appreciation historically. Bricks and mortar are a fantastic choice for the risk averse investor because your investment is a tangible reality – property can be improved easily and on demand with repairs and renovations – and isn’t reliant on the bank remaining afloat.
The housing supply in the UK is also at a 100-year low, and demand is growing daily; it is predicted that 25% of households will be privately rented within the next 5 years.
Perfect for self-funding your pension
Pension schemes can vary in their success and returns, based on location, employment and a whole variety of other reasons, and there is no guarantee that when retirement hits, your income will cover the cost of living (you need to consider factors like inflation). Buy-to-let property, when bought well and managed carefully, can provide solid returns almost immediately, supplementing and supporting any lifestyle and making retirement enjoyable and stress free when it comes.
A reputable property management agency contributes to this, as not only does the investment provide the income, but the agency ensures your retirement is free of hassle – there is less paperwork, access to a quality network of experts and everything is simplified. The FT recently discussed using property as a supplement to a pension and concluded that a well-made retirement plan is the most important thing for any individual.
For the reasons covered, Buy to Let residential investments are a cut above the other property sectors and other investment avenues as well. The overwhelming demand for UK property from a homeowner’s and investor’s perspective only leads to big levels of growth combined with the relative security that owning a property brings.
In short, it’s a long-term, lucrative investment avenue should you do it right.
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