We live in a world where every second counts, stocks and shares can be bought in a split second and everything moves so quickly. However, the world of property investment has seen very little real change when it comes to long-term investment strategies. Yes, there may well be chances to lock in a short-term profit with an opportunistic buy but this should probably be seen as more of a bonus than a regular strategy. So, what are the benefits of taking a long-term approach to property investment?
It is very rare that you see huge volatility in the value of homes although there are occasions, such as the 2008/9 economic downturn, when things can change very quickly. As long as you pick the right location, pay the right price and obtain the market rental rate, there is every chance that you should enjoy long-term capital appreciation from your property portfolio. This is why it is better to follow long-term trends as opposed to short-term fads which can often disappear very quickly. Whether investing in shares or property, the likes of Warren Buffett and George Soros have made their fortunes by taking a long-term approach to investment. If it works for them……
Flexible job market
For many years we have heard experts discussing how the future job market would become extremely flexible. While not necessarily a trend which has caught on across the world, there are particular areas and particular industries where employee flexibility is a necessity. This opens up the potential for not only short-term letting opportunities but also the ability to work with corporate entities to service their often constant flow of employees. Even though the Internet has literally taken over the world of business, there are still many industries which require physical work and face-to-face interaction. Focus on these and there is significant money to be made.
Long-term rental yields
There is a general misconception that rental yields are useful but not an integral part of long-term property investment. True, the actual yield on your property investments may remain fairly static in the short, medium and long-term. However, as you hopefully see long-term appreciation in the value of your property, rental income in terms of cold hard cash should increase as time goes by. Those who have fixed loans/fixed mortgages will see a growing surplus of rental income as capital values grow, rental yields remain steady and actual rental income trends higher.
A growing population
Whether you are looking at the UK, the US or any other leading country around the world, there is a general trend towards growing populations. As a rule of thumb, the vast majority of governments around the world have failed to keep up with population growth and the need for more and more newbuilds. If we look at the UK in particular, this is a country which is literally hundreds of thousands of newbuilds behind the trend. While many have promised, few governments have delivered in what is now becoming an acute housing crisis which is almost certain to get worse before it gets better.
As a consequence, demand for rental properties will continue to grow, rental yields will trend upwards and those with buy to let property portfolios are in a very good position. That is not to say there will not be a time to sell elements of your property portfolio and reinvest elsewhere. However, if your initial research is accurate, you bought at the right price and manage your properties correctly there is no reason why you cannot enjoy significant long-term capital and income growth.
When looking towards property investment it makes sense to take a long-term approach although if short-term opportunities emerge then there is nothing wrong in taking them. Finding areas likely to attract long-term population growth is the Holy Grail for many investors. These areas ensure healthy demand for rental properties, and properties to purchase, which can create situations in which investors can cash out while markets are “hot”.