BuyIncomeProperties.com
Your #1 Income Property Resource.

 No Money Down Real Estate Investing Course
Learn How To Buy Income Properties Without Risk, Good
Credit, Money Or Tenants!

Click here for more information

 Welcome to BuyIncomeProperties.com! Visit the Real Estate Investing Forums.


Real Estate Articles 
 
 Real Estate 
 Homeowners
 Second Home
 Success Stories
 Rentals
 Real Estate Q & A
 Real Estate News
 Real Estate Law & Policy
 Money Making Ideas
 Home Improvements
 Tax and Insurance
 Appraisal and Inspection
 Log Homes
 Mobile Homes
 Home Buyers
 Constructions and Home Buildings
 
 Real Estate Investing 
 Foreclosure
 Vacation Home
 Rental Property
 Preconstruction Investment
 Marketing Secret
 Joint Venture
 Land Investment
 Lease Purchase
 Probate Real Estate
 Real Estate Clubs
 Short Sales
 No Money Down Investing
 Flipping
 Fixer Uppers
 Resort Home
 Loft Apartment
 Property Development
 Tax Incentives
 Investing Strategy & Tips
 Real Estate Wholesale Property
 How To Articles
 Subject To
 Real Estate Books
 Apartment Investing
 Commercial Real Estate
 Residential Property
 Hotels and REITs
 1031 Tax Deferred Exchange
 Investment Property
 Real Estate Advanced Techniques
 Trust Deed Investments
 Creative Home Buying
 Wholesale Real Estate
 Real Estate Auctions
 Tax Lien Certificate
 HUD Homes
 Real Estate Regional USA
 Austin, Texas
 Houston
 Colorado Springs
 Florida
 Boise
 Reno, NV
 Landlord
 Rehab
 Market Analysis
 Property Management
 Condo Conversion
 real estate guru
 Bank Foreclosure
 VA Homes
 Buy To Let
 Rent to Own
 Tax Deed
 Stop Foreclosure
 Retirement Planning
 Real Estate Investors
 International Real Estate
 Canada
 india
 United Kingdom
 Real Estate Seminars
 Negotiating
 Condo Hotel Investments
 Partnerships
 NNN Properties
 real estate notes
 Real Estate Education
 REO Properties
 Life Estate
 REIT
 Income Properties
 
 Mortgage and Finance 
 Mortgages
 Mortgage Leads Generation
 Mortgage Leads - Leads Mortgage
 Mortgage Marketing
 Creative RE Financing
 Hard Money Lender
 Debt Consolidation
 Income Property Financing
 Home Equity
 Credit Repair
 Mortgage Tools
 Home Construction Loan
 Commercial Loans
 Owner Finance
 Private Lenders
 Discounted Notes
 Assumable Mortgages
 Seller Financing
 Equity Lines of Credit
 
 Real Estate Pros 
 Real Estate Agent and Broker
 Mortgage Agent and Broker
 Real Estate Marketing
 Real Estate Consultant
 
 Real Estate Resources 
 Mortgage Foreclosure Example
 Mortgage Origination forms
 Property Transfers
 Tenancy Agreement and Form
 Internet and Online
Search


Real Estate Investing : Investment Property Last Updated: May 14th, 2012 - 22:24:01


Why Invest In Property?

 
Email this article
 Printer friendly page
Why property, some people ask when looking for an investment. Well, as far as I am concerned, property investment is, and always has been, the most powerful type of investment for building wealth. It has been said that over 90% of the world's millionaires got there by owning property. The reason property is such a powerful way to build wealth is due to one key concept: leverage.

Once I realised this, I didn't look back. Now if you are an experienced investor this may be obvious, but for the benefit of those who haven't seen the light, let me explain ... Leverage is your ability to magnify your returns by using other peoples' money (in this case, it's usually the bank's money).

To give a clear example, say you have ?0,000 to invest. This can be a lump sum or by releasing equity in your main residency.

So what is the best way of investing this money?

Option 1 ?Stick it in your local bank by some considered the safest option, "at least you can't lose it, and you get some guaranteed increase in value" usually goes the argument.

Money in the Bank - assumed return: 4%
Now ?0,000
1 Year ?0,800
5 Years ?4,333
10 Years ?9,605

As you can see, after 10 years, you've made virtually no progress at all, especially when you consider the effects of tax and inflation.

Option 2 ?Stocks and Shares Now over the last 10 years, although admittedly not in last 4 years, the stock market has been very popular. However I cannot accept it is a better bet. When I read that the stock market is a better bet over the next 2 years as will go up by 15% a year, as opposed to the property market that may go up by 5% a year this does not take leverage into account and so paints a very distorted picture!!

And I will show you why. It's hard to say what sort of return you might get on the stockmarket, but let's say you get 12% a year for the next 10 years ?very unlikely, but let's just go with this. So if you could beat the odds and get a 12% return every year ......

Money in the Stockmarket - assumed return:12%
Now ?0,000
1 Year ?2,400
5 Years ?5,247
10 Years ?2,117

Now thatís a big increase on sticking the money in the bank, but clearly is not guaranteed. But can you do better?? I think you know what Iím going to say?lt;/p>

Option 3 Property

One of the great things about property is it enables you to leverage the ?0,000 to purchase a ?00,000 investment property (in other words, borrow the remaining ?0,000 from the bank). Now say the property market slows down to an average of only 6% return for the next 10 years. This would probably be a fair estimate in the UK, although there are plenty of markets which are growing more rapidly, lets concentrate on UK for this example.

Money in Property - assumed return: 6%
Now ?0,000 (?00,000 property value ?80,000 mortgage)
1 Year ?6,000 (?06,000 property value ?80,000 mortgage)
5 Years ?3,823 (?33,823 property value ?80,000 mortgage)
10 Years ?9,085 (?79,085 property value ?80,000 mortgage)

Make sense? So you make 6% increase on the full value of the property, not just the ?0,000 which you initially had. This is the power of leverage. In effect you have increased your initial investment 5 fold in 10 years! So even if the stock market increases by twice as much per annum as the property market over the next 10 years, you can make far more money from property.

Now for simplification, I have not included lawyers fees, agents fees or stamp duty. Admittedly buying a property has more additional costs than buying shares, but would not make a significant difference on your profits ?around 4% in the UK, higher overseas.

One thing to point out is that in the short term you have greatly increased your potential loss ie if the property went down by 10% in value, you would lose more of your initial investment, because the property value would go down to ?0,000, you still owe the bank ?0,000, so you now have ?0,000. In comparison if the stock market dropped by 10%, your investment would be worth ?8,000, as only lose 10% of ?0,000.

However over a length of time, using leverage to good effect and using all the other skills you need when buying property, property is by far the best investment, for the majority of individuals.

The figures I have used have been very conservative, many individuals are making far more than this on property, whereas anyone making the same returns on the stock market, will generally be benefiting from some sort of insider dealing or be very high up in the company, I would imagine!

Alan Forsyth is a full time property investor and developer with 10 years experience in UK and overseas. He is managing director of http://www.property-investment-tips.com which offers free independent advice and tips on property investment, courses, countries, strategies, mortgages and much more - with a free newsletter every 3 weeks giving latest tips and offers to over 500 investors. Sign up today at the site for free independent advice!

 

Do you own real estate articles or stories and want to share with other investors? 
You have chance to win
$100 Amazon Gift Certificates. We will give away 3 prizes for top authors each month!

Email your articles or stories to:  articles@buyincomeproperties.com

 

© Copyright 2001 - 2010 by BuyIncomeProperties.com            Page copy protected against web site content infringement by Copyscape   

 


 

Visit Real Estate Forums for every real estate investing topics!  Enter Here

    

Top of Page



Home Courses Real Estate Forms Income Properties For Sale Forums CalculatorReal Estate Education    


Copyright © 2001 - 2010, BuyIncomeProperties.com. All Rights Reserved. Privacy Policy in Observance.