Property investment has long been thought of as one of the most reliable and profitable ways to save for the future and invest your money.
But just how lucrative is property investment?
It turns out that as a long-term investment, property can earn investors incredible returns. Profits can go into the hundreds of thousands, proving that property investment is a great strategy, despite recent changes to taxes and government policies.
Recent research has shown that landlords could earn an incredible £162,000 over 25 years for each property they own. The figures showed that landlords make around £6,500 profit a year, which adds up to a huge £162,000 over a period of 25 years. Despite changes to tax policies that have discouraged buy to let investment, property remains a solid investment.
In London, total profit made by landlords over 25 years reached an incredible £307,887 in today’s money. In other areas where property is cheaper, landlords could purchase multiple properties, dramatically increasing their long-term profits. In Liverpool, where investors can purchase a property for less than £50,000 with property investment experts RW Invest, house prices are rising by almost 8%, meaning capital appreciation is increasing at a dramatic rate too.
If a typical British investor took out a typical deposit of £73,908, they should receive an impressive total rental income of £369,495 over 25 years. Therefore, allowing for total capital gains of £269,464 and total costs of £373,309, the profit would be £265,650 – the equivalent of £161,922 in today’s money. These figures were also calculated including remortgaging, buying and selling costs, running costs and taxes, showing just how profitable property investment can be.
Property investment has two benefits that landlords can make the most of. The first is capital appreciation, where a property goes up in value over time and is sold for a profit. Then property investors can also benefit from rental yields, which are the monthly rental payments that they receive from their tenants. There are certain costs that are involved that prospective investors need to be aware of, but as mentioned previously the figure of £6,500 income a year included these. Rental demand is rising across the UK, pushing up rent prices and increasing landlord’s profits.
Property continues to increase in value, and though house prices in the UK have had their ups and down, over time they have increased tremendously. The Bank of England has predicted that house prices will continue to rise for the next 50 years due to the restrictions on land availability and shortage of housing. In 1973, the average UK house price was £9,767, compared to an average of £205,936 now. In the late 1970s people needed an average of 4.5 times their salary to buy a home, but today it is 7.3 times more. For property investors, if they can hold onto a property for a long period of time and charge profitable rental rates, their investments can grow exponentially.
As rates of homeownership fall, demand for rental property rises. This in turn leads to increasing rental rates and increasing landlord profits. For buy to let investors, the UK property market is ideal for long term capital growth and generous rental income. With profits rising into the hundreds of thousands, property remains a leading asset that is worth considering for long-term benefits.