What if property prices double in the next 10 years? Historically, they have doubled every 10 years in the UK (UK Property Prices). Like with any market, there are no guarantees with the UK Property market. This is on average and it is based on data spread across the whole of the UK. Prices rise faster in certain areas.
This week’s blog is about capital appreciation or potential capital appreciation. Based on what’s going on in China with Evergrande, house prices doubling is probably a big if. But we’ll roll with it anyway just to highlight the possibility of house prices going up.
Over the last few years, I have started to think about cashflow when buying houses. Any capital appreciation is a bonus. Let us look at that potential bonus …
The houses I am currently looking at range between £80k and £120k. We will use £100k as an example.
Imagine you have £60k in a less than 1% savings account. And you decided to buy 2x houses at £100k each:
- You would need roughly £30k for each property
- £25K deposit (25% deposit with a 75% LTV mortgage)
- The other £5k would cover legals and light refurbishment
- This means the £60k would buy you 2x decent BTL rentals. Maybe not in the South but you would get 2x in the North East
Not only would you benefit from positive cashflow, you have potential capital appreciation. From my experience £250 pcm is easily achieved when looking at profit from a single let. If you want to increase your cashflow, you can look at HMOs or other creative strategies.
If the 2x properties doubled in 10 years, you would have £200k in equity. And well on your way to FI (Financial independence). Or you could keep it in that savings account at <1%.
Even if you managed to get 1%, your 60k would turn into £66,307.49. That means you have earned £6,307.49 with your savings account.
That is £193,692.51 less than if you had bought the 2x houses.
Property is a no brainer for any investor. And this example proves the point.
There is a lot going on in the North East. It is a great place to live and there is a lot of things happening work wise.
This is evident in Teeside. And this is due to Teesport being a Freeport. It is attracting a lot of interest from some of the biggest companies in the world.
If you believe what you read, the Freeport is set to create 18,000 skilled jobs within 5 years. And this will boost the economy by £3.4billion (Freeport). Darlington and other parts of the North East also have a lot going on.
The Freeport is set to welcome offshore wind, clean energy, chemicals and process, and manufacturing sectors. If you live in Teeside, this good news is well over-due.
House prices should rise in the North East to catch up with other areas in the UK. Remember, there are no guarantees, and this is only my opinion. Not only that, but the influx of work will also add fuel to the fire. I am confident that there will be house price rises in the North East in the next few years.
Taking everything into account, the house prices could increase significantly over the next few years.
What to do …
Get out there and start looking at buying a rental or a few rentals (Numbers game).
If you live in the North East, I would definitely look at buying rentals. You can benefit from cashflow and potential capital appreciation.
Learn from some of the lessons at duffmoney ltd. Read some books and educate yourself.
What if you don’t have the deposit money? There are ways of buying without any of your own money. Read the excellent Property Magic (by Simon Zutshi) to find out how.
There are also free webinars on YouTube with a lot of material to educate yourself. Educate yourself on property and how to invest using other people’s money.
DUFF PROPERTIES help people who need to sell their property quickly and investors get an excellent return on their money.
Book of the week: Property Magic, by Simon Zutshi. I have recommended this excellent book in previous posts. But it is well worth a read. It will improve your financial literacy. And take your property knowledge to another level. If you haven’t got any spare money for deposits, it will show you how to invest using other people’s money. A must for any property investor.
For a hard copy visit the excellent Imagined Things Bookshop: Imagined Things.