Property investor John Russell first started investing in property he did so for a number of reasons.
These included the fact that property investment is easier to understand than other investments. These are his experiences.
With stocks and bonds, it’s all about balance sheets, forward ratios, price-to-earnings multiples … I’m sure you get where I’m coming from.
So for me, investing in property was (and still, is) easier to get my head around. But this wasn’t the only reason I decided to set my stall out as a property investor. Here are seven other reasons why property investment beats all others:
I’m in control, but others do the work
Being a property investor gives me the ultimate control. When I was investing in the stock market, I always felt that my investment was in someone else’s hands; the management and employees of the company I’d invested in.
Investing in property is different. Even though I hand the property management side of things over to a company that’s better equipped than me to do the job, I’m the one in control of my fate.
It’s a bit like changing the water boiler at home – I’d never do that myself, I’d get a professional in.
The rental income pays better dividends
When you look at the income you get on stocks or government bonds or cash accounts, property beats all of these.
Quite frankly I was getting bored taking my 3 percent or 4 percent dividend from stocks, and leaving my cash in the bank just meant I was losing out to inflation.
With property investment I can set the rent I want to charge (in line with the market, of course) and manage my costs around that.
Generally I make around 5 percent to 7 percent gross rental yield, or three times the dividend yield on British stocks.
Sure, I have a mortgage to pay and factor in, but remember I was able to control a much bigger property with a mortgage than if I paid cash with my deposit (and my capital growth is on the whole value) so overall I am still making this 5 percent to 7 percent on my deposit amount.
Fantastic capital gains
Property is always in demand. There’s an undersupply of homes all around the world and even when the market turns down (as it did after the Global Financial Crisis) the property market bounces back quickly when you buy with fundamentals.
In comparison to the Stock Market again, property investment had given me a capital gain over the last 20 years that stock market investors can only dream about.
In fact, had I stayed invested in stocks all that time and suffered the capital loss they’ve produced, my retirement would still be way out beyond the horizon of my future.
I get to leave my kids something real
You know, when I do depart this world I want to leave my kids a real legacy. A property portfolio does that.
It provides shelter to families, and will give my kids an income that a wedge of life insurance money or a pile of stock certificates can’t.
By the way, I’m not advocating for no life insurance – quite the opposite – you need life insurance.
A portfolio of property investments will give my children something on which they can build a future for them and their children, and their children’s children.
Gearing powers my profits
Just like driving a car, when you’re investing in property you get to benefit from something called ‘gearing’.
The engine power is the same, but when you move up a gear, it has to work less hard to move the car faster. For example, if you want to invest in the stock market or government bonds and you have PHP 200,000 and the market rises by 10 percent, you’ll make PHP 20,000.
But if you use that PHP 20,000 as a deposit and borrow PHP 80,000 to buy a PHP 1 million property, when that property rises by 10 percent you’ll make PHP 100,000 – or a 50 percent return on your initial capital.
That’s a huge plus for property investment.
Anyone can be an expert property investor
You don’t need a degree to be an expert property investor. What you need is an interest, and:
- a tried and tested research strategy.
- a conservative method of controlling cash flow; (we call this cash flow discipline).
- a solid property investment strategy.
As with all property investments Dot Property Group suggests you seek legal advice prior to signing any sales and purchase agreement, and also have both a defined and clear exit strategy for all of your property investments.
