People ask me a lot. Why did I get into property? Why do I continue to invest in property?My answer, is that, I look at the richest people on this planet, and I realised something, that is, that the wealthiest people, the richest people right across the planet, no matter what country they're in, they’ve either made their money from property, or they invest their money into property. Their success leaves clues.
Why do they invest money into property? One of the main reasons, it's because it's the safe place to invest their money. Many of them have actually made their money through property, through investing in property in the first place.
If that's not a good enough reason in itself, as to why you should invest in property, why I invest in property, then I don't know what it is.
I'm going to talk you through the 10 reasons why I believe now, is, the perfect time for you to be investing in property, and why property is one of the safest investment vehicles that you can invest in.
Reason No. 1: Population growth
Reason No. 1. If you're investing in UK property market, reason number one, is, population, the population growth.
I've done some research. We've got some data here. Apart from the fact that we live on a small island, and it ain't getting any bigger, they're not building any more land. The island is the size that it is. But the data tells us that the UK population has increased by a record of 8 percent. 6 million people increase in the last decade alone. So, the population at the moment stands at just over 66 million people. 66 million people on a small island. That's getting bigger and bigger every single day. But we've got no more space. So, there's a huge, huge housing shortage.
But in the next 20 years, the number of UK household is expected to reach 28 million people. So, 28 million different UK households in the next 20 years. We're not building houses quick enough. That's an increase of around 250,000 households every single year. 250,000 a year increase! And we're not building anywhere near that sort of supply of houses. So, that's supply and demand immediately. Supply is not as much as demand, which is creating the need for housing, the need for rental, and pushing house prices up, pushing rental prices up.
During that same period, the next 20 years, single person households are going to increase a further 3.2 million. Households, where individuals live, and that's due to divorces, people living longer. One member of a couple living longer, or people getting divorced. And I'm seeing that myself personally in our portfolio, in our letting agency. There's lots and lots more people are looking to rent smaller properties. One-bed flat and more people are looking to live in rooms. Rental accommodation by the room. It's why rent-to-rent is such a great strategy right now, because lots of people want to live by the room.
We're seeing divorces at about 50 percent in the UK. Most people unfortunately in marriage, have marriages falling apart. People get divorced. Many people I know have been divorced 3 or 4 different times during their life. Single person households, huge, huge opportunity in the next 20 years for smaller accommodation across the country.
The UK is even more crowded now than any other European Union or G8 country with 402 people living per every one square kilometre. That's phenomenal amount of people within a square kilometre.
Some data around that from other European countries. Our population density is 4 times that of France. The UK is 4 times more densely populated than France. In the next 20 years, it's going to be doubled that of Germany. Now, Germany is a country which is 3 times larger than ours. So, they have space. But we're going to be doubled the density of Germany in the next 20 years. It's getting bigger, and bigger, and bigger all of the time. Our grand kids are going to have even bigger populated country.
Housing is a huge need. People need to live in houses. There will never be a shortage of the need for housing in the country. But what there is a shortage obviously, is, the actually houses themselves, which are pushing those prices up. We're not building enough stock. But the most scary thing, is, we don't seem to have a plan to build enough stock.
Just some data around the Government: the latest estimate, is that, around 232,000 new properties will be built in England every year. 232,000 new properties, but we need as a minimum 250,000 just to meet the current demand, without ever catching up on the shortage that's currently there at the moment.
The number of new homes being built right now, is, at its lowest points since the 1920s. For the amount of construction that's happening in the UK, for the amount of ability that we have compared to the 1920s to build houses, we're not building them. And a lot of that is down to cost. So, the cost to acquire the land, the cost to build the houses, the availability of the brownfield type sites to build the houses on, it's all about numbers. It is not cheap to build houses, and for developers to make money from it. But that's a huge opportunity for us, as property investors, to bring all the housing stock back into use. There are hundreds of thousands of empty homes right across the UK, empty properties, rundown properties, vacant properties that you could bring back into use to help fill the housing supply, to help ease the housing stock and housing shortage.
Reason No. 2: Generation rent
We are right now bank in generation rent. More and more people all of the time are renting, because they cannot afford to buy property. But not only just because they cannot afford to buy property, a lot of people don't want to now buy property.
There's a lot of people, younger people, younger generation, and they prefer to rent. They prefer to be able to have the freedom to move. So, move jobs, move country and travel a lot more than being tied down to owning their own property.
The UK over the last numbers of years, probably through history have much more owner property, ownership mentality than a lot of other countries, especially across Europe. If you look across Europe to countries like, the Netherlands, Germany, France, people tend to rent a lot more than they do to own property. And that type of idea is now beginning to come into the UK property market, where people prefer to rent, and have the freedom to travel, the freedom to move than actually being tied down to that mortgage.
But even without that, there's still the affordability problem. The average age of a first-time buyer right now in the UK, is, mid 30s. That's right across the UK. But the average age of a first-time buyer in London and the South East, is, mid 50s. Mid 50s is scary. It really is. Most people now when they're looking to get a mortgage, generally, they're looking for the deposit to be prepared and given to them by bank of mom and dad to help them out with the deposits. When you're looking at mid 50s, mom and dad only to have to provide the deposits either. So, this problem is going to get bigger and bigger over the coming years.
If you want to get into property, if you want to ensure that your children, your grandchildren, your great grandchildren can get into property, then you need to be the one that starts on that property journey today to protect them and look out for them in the future.
A recent report I wrote stated that a quarter of the UK population will rent by 2021. A quarter of the population, 25 percent of people will be in rental within 2 years' time.
I'm somebody who'd rented for a number of years. myself personally. I lived in shared houses. I was renting only 4 years ago. Then in the last 4 years, I've moved through my property journey, built up my own portfolio, and bought my own home. But the first 3 homes I lived in, I actually had on rent-to-buy. One of the strategies that I teach at the No Money Down training at Progressive, is, all about rent-to-buy, and making a tenant a tenant buyer.
If you're currently in rental, or if you know people who are rent rental, but you want to help them get on the property market, then tenant buyers rent to own is a brilliant strategy to help people, or help yourself, either move onto, or move up the property ladder.
For me having being on both sides of the rental side and the purchase side, rental is great. Yes, you can move around. I went for something to eat before this podcast. And I was sitting in a restaurant. There were 3 people I overheard having a conversation. One lady was talking her friends about them trying to sell their home at the moment, because she wanted to sell their property to fund her marriage, to fund her wedding.
I was thinking, "oh my god, you're going to sell your house to fund your wedding. This is crazy." But the conversation went on. And I kept listening. What she said next, scared me even more. She said that one of her friends asked her, did she consider renting the house out, because what happened, if she hadn’t find the buyer yet? She said, yes, we looked at renting it. But the problem with renting, having tenants, is, they’ll probably ring up some day, and say, the washing machine is broken, and we'll need to fix it. Or, there's a problem with the boiler. And that's just way too much hassle.
I'm sitting there as an investor thinking, the rental income, the money you can make from rental income will pay for 10 washing machines, will fix 3 boilers, will put a new boiler in. And you're saying, it's way too much hassle. So, you're going to sell the one asset that you have, your property. You've been lucky enough to get onto the property ladder. And you're going to sell that property so that you can move back into rental, to fund your wedding. Find another way to fund your wedding. Take out a loan, if you have. Take out a credit card, but keep the asset. Keep the property.
It scares me, that the mentality of the younger generation, is that, rental is a good thing. Rental maybe a good thing to move around, but it's not a good thing to build your wealth. If you want to build your wealth through property, then you need to be buying property. Whether it's securing the property today and buying it later, with strategies like, lease options or tenant buyers. But you do need to be securing property for your long-term legacy.
Reason No. 3: Leverage
Property allows you to leverage lots of different stuff. But let's focus initially on leveraging money. So, property allows you to leverage your money more than any investment class that I can think of.
You could invest £100,000 of your money in stocks and shares, and get £100,000 worth of stocks and shares. And yes, they might go up 8 to 10 percent a year. Let's say, you have £100,000 worth of stocks. They go up 10 percent a year, you're going to make £10,000 on your money. But now, take the same £100,000 and invest it in property. You can leverage the bank’s money. You can get your £100,000 and put that in as 25 percent deposits in property, and buy £400,000 worth of property. So, the bank will lend you 75 percent, 300 thousand, and you put in your 100 thousand. That's giving you 400 thousand worth of property.
If the property market doesn't go up as high as stocks and shares so stocks and shares go up 10 percent a year, you're making 10 thousand on your 100 thousand. Let's say, the property market only goes up half of that, 5 percent a year. Property market has gone up to 5 percent a year, but it's gone up 5 percent on your 400 thousand. So, you have 400 thousand worth of property. That is 20 thousand a year. So, your 100 thousand investment is returning 20k or 20 percent return. You've doubled the amount that you'll get on the stock market just by using leverage.
Leverage is one of the most powerful tools that you can use in property. That's leveraging money. But you can leverage everything. You can leverage letting agents to manage the property for you. You could leverage estate agents to go and find the property. Or, you could leverage a property sourcer to find you the property. Once you've secured the property through an agent, you can leverage solicitors. You can leverage mortgage brokers to get you a mortgage. You can leverage builders to do a refurb for you. Once you've got the refurb and everything done, you can leverage a handyman, a local handyman to do all the maintenance for you. You can leverage cleaners to clean it for you.
The thing about leverage, is, you can literally outsource everything, leverage everything, and yet retain most of the money. That's one of the things I love the most about property investing. It's the ability to be able to leverage so, so much. So, you get to live the life that you want to live, but have the income that you need at the same time without having to exchange your time for that money. But you can use other people’s time to create that money for you.
Reason No. 4: Instant equity
With property, you can make your money the day you buy. You can secure a property below market value. Let's say, you have 100k house, you know it's worth 100k. A house nearby sold for 100k in the similar condition. You've done your research. You've checked your comparables on Rightmove, on Nethouseprices, on all these comparable sites. You've checked recent sales. You've checked what's currently on the market. And you've found this house, its value is 100k. But you can secure it for a purchase price today of £80,000. You're immediately building in 20k equity. You're making yourself 20k today. If you sold that house in 3 months' time for 100k, you will make £20,000 profit.
There's no other asset class, nothing else that I know of that you can secure an asset today, and build it in profit on day one. It's phenomenal what you can do with property. But it's not just about securing it below market value. It's about the potential future added value. I don't mean through capital growth, but how can I add value to that asset.
Looking at a house, for instance, and a number of deals that I've done, if we take a 3-bed house and convert it to a 5 or 6-bed multi-let property, massively increase in value of that asset. The same house, but completely different value to the asset by just changing the way that the alignment of the property, changing the layout of the property, changing the use class of the property.
Property, you can add instant equity to it, or you can add value to increase the equity in a short period of time, in fact literally a matter of weeks. There's no other asset class that I know, that you can do that with the way you can do it with property.
Reason No. 5: Timing
I hear so many people say, I'm waiting for the right time to buy property. I'm waiting till after Brexit. I'm waiting till after the Government changes. Way back in 2000, they were saying, wait until after the millennium bug, if it happens or not. Then the crash came in ’07, and they weren't going to buy, because there was a crash. Then they’ve probably started to rise, and I heard the same people saying, the house market is rising now, I can't buy. It's going up. I've got to wait till it comes back down.
What it is, is, a bunch of excuses about why you shouldn’t get started. Here is the thing that you should do, is, you should buy now. It doesn't matter, whether we're in Brexit or not. It doesn't matter if laws are changing. Laws change all the time. It doesn't matter about a recession or a rise. What matter it that you buy property now, and you make money when you buy. You secure the property at the right price. You're not buying on the hope that it might go up in value. That's gambling. You may as well go down to the casino and just put all your money on red or black. You're buying with the right knowledge, the right understanding of what a good property is,| that makes you money, that you can add value to, that you can buy below market value, are secure and buy later building in value.
It's about making sure you've got cashflow. So, don't buy a property, just because it's below market value, but it makes you no money every money. You have to buy for cashflow. A property must made you money every single month. Otherwise, what was the point in buying.
Now, if you buy building in value, building in a property that's going to cash flow every single month, then it doesn't really matter, if the property market goes up, down, or sideways. When the crash came in ’07, loads of people couldn’t survive, because they were buying for equity growth, for capital growth. They ended up having to sell, go bankrupt. Lots of property investors went under. But they weren't professional property investors. They were buying for the wrong reasons in the wrong way. If you buy for cashflow, investors that bought for cashflow, could ride out the recession. Because interest rates dropped to the lowest that's ever been in the recession, the lowest in history. That allowed people to hold on to their properties, and made more cash.
Progressive Property grew massively. Rob Moore and Mark Homer, the Founders of Progressive, they grew their business massively through the recession, because they were able to pick up assets that are very low price. But they haven't stopped buying today, just because the market is beginning to move a bit. They're buying even more now.
So, you've got to be consistently buying. I buy property every single year. My aim is to buy one property a month this year. I bought one a month last year, and the year before. I want to average at least one property a month, every single month as a minimum. So, this week, I've secured 2 deals, which gets me to 4 this year. And I want to continue that through the year. Why? Because I'm not worried about recessions. I'm not worried about Brexit. I'm just focussed on getting property income in, cashflow in, and holding the property long term.
Mark Homer has a saying, you don't wait to buy property. You buy property and wait. The property market is higher today than it was in the biggest crash in history in 2007. When the crash came in 2007, people were panicking about property that it would never return again, that nobody would ever make money in property again. The house prices would never be as high again. And they panicked and sold. Fire sale. House prices are higher today than they were then. It's just 12 years later.
They're going to be higher in 10 years' time than they are today, and higher again in 20 years' time, and in 50 years' time. So, get started in property today. Stop procrastinating. Stop waiting for the right time. Now is the time. Now has always been the time.
Reason No. 6: Section 24
I meet many people right now, panicking about Section 24. For anyone who's listening, who's not aware what Section 24 is. The Government brought in a new law last year, that meant, that landlords, anyone who has more than one property, so from a second home onwards, anyone with a second home, or any investment-type landlord, anyone with rental properties, they would no longer be able to claim their mortgage payments as a tax-deductible expense.
So, as of April last year, if you've got a mortgage on a rental property, you now have to pay tax on that portion. So, it's seen as profit, even though you've got to pay a mortgage on it. Now, a lot of landlords had been buying properties in their personal name. They built up big portfolios of properties in their personal name. These properties, if they're bought in your personal name, landlords that were making money, have now gone from making a profit into making a loss, because of the tax that they have to pay on that mortgage portion. To avoid this, you can buy properties within a limited company. So, that in the moment in a limited company, your mortgage portion is a tax-deductible expense.
However, the cost of moving properties from your own name to a limited company, and this is something that's possible within corporation relief, but the cost of doing that can be excessive, depending on, if you've got fixed rate mortgages, if you've got low mortgage payments, because limited companies would be higher. If you own the properties personally, or you own them with your life or business partner, but in your personal name. So, there's 2 people are more on the mortgage. All of these things create difficulties with moving properties. So, a lot of people, what their choice is, is, to sell. Sell their properties to avoid the extra tax.
Now, because there's a lot of these properties hid in the markets, landlords that have them are not getting the price they need. They're getting taxed every single month that they keep the properties. This means that a lot of these landlords are open to take in offers for their house, whether that be a straight cash offer below market value, or using a creative technique like, exchange with late completions or lease options. They are open to getting rid of their properties and getting rid of them quickly. This absolutely a mass opportunity for you to get started in property, and to benefit from these opportunities.
Reason No. 7: Brexit
Brexit is clearly all over the news at the moment. We don't know, if we're leaving, staying, what's happening around Brexit and the European Union. But this is what things like Brexit cause. They cause the newspapers to hype things up, that this major crisis is coming. One thing is for sure, that people will still need to live in houses, whether Brexit happens or not. People need homes to live in.
But what Brexit is causing, is, it's causing a major problem with manufacturing, major problem in industry. You've seen in the news over the last few months, lots of car companies are shutting down. They're saying they're leaving the country. There's a lot of people who are facing job losses over the coming months. I don't think we even realise how bad that could be yet. We don't know. None of us know. But what we do know as a professional property investor, is that, we need to be ready. We need to be ready to make successful property purchases during this period.
Whether it be Brexit or not, a lot of my tenants, a lot of people I speak to locally on the ground in property day in day out, are on zero hours contracts. So, zero hours of contract came in a few years ago, wherein lots and lots of companies are using zero hours contracts now. They benefit for companies of zero hours contracts, because they don't have to pay as much National Insurance, and PAYE, and all these sorts of things for employees. These employees though, they’ve got no guarantee of a job.
I remember years ago, when I was growing up, and my mom and dad used to always say to me, get a good job and a good company, you'll have a job for life. You don't have a job for life anymore. There's no such thing really there's jobs for life.After Brexit, maybe that sort of thing will come back in again. But right now, with all these uncertainties, there's no jobs for life opportunity out there for many, many people across the country. This means there is uncertainty for them instead. And a lot of these people are facing repossession. A lot of people who've bought their dream home, had the opportunity to get the chance to buy their home in the first place, they end up getting repossessed due to life and circumstances changing, whether that be job loss, or whether there be other stuff like divorce. These people have got a situation that they need to sell their house quickly before the banks take that property off them.
However, if the bank takes the property off them, they don't just kick them out on the street, and don't care about where they're going. They’ll give them bad credit. They’ll give them a bankruptcy. It'll take them years to get back, and get a good credit file, a good credit rating.
You can help these people by securing their property purchase. You could use a lease options to secure the property, pay the mortgage for them, allow them to move on with their lives. And then you rent that property out for a profit. But it saves them from bankruptcy. It's a true route win-win opportunity.
So, these types of opportunities are going to become even more available in the coming months as things start to happen with Brexit. As Warren Buffett once said, be fearful when others are greedy. But greedy when others are fearful. And right now, Brexit is one of those moments, where a lot of people are fearful about what's happening in the market. A lot of people wait and worry about getting into property, because of all this uncertainty while the educated investor is in there making a killing right now, making money from property deals. Because once, it's all settled, you will have missed the boat. Don't miss the boat.
Reason No. 8: Pensions
Over the last few years, more and more people are waking up to the reality that their pension is not worth what they had thought it was, or what they hoped it was going to be worth. There may be some good pensions out there, but majority of them are not great. It'll depend on location, around job, around what you're paying in.
But over the bigger scheme of things, most people when they hit retirement, do not have enough income from their pension to cover their cost of living. Their living cost that they’ve got used of in the job, the day they walk out the door of that job, and start to rely on their pension, their income generally goes down by about 70 percent, huge, huge drop in terms of the money that they're bringing in every single month. There's a pension shortfall. The retirement age is getting longer and longer all the time. People that are born today, when they retire, they're going to be in their late 70s, maybe, early 80s. Our grandkids even older. Retirement age is getting further and further away, because of the pension shortfall.
Just one buy-to-let property, just one investment property bought in the right way so by building in equity, building in cashflow, that one property can supplement your retirement. Just one! Can you imagine, if you have 10 though, 10 buy-to-lets properties, each one bringing you an income every single month.
Not only have you got cashflow from those properties, but you've also got something that you can hand over to your kids that they can give to their grandkids, et cetera.
When you die with a pension, generally the pension dies with you. There is stuff like SSAS. So, a lot of people I know have invested in a SIPP. But there's also a SSAS so, small self-administered scheme. With a SSAS, you can convert your income, your pension pot into a SSAS. You can lend 50 percent of that pension pot to your own limited company to buy property with it. That's phenomenal. But you can buy not just commercial property, you can buy residential property.
So, what I do with my pension pot. I've got it in a SSAS. I lend 50 percent of my pension pot to my limited company to buy residential property with it. Then I lend the other 50 percent of my pension pot to other property investors, people like you. And I lend that out for you to do bridging. to buy your property. So, ,you can use my pension pot funds to buy your property. You pay me an interest on that money. So, I'm making money through buying property within my limited company with one half of my pension pot, and I'm making money by lending the other half out.
But here's the thing. In my 10 plus years in employment, in a big major company in the UK, I was paying into my pension pot the maximum I could, and they would contribute to that as well. But I was making nothing like I'm making with my pension pot today, using property to grow the pot. If you make profit from your limited company as well, you can pay money into your pension pot.
You can pay money from your limited company into your SSAS pot every single year up to a maximum of £40,000 absolutely tax free. So, you can pay £40,000 into your pension pot tax free, and immediately lend £20,000 back to yourself, tax free. So, huge opportunity to be creative to make more money, using your pension pot that might right now be sitting there making you nothing.
Reason No. 9: Property investment
Putting your money into bricks and mortar is much better than leaving it sitting in the bank. Bank returns. So, if you've got money sitting in a bank account, the interest you'll get on that money is somewhere around less than one percent. On average, a good buy-to-let property will be bringing you in about 7 percent return year on year, much, much higher returns than you're going to get from a bank. Now, that's just a simple single-let property.
But let's look at multi-let type properties you can get 10, 15, 20 percent returns on your money, without ever buying below market value, without ever adding value, just simply by buying the asset. Now, you can scale your returns by doing all of those creative things with that property.
People years ago, my mom included, I was always told growing up that there's nothing as safe as cash in the bank. That's not true anymore. That's not true at all. Maybe, some cash in the bank is safe. But once you've got £85,000 plus of savings, your money is not protected. If the bank went bust tomorrow morning, your money or anything over £85,000 will be gone. No protection whatsoever.
Many of us might still remember the Northern Rock crisis in the late 2000s, when there were queues of people down the street outside Northern Rock Bank, looking to draw out their money. If similar things happen again in the future, your money is not safe sitting in that bank account.
But even if it doesn't go bust, even if the banks do survive, even if there isn't another Northern Rock type crisis, your money is still getting eroded, eaten away by inflation. Inflation, if it is higher than the interest you're getting in the bank, so, if you get less than one percent in the bank, and inflation is at 2.5 percent, your money is eroding by 1.5 percent a year. If you've got 100 grand sitting in the bank account today making one percent a year, and inflation is 2.5 percent, you won't be able to buy this same amount of stuff with that 100 grand in 12 months' time as you could buy with it today.
However, putting that money into property, into bricks and mortar, protects it from inflation. It protects it from a run on the banks. But it also protects it mainly from inflation. Not only does it protect it from inflation, but the capital growth of the property makes it a double win for you. So, years ago, yes, maybe there was nothing as safe as cash in the bank. Right now, today in today’s world, there is nothing as safe as bricks and mortar.
Reason No. 10: Political and economical stability
Whatever you might think about Brexit and our Government at the moment, the fact still remains that we are in one of the most politically and economically stable countries in the world. I learn to my horror back in the early 2000s, what could happen when you invest in a country that is not economically and politically stable. I've invested in countries like, Estonia, Bulgaria and Turkey. I lost over £100,000 on investments that were never stable property investments.
Here in the UK, we've a stable property market, probably, the safest property market in the world, anywhere in the world. We've got a democratic country, a democratic Government. You can go to different countries all across this world. They are war torn. There is death. There's disease. You cannot walk down the streets safely in a lot of areas. You have properties that are valueless. You've got currencies that are in chaos right across the world. Right here in the UK, sometimes, we forget just how lucky we are. We live in a great country that has a stable economy, that allows us to build businesses, allows us the freedom to become wealthy. The freedom to live our dreams, if we have the willingness to go out there and go for them.
I'd like to leave you on that point of go out there and live your dreams. Go out there and hit your goals. Set your goals. Aim at them, and hit them.