There are so many different property investment options available. However, we think property investment is one of, (if not the best way) to invest your money… and we’re going to discuss exactly why in this blog.
Let’s start by thinking about the average person in the UK and why they may be thinking of investing in something in the first place.
I’m going to paint a picture for you:
The average person works a 9-5 job, trading their time for money - usually around 40 hours per week. Staying on the subject of time, the average holiday allowance per year for PAYE employees in only 28 days!
Studies show that most people in the UK have less than £1,000 saved in the bank - which is a shockingly low amount and very limiting. And Most households are in debt - (we’re talking bad debt here), which we’ll touch upon later on.
Plus let’s not forget about tax - we all have to pay our way in society, but it does have a big impact on our finances. Those who are in the higher income bracket, are paying a whopping 40% income tax. Working 40 hours a week and you only get to keep 60% of your earnings - it can feel like you're giving away nearly half your time for free.
Taking all of this into consideration, how then do people create something they can pass onto to future generations? If we do prepare for this we still have to remember we’ll be paying inheritance tax…
It's easy to get stuck when you’re earning a regular salary, you feel somewhat secure, but you have no freedom. And with lack of freedom comes stress.
Why property investment is the way forward
At Touchstone Education, we work closely with people who want to invest in property. So let’s look at the outcome of a person who we have worked with for 12 months…
This person is happy and benefitting from financial freedom, here’s why:
They have ‘sacked’ their boss - quit their 9-5 day job that was eating into all of their time and locking them into a time for money contract.
More free time = more opportunity to enjoy holidays, when you like and for how long you like.
Property investment has created a source of passive income for them. They have worked hard to allow them to invest, and once they have the property they’ve got money coming in without having to give up their regular time for it.
They are tax-efficient - they’ve set up LTD companies which creates the opportunity to become very very efficient with their taxes. No longer is the Government taking 40% of their salaries, instead, they are taking corporation tax. Plus it removes inheritance tax issues.
At the time of writing this blog, corporation tax is at 19% (you can check it here: https://www.gov.uk/corporation-tax-rates). That’s a huge difference in comparison to the 40% income tax rate!
When it comes to savings - remembering that the average person in the UK currently has less than £1,000 in the bank - property investors have savings in their properties. They will likely have mortgages on all of the homes they own, but on top of this is equity.
At Touchstone Education, 9 times out of 10 we teach that everything a person makes from property investment, they save 10% until they reach 6 months of living costs.
Good Debt vs Bad Debt
Good debt is borrowing money/taking out a loan to purchase something that will see a return on the money invested.
For example, a farmer might buy a new tractor, he has fallen into debt because of the purchase, but the tractor helps him make money to pay the loan back, and have a passive income.
Bad debt is using a loan/credit card to purchase an item such as a television or a new sofa - it’s consumer debt - you’re paying out for something but not making anything in return.
Property investment does create debt - a mortgage is in the debt category, but - it is good debt. This is because it is considered as an asset vs a liability!
Choosing property investment over other investment options
Some other investment opportunities that people consider are:
- Stocks & shares
- Business (angel investor)
So why do we think property investing is the best thing you can do?
A lot of it comes down to being educated in the different options. Many people find things like Bitcoin quite difficult to grasp, whereas investing in property is more straightforward. A lack of understanding of your type of investment can create risk.
What we like about property investment:
- Property goes up in value
- It’s an asset - you’ve always got it there (bricks & mortar)
- It offers flexibility
- You’ll get a passive income
- It’s safe, secure and once you know it, it’s pretty simple too - the hardest part is getting your knowledge up there… which is where companies like Touchstone come in. We teach you how!
Opportunities that investing in property can give you:
- Joint venture finance - a deal between multiple parties to work together and combine resources to develop a real estate project.
- House flipping - purchasing a property that needs renovation at a low price, doing the work and selling on to make a profit.
- Lease options - an agreement that gives the renter the choice to purchase their rented property during or at the end of the rental period.
- Buy, refurbish, refinance - when an investor intends to purchase a property, add value to it by refurbishment and then refinance it onto a Buy to Let mortgage for rental.
- Commercial conversions - turning vacant commercial properties, such as shops, into residential properties.
- Commercial property - purchasing property solely for businesses to rent such as retail, industrial, leisure or office purposes.
- Capital allowance - an amount of money spent on business assets that can be subtracted from what a business owes in tax.
Having these things to hand and knowing how to do them well, will support you in building a property portfolio that provides more financial freedom, and less financial stress.
How do we know that property is going up in value?
Since records began house prices have increased year on year, because:
- We have a rising population
- There’s a housing shortage - especially in the UK
When demand isn’t matched by supply, the cost goes up.
Just think back to when Covid-19 first hit. People went crazy bulk buying toilet roll, then there was a shortage in stores. Manufacturers were still creating stock but stores weren’t replenishing at the rate consumers wanted to buy… soon enough people were selling toilet rolls on eBay for ridiculous prices.
We’ve got more on property demand and its effect on house prices in this blog: Will the property market crash? (2021) | Surviving a Recession
We know that the average house price increase per year is 4%. However, if we look back on last year when the demand for types of property changed quite dramatically, house prices went up by 6.9%!
Why? Well, people were stuck at home, whole families confined to four walls. Before long people were fed up with being in flats; or homes without gardens; or a lack of room for them to work from home and their kids to both study and be recreational.
They started searching for houses that suited this un-predicted lifestyle change.
Returning to property investment, let’s look at some numbers. If you own a property worth £100,000 and it goes up by 6.9% each year, that’s £6,900 in equity.
Now if you own that house and choose to rent it out, not only are you getting the rental income, you are getting a £6,900 per year increase on top. The more properties you own, the more equity you stand to gain.
Thank you inflation (for once)!
Is property investment right for you?
If you don’t want to be trapped in a time for money system, where you lack freedom financially and in general, then yes, it’s worth looking into.
Out of the vast investment opportunities that are available, property investing is a much easier and straightforward solution. Yes, you’ll need to invest some time and effort into learning how to do it, but it's far less complex than many alternatives.
It is safe, secure and flexible; the risk is low as demand will always be high.
Looking to get on board and find your perfect property strategy? We offer the only 2-day online ‘Wealth Through Property’ course! Come along and spend 2 full days learning from the industries leading minds, ask as many questions as you like and come away from the weekend with an ignited passion for property!