Why People Invest In Property - Investing For Capital Return Versus Rental Income

Last updated 15th May 2019 • Ethan MathewsJaeVee

Investment, Investor, Property

While there have been plenty of “fast bucks” made from investing in the UK property market over the years, most investors tend to take a medium to long-term view (six months to five years) and there are a few reasons why this is the case.

For starters, while property in the UK does experience the same highs and lows as any other investment, over the longer-term, values have historically risen over time.

During the last ten years, for instance, values of residential property have increased by an average of 22%!

So who invests in UK property?

Investors and investment companies alike favour placing at least a portion of their capital into UK property as an investment.

Recent changes in the pension rules now allow for retirees to take a cash lump sum and many such individuals are realising the potential that property income can have in supplementing their incomes and lifestyles.

Many astute individuals who need to make financial provision for their future are also utilising property investment as a pension income vehicle.

While property investment may once have been an opportunity for companies and individuals that had access to substantial funds, there are now many projects that require as little as a £5K investment.

Deciding on a short or long-term return

Purely for the sake of clarity, it could be fair to say, that in the main, returns from property investment fall into two distinct categories; profit from sales and rental income.

While “selling on” has the potential to release the whole of an investor’s capital, rental income provides an on-going return and (hopefully) a growth in value.

In 2018 for example, rental returns achieved average yields against property values of between 8 and 10% with some university towns seeing some spectacular returns well above these figures.

While, on the other hand, property values have slowed down somewhat recently, those choosing to invest in new builds and major refurbishments have also been able to sell on for solid profits by investing “off plan” at the initial development phase.

The best of both worlds

Through creative and well-informed exit strategies, astute investors may choose to leverage the benefits of both sides of the property investor guide.

With many of the new wave of multi-investor schemes offering a variety of exit options, investors can choose the one that suits them best.

By agreeing to keep their capital in a project for a pre-agreed period of time, investors receive both favourable rental returns and benefit from any value increase at the time they exit the investment.

The same strategy could be applied to the more traditional property investment format too with an investor choosing to rent a property out for a predefined period before selling on to recoup (and hopefully make a profit from) their initial investment capital.

By maintaining a varied portfolio, over time, property investors are then able to release funds for continual reinvestment in the developments of their choice.

Find out more about investing in some of JaeVee's current projects.

Please note, this blog post is not to be considered as investment advice. We recommend you seek independent financial advice and conduct your own due diligence before making any investment.

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