Why property beats all other investment
Category Finance
Off-market specialist, YPC Group says property beats all other forms of investment.
New-build specialist David Lines has come up with several reasons why other forms of investment offer no competition to real estate
He says, “When I first started investing in property, I did so for a number of reasons. These included the fact that property investment is easier to understand than other investments.
“With stocks and bonds, it’s all about balance sheets, forward ratios, price-to-earnings multiples… I’m sure you get where I’m coming from. So, for me, investing in property was (and still, is) easier to get my head around.”
Here are four other reasons from David Lines, of YPC Group why property investment beats all others:
1. Investors are in control
Being a property investor gives me the ultimate control. When I was investing in the stock market, I always felt that my investment was in someone else’s hands: the management and employees of the company I’d invested in. Investing in property is different.
Even though I hand the property management side of things over to a company that’s better equipped than me to do the job, I’m the one in control of my fate. It’s a bit like changing the water boiler at home – I’d never do that myself, I’d get a professional in.
2. The rental income pays better dividends
When you look at the income, you get on stocks, or government bonds or cash accounts, property beats all of these into a cocked hat. With property investment, I can set the rent I want to charge (in line with the market, of course) and manage my costs around that. Generally, I make around 5% to 7% gross rental yield, or three times the dividend yield on UK stocks.
Sure I have a mortgage to pay, and factor in, but remember I was able to control a much bigger property with a mortgage than if I paid cash with my deposit (and my capital growth is on the whole value) so overall I am still making this 5 – 7% on my deposit amount.
3. Fantastic capital gains
Property is always in demand. There’s an undersupply of homes all around the world, and even when the market turns down (as it did after the Global Financial Crisis) the property market bounces back quickly when you buy with fundamentals.
And, in comparison to the stock market again, property investment had given me a capital gain over the last 20 years that stock market investors can only dream about.
4. Gearing powers profits
Just like driving a car, when you’re investing in property you get to benefit from something called ‘gearing’. The engine power is the same, but when you move up a gear, it has to work less hard to move the car faster. For example, if you want to invest in the stock market or government bonds and you have £20,000, and the market rises by 10%, you’ll make £2,000.
But if you use that £20,000 as a deposit and borrow £80,000 to buy a £100,000 property, when that property rises by 10% you’ll make £10,000 – or a 50% return! That’s a huge plus for property investment.
Author: Adrian Bishop
