With the guideline of having 10x your salary saved before your mid-60s and living costs on a continuous rise, it can be difficult to visualise financial goals such as comfortable retirement or financial independence as achievable, but optimism remains. In spite of Covid-19, it’s been found that over 20% of Brits felt they were more likely to invest during or after the pandemic, and 75% of Gen Z admitted that they intend to buy stocks or shares in the future. More specifically, property investment company FJP found that 44% of property investors planned to add at least one new property to their portfolio in 2021. So, with investor appetite so high, what’s the potential in the current property climate and how could it benefit your financial goals?
Setting financial goals
For any level of investor, setting financial goals is a crucial starting point to understanding your journey ahead. Without a clear destination, the road to success can be complex and stressful, so it’s a good idea to clearly map out exactly what you want to achieve and the timeframe in which you want to achieve it.
Property investments are generally classed as medium to long term, so this could be a suitable solution if your goal is, for example, to prepare financially for retirement. But staying on track can be tricky, particularly if your end goal is decades down the line. Some planning methods that can help digest long-term goal setting are:
· Define and understand your purpose
Outlining the purpose behind a goal could help with getting started as it offers an understanding and reasoning behind that goal itself and how you will benefit from it. It can also help with keeping your eye on the end target and act as a source of motivation to achieve it.
· Break your goals down
Long-term planning can be daunting, so breaking goals down into several smaller, achievable goals could be more manageable. These can be yearly, monthly, or weekly. Once your first goal is achieved, this gives you a good opportunity to review your circumstances as well as the next objective.
· Simplify your action plan
When starting financial planning, numbers and options can be overwhelming, so keeping your action plan simple and easy for you to understand as time goes on could be a good way to avoid side-tracking.
Different types of residential property
Investing in property doesn’t always mean becoming a landlord. It’s important to take the time to familiarise yourself with the various options available and determine which is the right approach for you and your financial goals. Some residential property investments include:
· Buy-to-let (BTL)
A BTL is suitable for residential landlords who want to buy property and rent it out to tenants. This strategy can help with mortgage repayments.
· Property development
Also known as ‘flipping houses, this involves buying a residential property to refurbish and sell on. This investment type has the potential to generate good and quick returns by buying at low cost and developing the property to increase its value.
· New builds
This means buying ‘off plan’, or before the physical property is built. Typically, developers look to secure early sales and revenue by offering reduced prices, so investing in new builds could create healthy returns if purchased at a healthy discount in the off-plan stage.
· Real Estate Investment Trusts (REITs)
This involves buying shares in a property investment company. Shares from all investors are combined to invest in a property and profits are gained from the rise in share prices.
Points to be aware of before investing in residential property
The suitability of residential property investment is dependent on your financial goals. Before getting started, it’s worthwhile researching and understanding some of the challenges of this investment vehicle. These can include:
There are no immediate exit options from a purchased property, so if you’re anticipating the need to access funds at short notice, buying a physical property may not be suitable.
· Interest rates
As interest rates rise, so do the monthly repayments on your mortgage. It’s important to be cautious in this area to avoid rising interest rates outweighing your earnings from the property.
· Challenges with borrowing
If you have existing properties in your portfolio, this may present some difficulties when applying for a new mortgage as lenders can be more scrutinising before approving an additional mortgage.
· Additional costs
There are several maintenance and further costs to keep in mind such as replacing boilers, carrying out renovation, and stamp duty. This will all eat into your profits, so it’s handy to be mindful of the extra costs involved with running a property.
If you’re unsure about where to start or which methods are most suitable for you, it’s always advised to consult a financial professional who can guide you on elements such as affordability and appropriate ways to approach your goals.
Benefits of residential property investment
Despite some of the difficulties of this investment method, there are some considerable advantages to consider as well. For example:
· A regular source of income
While a BTL can involve locking large sums of money away for a long time to secure a mortgage, the investment opportunity is in the growth of the property value while the mortgage repayments are covered by a monthly income stream from tenants.
· Prospects for flexibility
REITs, for example, can offer more flexible exit options through selling your shares, which can help if you need quick access to your money. You can also invest smaller amounts into REITs compared to the substantial sums needed upfront for a property purchase.
· Potential long-term yield
Despite fluctuating prices, there is generally a good likelihood that property value will go up over time. Rent costs also tend to rise, so while it’s not guaranteed, there’s a good chance of generating healthy returns when it’s time to sell. REITs also present the potential for high returns as companies don’t pay corporation tax as long as 90% of profits are paid to shareholders.
· Diversification opportunities
If your investment portfolio focuses on property, there are many prospects for diversification in this asset class. For example, expanding on the locations that you cover could help with servicing a larger target group, or adding various property types and sizes to your portfolio can help with meeting a higher range of demands.
Potential in the residential property market
If you are considering investing in residential property, there is significant potential to explore in today’s market state. The UK housing stock is currently worth over £9.5tn. By the end of 2021, the average home value reached £240.8k, and sales peaked at pre-pandemic levels.
The property market was one of the few industries to defy expectations throughout Covid-19. On top of Brexit and the stamp duty holiday, the unprecedented circumstances of the pandemic led to a surge in home and hybrid working, which had a positive knock-on effect on the UK housing market. In quarter 4 of 2021, Nationwide reported a 10% year-on-year growth in property prices, causing 2021 to be the strongest year yet for price growth since 2006.
On a regional level, despite a momentary drop in London’s popularity among home-seekers in 2021, the new year has helped recover the city’s top spot, with 40% of property investors showing an interest in investing in the nation’s capital. This is followed closely by the West Midlands (32%) and East of England (26%). As industry experts look ahead at what 2022 has to offer, it could be that the property market is set for “another golden year”, according to the UK chief executive officer at Fiera Real Estate Alex Price.
Residential property investment opportunities
At Propiteer Capital, our Residential Rentals investment type offers an opportunity to get involved in a diverse portfolio of residential developments without the hassle and maintenance of a traditional BTL. There’s no added stress of taking out a mortgage and no ongoing management or expenses. Instead, there are flexible exit options with a notice period of just 30 days and a minimum term time of 12 months, and we’re pleased to offer clear, fixed-rate returns of 5.5%, which are paid bi-annually.
Our property portfolio covers homes and apartments in a variety of in-demand locations across the UK and Ireland. One of our recent residential developments includes Brizes Park in Brentwood, Essex, which is on track to completion later this year. It will feature 75 acres of luxury new-build homes and apartments in picturesque, historic grounds, all within a comfortable commuting distance to the city without the commitment.
In Dublin, our flagship town centre project will bring over 900 modern apartments to Clondalkin, one of two most prominent regions to be developed in South Dublin. The 21-acre site will also introduce childcare facilities, retail units and food outlets.
· A clear action plan with realistic timeframes can help with visualising your journey and reaching financial successes
· There are several property types to invest in, such as BTLs or REITs
· Some challenges of residential property investment include rising interest rates and additional costs, such as maintenance fees
· There are substantial pros to residential property investment, too, such as long-term yield potential and diversification opportunities
· Propiteer Capital’s Residential Rentals investment type offers an easy diversification solution and a convenient and hands-off approach to residential property investing
How to get involved in residential property investing
If you’re interested in getting involved in our Residential Rentals investment, visit our website to learn more about how this investment works and find out more about Propiteer Captial and our listed bonds.
Rates are accurate at the date of publishing. For our latest rates, please visit our homepage.
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