In the conclusion of our discussion on residential property investment, I focus on the dubious capital growth and on alternative investments that will make the most of your money.
Reason No 5: Doubtful Capital Growth
I’ve left the biggest reason to last. If the income flow is poor, maybe we—as property investors—can make up for it by relying on capital growth. In fact, many investors in my experience put capital growth at the top of their reasons to invest.
This discussion assumes that your properties have benefited from capital growth. But that’s a very big question. Property goes through cycles like many other investment models, and right now in the UK it is questionable what the level of capital growth will be. In spring 2017 there are already indications that prices have fallen back in London and the latest data has recorded a UK wide price fall as of May 2017.
In historic terms UK property prices tend to follow a pattern which flows from London, to the South East, To Midlands, to North. So if we are seeing falling prices in London, it is likely that will be followed by a wave of stagnating prices across the UK until the next cycle starts in perhaps another 5-10 years.
There is a much bigger problem with capital growth than worrying about the level of it. If you have invested in property for your retirement, or to replace—with a passive income—money from a job you wish to leave, then capital growth is no good to you. You can’t eat it or spend it. The only way of realizing money from your property investment is to either a) live on the rental income, which as we have seen can be very tricky, b) re-mortgage the property and borrow more, c) sell the property and either live on capital or invest for income elsewhere.
I see an increasing number of people who invested in property in the last 20 years and are realising that they have a large chunk of capital tied up in a time consuming asset which is simply not providing them with the level of passive income they need.
Alternatives to Buy-To-Let Investment
If this article has struck a chord with you and raised concerns about your existing portfolio or any potential new investments, that’s good. At least you can go into any investment with your eyes open and having considered the downsides as well as the upsides.
But what you should know is that there are other property investments which are structured differently, offering substantial benefits to investors both short and long term.
This is through the F.R.E.S.H Investment strategy.
F – Fixed incomeR – Rewarding returns, typically 7%-15% annually!
E – Exit strategy in place, you know the length of the investment
S – Security
H – Hand’s off, no management required
If you’d like to explore the F.R.E.S.H investment strategy ask for our complimentary 60 page report. You’ll be glad you did.