5 Reasons Why Investing in Property in Hull Will Create Wealth

This article aims to educate the reader on the 5 fundamentals of professional property investing specifically focused on the city of Hull in the East Riding of Yorkshire

The topics covered

 

  1. Leverage
  2. Return on Investment
  3. Rental Demand
  4. Stress Testing
  5. Exit Strategy

 

Leverage

When investing in property you can benefit by borrowing from the bank using the power of leverage. Typically, a buy to let mortgage requires you to put a 25% deposit down and the bank will provide the remaining 75% of the purchase price of the property. Where else can you Lentor Modern Price get them to do that? Banks will lend you money to buy property. They are less likely to lend you money to grow your business and they definitely will not lend you money to buy stocks and shares. They understand that property is still a safe secure asset despite what the media says. To show you the power of leverage lets show you an illustration. You have 100,000 to spend on an investment property. The following scenarios show how you can spend that money

Scenario 1 – Buying 1 property worth 100K with all your cash

Buying 1 house without a mortgage. Put down 100K and buy the property outright. The following year inflation raises the price of that property by 5%. The property is now worth 105K. You now have a property worth 105K and an equity of 5K in that property.

Scenario 2 – Buying 4 properties each worth 100K with a mortgage on each

You put a 25K deposit down on each property and a mortgage for the remaining 75K, spending all your 100K across 4 properties not just 1 property this time. The following year inflation raises the prices of that property by 5%, the same as scenario 1. Each property is now worth 105K. However, now you have 4 of them so benefit from the 5K equity in each one. So you now have 20K equity instead of the 5K in scenario 1. You have still spent the same amount of money but have benefited from leverage of money from the Bank.

2-3 bedroom properties in Hull can be bought for between 40-100K. They offer a superb opportunity to leverage your cash

Return on Investment

The return on investment is defined below

Return on investment = Gain of Investment – Cost of Investment / Cost of Investment

In basic terms, how hard is your money working for you. You can choose to invest in a new business venture, shares on the stock market or property. Each wealth creation channel has its own return on investment together with its associated risk. As a professional investor you have to weigh up your appetite for risk and potential return on your investment. Lets revisit the 2 leverage scenarios and examine the return on investment

Scenario 1 – Buying 1 property worth 100K with all your cash

Return on investment (ROI) is 5% e.g. 5K/100K

Scenario 2 – Buying 4 properties each worth 100K with a mortgage

Return on investment (ROI) is 20% e.g. 20K/100K Hull is a great place to start your professional property investing career because of the great return on investment. The reason is that property prices in Hull are among some of the cheapest in the UK. So, the cost of your investment is lower. This means not only can your money go further ie. you could buy more properties but each of those properties will go up in price and if you’ve leveraged your investments with mortgages your return on investment will be even greater.

 

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