Investing in property is a great way to build wealth but many people choose to stay far away from it for a number of reasons.
It seems too risky, the stakes are high, you need a lot of money and many other reasons as well.
While there is some element of truth to this it is not the whole truth.
The more you get to understand property and the way it works the less scary and risky it will seem.
There are a ton of advantages to investing in property and that is why I always recommend that if you want to build up passive income, property investment is the way to go.
Let’s take a look at why you should invest in property and the benefits for you.
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11 Reasons why you should invest in property
1. Rental income is passive
Rental income is one of the first rewards you will feel once you invest in property.
Passive income basically means money that you get each month without having to do much more work to get it.
All the hard work is done up front before you buy the property so later you simply have to maintain it which does not require huge amounts of work.
If you can implement the right strategies you can repeat this over and over again providing you with cash that can completely supplement your income.
It’s not unheard of to have people quit their full-time jobs in order to pursue property investing as a full-time career instead.
2. Property appreciation
Another great thing about investing in property is that property hardly ever goes down in value.
I say hardly ever because anything can happen at any time. You could have a nightmare neighbour that is completely bringing down house values or a bomb could hit your house (unlikely but still possible)
Usually, the value of a property is always being increased as the area develops. Shopping malls get built, the area becomes more affluent, properties are scarce in the area, therefore, driving the value of your house up.
There have been properties that I purchased some time ago and when I go back and look at them now I can no longer afford to buy in that area because the value of the property has appreciated so much.
When you buy a property for investment purposes always consider how much value a property could potentially have 5 years from now by comparing it to how much it has gone up in the last 5 years.
Trust me property appreciation can set you up very nicely if you decide to sell one day.
3. Anyone can do it
Absolutely anyone can buy property. It doesn’t matter what grades you got in school. Property is fair game to anyone.
Unfortunately, people think that buying property is only for the super-wealthy and that simply is not true.
There are ways to buy property without having to put up all the money yourself. A mortgage being the first immediately obvious way.
There are other ways too but we will look at that another time.
You need to make sure that you do the right type of research into the particular property that you want to invest in and the area and you will already be halfway there.
4. Financial security
Everyone that I can think of wants financial security.
Once you have financial security you can live the life that you want. You don’t have to worry about going out for a meal and be thinking about the bill for the whole time.
You no longer have to settle for less than you want because you have the security that you need.
If you invest in the right kind of property your future can be very bright indeed.
The difference between having a job and having passive income from property is that you can get fired from your job tomorrow. Your property will never fire you unless you don’t pay the mortgage if you have one.
Investment properties provide financial security.
5. Can provide retirement security
If you haven’t yet made plans for retirement yet then property can be the thing that helps you to make up the shortfall.
According to the Guardian, 31% of Brits have no private pension at all. You would then have to rely on the state pension which is currently set at £168.60 a week at maximum meaning this would depend on your contributions. (source)
Could you realistically live on £168.60 a week to support your lifestyle?
If are closer towards retirement age then property income can give you that little extra boost that you need to take you through your retirement years.
6. Tenants pay your mortgage
The great news about property investing is that once you find good tenants you no longer have to worry about covering the mortgage yourself.
The money that you get in rental income should ideally cover your mortgage plus a little extra.
Say your mortgage payments are £700 a month. You should be getting a return on your money (ROI) of between 8-10% which is considered good.
If you want to work out your property’s ROI (return on investment) you can use this simple formula of annual rent profit / cash invested x100
For example (Annual rent profit) £3000 / £30,000 (personal cash invested not including mortgage) x 100
£3000/ £30,000×100 = 10% ROI
Having your tenants cover your mortgage means that you are free to do what you want.
7. Cash flow
Property investing done in the right way can provide you with generous cash flow opportunities to do the things that you want.
Let’s face it, without cash flow you are pretty much stuck and can’t move anymore.
If you have chosen the right property then over time as more of the mortgage gets paid off, more equity is available to you.
Some people like to use this equity to reapproach the bank for more finance in order to buy another property and do the same thing over and over again.
No matter which direction you take with your investment property you have to make sure that you have enough cash flow. The last thing that you want is to make your financial situation so tight that you are now fully dependant on the income from your tenants.
This is why some people like to use property diversification methods.
This way if you have a problem with one property (perhaps it’s taking a long time to find the right tenant) your other properties should be able to cover the shortfall without you having to use your own money to cover the mortgage payments.
8. Creates wealth
The more times that you rinse and repeat the property investment process the more you create wealth.
It’s not a coincidence that some of the richest most wealthy people like to invest in property.
If you are not yet ready to take the leap into stocks and shares then property is a really great way to begin to create wealth for your family.
9. Alternative means for saving
We all know that opening a savings account at the bank will not bring you returns that are large enough to bring you anything worth talking about.
If you have a small sum of money available and are not sure what to do to increase it and get that money working for you then property for me personally wins each time.
You just need to find a property in an area where your savings will be enough for a deposit and you can get a good return on your money.
8-10% ROI is usually a good percentage when you are talking about property investment.
You will be much better off leaving your money in a property rather than a bank where any investment is likely to be eaten away by depreciation.
If you want your money to hold its value and grow then that has to be property.
It’s a great way to use your savings and help you to save even more.
10. You make the decisions
Unlike anything else, you are in full control when it comes to investing through property.
Even investing with the bank carries risk. Property does too but your money is much safer in property because it is hugely unlikely that your investment into property will be valued at zero.
This is what sets apart investing in stocks that you can’t touch and feel and investing in property.
Yes making an investment into property is much larger but the rewards can also be large too.
You decide how much you want to invest into the property.
You decide if you want to rent it out or fix it up and sell.
You decide if you want to refinance it and do it all again.
Every decision is your own to make.
11. You can never fully go wrong with it
It’s quite hard to make a bad decision with property unless you have literally put a pin in a map and bought a property without any research at all.
Even if you have done that you can still get a return over time. It might take a long time but you can still win if you can wait it out.
The more research you do into the right property the more you will gain from it.
You can get a property that will bring you in an extra £500 a month but with a little more research you can get an even better property using your same investment to make £800 a month.
Final thoughts on why you should invest in property
Investing in property is actually quite a secure way to make extra money proving you take the time to do your research properly.
Never be in a rush to put your money into any property unless your research is 100% perfect.
Run your numbers more than once to make sure it makes financial sense.
As long as you have done your background work investing in property is one of the smartest things that you can do if you want to build up passive income.