By the very nature of your having found this site, the chances are that you already know why property is such a great investment – it’s a subject that has been covered in countless books, newspapers, magazines, websites and TV programmes. But in case you don’t, here are the basic reasons why investing in property is so much more attractive than pretty much every other type of opportunity.
1. Property is a pretty good bet
There is no such thing as a sure thing when it comes to any type of investment, but property is a much safer bet than most (as long as you do your sums first). Sure, there are sometimes bubbles and markets can overheat after years of rapid growth but, nine times out of ten, property will continue to increase in value.
That’s because everyone needs a roof over their heads. Not everyone needs an ingot of gold in a safety deposit box, a ten-millionth share of Microsoft or a Picasso on the wall. But shelter is one of man’s most basic needs.
Don’t just take my word for it – all the banks in the world agree with me. It’s the only investment going that they will lend money on secured only by the investment itself. Try going to your bank manager and ask him to lend you EUR100,000 to invest in Google stock using only the stock itself as security and see what he or she says.
Which leads on to point #2.
2. You can use Other People’s Money
Because banks are so confident about the fact that lending against property is such a safe bet, they are prepared to lend you most of the money – over 90% of the value in some instances.
If you want to invest in stock then, for EUR10,000, you are going to be able to buy exactly EUR10,000 worth of stock.
With property, however, if you have EUR10,000 spare, the bank could give you an additional EUR90,000 to play with.
So you could buy EUR10,000 worth of stocks or EUR100,000 worth of property. Which do you think is better?
You’ve probably figured this out. But do you know exactly how much better?
Here’s an example. Let’s say you had a great stock tip and found a company that was going to grow in value by 10% each year. Let’s compare that against how much you would earn by investing the same amount in property which also grows in value by 10% per annum, using it as a deposit against a 90% mortgage:
So, over a five year period, investing in stocks will have increased your money by just over 60%. Not bad. But with property, you will have increased your money by a whopping 600%.
| Profit|| 6105|| 61051|
However, banks are not noted for their kindness and generosity. They want something in return for lending you all their money. They want you to pay interest on it.
3. You can pay the interest by renting out your property
As opposed to ingots of gold or Picassos, property is really useful stuff because other people want to live in it – and should quite gladly pay you for the privilege of doing so.
If you’re clever (and perhaps just a little lucky), you should be able to cover all of your interest payments you need to pay the bank with the rent you receive from the tenants who rent out your property. If so, then all that 600% profit will be yours after five years.
The above is obviously a very simplified crash course on the buy-to-let market. If this really is all pretty new information to you, then we really would recommend that you do a bit of reading on the subject so you know what you’re doing.
There are plenty of excellent books on the subject in our Book Store. Believe us; it’s worth investing a few quid on educating yourself. After all, there’s some pretty big money at stake here.But if you think you already know enough about the markets, carry on reading to find out what we believe is the safest type of property to buy for the jet-to-let market.
What type of property should I buy? >>>