Investing in Property in Today’s Market

Of the five different areas of investing your money, after cash comes property. Many people believe that the property they live in is their biggest and most important investment. Whilst this may be true, and is true if you have no mortgage, it isn’t really your property as long as you have borrowed money to buy it.

In many respects it is the lender’s investment because his asset will grow in value. He gets your money and invests it as well. You may well argue with some justification that the house is your asset, and when you sell it for a better price than you paid for it, that your asset will have appreciated. In fact many others will argue that your home is a liability!

Property as an investment really means looking outside and away from your own property. Bricks and mortar are as good an investment as any, and indeed better than most. Do not be put off by a short term loss in property values. Anywhere that land is scarce as in the UK will mean a long term gain in value.

There are a number of ways to invest in property.  The first and most obvious is to buy, and then let. In other words you own the property and the tenant who lets from you pays your mortgage. Don’t necessarily feel you have to show a profit in your monthly income from the tenant over the cost of your mortgage. Think of capital appreciation of the property before the income from the rental. That is as long as the rental income and the mortgage costs cancel each other out.

At the end of the day if inflation is running at 5% and the property appreciates by 10% in the year you have created a winner.

You could also of course buy into a property fund, one that is run professionally, so it is very much hands off. IT is possible to do this through specialist Unit trusts and even personal pension plans. You could buy shares in property companies, but if the property market goes flat, then the share price will reflect this, and even successful property companies go to the wall.

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