Everyone wants to safeguard their future and their children’s future if possible, it is something that we aspire to and something you should look to do as soon as you are able to. So where to start. Well, many have pensions and contribute to those in a very conventional manner, but with interest rates set to remain low for the foreseeable future the likelihood of annuity rates hitting the higher rates that pensioners require remains a distant dream still. As a result of this and many other factors, the government has allowed people to unlock their pensions in ways that allow them to diversify and maximise the earnings they make away from traditional means. One of these allows people to invest in property, a sector that has continued to grow in the UK and is scheduled to continue as affordability, lifestyle choices, and a more continental approach to renting property takes hold and sees the buy to let sector grow.
Investing in The Right Areas
Property has always been popular and owning your own property continues to be the ambition of most people, but opinions are changing and it would seem that although this does still apply, it’s becoming less essential as the millennials choose lifestyle over owning stuff. It would seem that many younger people have become accustomed to renting, and as this trend continues, the opportunity to become a landlord and enter the buy to let market becomes ever more attractive. So, what returns should you expect to get in property, and why property? Obviously, returns do vary, and therefore there is not a definitive answer, that said, if you set yourself a target as we always say when starting out, by doing a business plan, then you could reasonably to expect returns of between 3% – 10% in areas that have potential growth story too. If you find areas with higher returns they tend to be located in parts of the country that are unlikely to see much (if any) growth. This range covers London at the lower end, around 3%, but generally most investors look for a return of 5% or more and for that you generally have to travel North and look at property in the ever-growing Northern Powerhouse sector, namely, Manchester, Liverpool, Sheffield, and Leeds to name a few. These areas offer the investor the returns they are looking for, and also offer the extra added bonus of above-average growth as this region is undergoing a major change, bringing with it new businesses and an ever growing and economically richer workforce.
Safe and Secure Income
With returns that look this attractive, most people look for a catch, well there is none, these are properties that you buy, sit back and let them work for you providing a safe and secure income. Why secure? That’s obvious, you can actually see what you own, you have a deed that says you own it and you are in full control of what you do with that property. Unlike shares in a company or bonds, the physical manifestation of the property itself is a very fulfilling and satisfying element of buying property. You don’t lose them like share certificates, or forget about them. Another added advantage is that you can provide a starter home for your children, allowing them to stay in your properties for a rent that just covers bills, allowing them to save for the future, and possibly a home of their own. All of this is very important when looking at property, remember you not only get a great return, you have a physical investment that you can use to help family members, and later an investment that provides you with income and security for your later years, that you can pass on to the family keeping their future and your grandchildren’s future secure for many years thereafter.
Building a Portfolio
So, why would you wait to start investing in property? If you are ready to start saving then the sooner you start the easier things will be later in life, and the sooner you start the easier it is to build that portfolio. Many worry that they are paying too much for a property at present as prices are moving in the areas they are looking in. Well yes, they have risen, but this type of investment, like a pension, is a long-term play, and so should be viewed in those terms. For example, when you start saving for a pension you don’t say 5 years before you retire, ‘right I better start saving.’ You say some 25-30 years before you plan to retire, ‘right I must look to start a pension’, that way the cost to set one up is relatively low. Well this is the same with a property, it is a minimum of 5 years, but should be looked at in a 10+ year perspective, and therefore your growth and returns should be viewed in similar terms. Also remember, unlike a pension, your property investment will start paying out from the get-go, not only covering the funding but providing an income whilst paying the debt down. Ok, you don’t get the tax relief that you get when saving for a pension, but remember when you pass away part of your pension dies with you, and unlike property disappears altogether when your spouse/partner passes away. So for a secure, and in many ways, an interesting pastime, entering the buy to let market offers the sensible investor a very secure future for both them and their loved ones, and as a legacy is the best thing you can do to secure a future for your whole family.
If you would like any more information about investing in property for your family’s future, get in touch today. Our award-winning property brokers have a wealth of experience in assisting all types of investors. So whether you would like to start earning more from your money, or add to your existing portfolio, let us help you invest the right way.