Real Estate Reference Why You Should Invest In Real Estate
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  by Alan Forsyth

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Why real estate, or why property, some people ask when looking for an investment. Well, as far as I am concerned, real estate/property investment is, and always has been, the most powerful type of investment for building wealth. It has been said that over 90% of the world's millionaires got there by owning property. The reason property is such a powerful way to build wealth is due to one key concept: leverage.

Once I realised this, I didn't look back. Now if you are an experienced investor this may be obvious, but for the benefit of those who haven't seen the light, let me explain ... Leverage is your ability to magnify your returns by using other peoples' money (in this case, it's usually the bank's money).

To give a clear example, say you have £20,000 to invest. This can be a lump sum or by releasing equity in your main residency.

So what is the best way of investing this money?

Option 1

Stick it in your local bank - by some considered the safest option, "at least you can't lose it, and you get some guaranteed increase in value" usually goes the argument.

Money in the Bank - assumed return: 4%

Now £20,000

1 Year £20,800

5 Years £24,333

10 Years £29,605

As you can see, after 10 years, you've made virtually no progress at all, especially when you consider the effects of tax and inflation.

Option 2 Stocks and Shares

Now over the last 10 years, although admittedly not in last 4 years, the stock market has been very popular. However I cannot accept it is a better bet. When I read that the stock market is a better bet over the next 2 years as will go up by 15% a year, as opposed to the property market that may go up by 5% a year this does not take leverage into account and so paints a very distorted picture!!
 
     
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