Why We Believe Investing For Income Is The Best Choice

Why We Believe Investing For Income Is The Best Choice

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With UK interest rates stuck at historic lows and showing no signs of increasing any time soon, many investors have come to realise that there’s little difference between a savings account and leaving their money underneath the mattress.

Leaving money in the bank might be the safest option, but it is also one which will see the value of those savings gradually whittled away.

Income investing is becoming increasingly popular – here are seven reasons why we believe it is the best way to secure your financial future.

1. A little risk goes a long way

To enjoy any sort of income from investing it is necessary to accept some risk, however the key is to find that sweet spot where the risk is acceptable given the potential and predicted returns.

Income investing can allow that balance to be found. Whether it is in property or established companies with a history of solid dividends, money can be put into areas which show historic stability.

Areas, sectors and businesses which survive recessions, fashion and the volatility of other markets.

2. There are safe options – major companies with a track record

Income investing does not have to be in risky start-ups or areas tipped for massive growth but with high risk.

In fact, while such options might work out in the short term, in the longer run the established areas tend to be the ones which not only offer stability, but also provide the better returns. You can have your cake and eat it (speaking of which, huge bakers aren’t a bad investment – people always want cake…)

Larger established companies have exited periods of rapid growth and expansion, so rather than reinvesting any capital tend to offer attractive dividends.

3. Potentially have two means of making money, yields and capital growth

When income investing it’s possible for two ways to enjoy a return.

Take property for example – admittedly our area of expertise. Invest in a rental property and there are the yields from rent, but also potential capital growth too.

Two ways to enjoy a healthy return – that beats savings and its big fat zero ways to make a decent return.

4. Helping to grow the economy 

This might not be your key concern, but income investment does help perform an important job. It helps keep the economy moving, it provides funds where they are needed, importantly to well-run businesses.

If investing in the UK, it helps keep our economy healthy and competitive, if investing in property it helps improve the housing stock and provide affordable housing.

Invest wisely and you can go to sleep with a healthy self-satisfied glow to accompany that healthy bank balance.

5. You can have range of different investments, some low risk, others with the potential to offer great returns

When investing, it is paramount to build a portfolio to help spread risk and with it maximise returns.

You can invest for income and do this by investing in a range of businesses, in a range of property or even a mix of the two.

Some industries offer healthy dividends no matter the economic circumstances of the day – pharmaceuticals for example and others providing products and services which are always in demand. Others such as car manufacturers and those producing luxury products are more likely to be affected by the prevailing economic mood.

Property, being in obvious demand, is firmly in the safer camp. That said, a little risk as part of a portfolio can go a long way – would Apple or Microsoft have seemed safe investments a few decades ago?

6. Healthy growth of dividends

The days of living three score year and 10 are long past – with a fair wind there’s a fair chance any of us could now live to our late 80s and beyond.

Great news on one hand, but it does mean those investments made in advance need to keep paying out for longer than you might imagine – especially as who knows what pensions will look like by then…

The percentage  increase in dividend pay-outs could be absolutely crucial – a difference of a few percent could more than double the annual dividend a few years later.

To reiterate a point made higher up, income investment in solid options enables you to tap into dividends which pay out, and pay out, and keep paying out – hopefully for many, many years to come.

7. Bricks and mortar

We’ve hinted at it above, but property can be an ideal investment for those seeking an income.

Traditionally, buy to let investing has been appealing but only available to those with sizeable savings pots – especially given the need to invest in multiple properties to spread risk.

However, the emergence of crowdfunded property investment means that smaller sums can go a long way – for example a £20,000 savings pot could be used for 10 stakes of £2,000 each in different properties.

With crowdfunded property investment also a passive investment, there is none of the red tape of going it alone as a landlord, or the worry around ever changing legislation on Stamp Duty and mortgage relief…or the coming difficulties of getting a buy-to-let mortgage.

With property investing, there is always a tangible asset behind the investment.

As you might have guessed, the House Crowd is a property crowdfunding investment platform.

If you do want any more information on property crowdfunding, please have a look round the site and register for more information.

And however you choose to invest, we wish you the best of luck.

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5 Reasons Why Manchester Is The Top Place To Invest In Property

mcr salfordIt was great to read this week on the BBC website that the Chinese are investing heavily in the Manchester property market – many of them now preferring it to London. It is bound to help boost the economy and inevitably push house prices higher – which may be good or bad depending on your viewpoint. You can read the article here: http://www.bbc.co.uk/news/business-36086012

I also read this week the Jones Lang La Salle’s report on The Northern Renaissance and their belief that Manchester is the best place in the UK to invest in property as it provides both healthy yields and excellent prospects for capital growth.

You can access the full report below, but here are just a few key points from their research:

  • Manchester sits at the heart of the Northern Powerhouse, a brand that is gathering real momentum.
  • The residential market is the strongest outside of London and has more growth opportunities over the coming years than any other city in the UK.
  • The ongoing infrastructure investment via the Metrolink extension, the airport and HS2 give the city added momentum going forward.
  • 2016-2020: predicted house price growth of 24.6%
  • 2016-2020: predicted rise in rental income of 22.8%

What this could mean for an investor who currently generates a gross yield of 9% on a property worth £100,000, is that over the next 5 years his/ her rental income will increase from £9000 a year to £11,052 per year and his/ her property will increase in value to £124,600. That makes a forecast gross annualised return of 15.9% (before deduction of the usual costs).

 

Access the full report here

 
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Unfamiliar With Bridging Loans?

Here are our two most frequently asked questions about these types of loans:

Why do borrowers choose bridging finance?

Borrowers choose bridging finance for a variety of reasons. We have listed some below:

  1. Speed of funds – bridging loans can be up to 12 weeks quicker to complete than a conventional mortgage. This can assist the borrower in a number of ways such as:
    a) 28 day exchange/completion for an auction purchase.
    b) Maximising a business opportunity
    c) Repayment of a tax bill
    d) The renovation and sale of an investment property
  1. Mortgage criteria – most mortgages are based on income multiples, however as all of the costs of a standard bridging loan are deducted from the gross advance there is much less emphasis on how much the borrower earns.
  1. Credit profile – if a borrower has a poor credit history they are unlikely to obtain a standard mortgage. Where a borrower is looking to repay a bridging loan via the sale of the security the credit profile of a client has less impact.
  1. Where funds are only required for a short period of time, typically 6 to 12 months.

What happens if the borrower defaults?

If the borrower fails to repay we would enforce the legal charge and take possession of the security. We would look to sell the property to recover any monies owed plus interest and default sums. To ensure the security is adequate the Loan to Value is always 75% or below calculated on the loan plus interest to reduce the risk of capital losses.

You can download our comprehensive full “Guide To Peer to Peer Loans” by clicking here.

 

 

 

 

 

 

 

 

 

10% p.a. Tax Free With An Innovative Finance ISA

 

10% p.a. Tax Free With An Innovative Finance ISA

You may well have read about the introduction of the new Innovative Finance ISA that is being launched in April.

This means that you will be able to invest in peer to peer lending products tax free. And, if you choose to do so via The House Crowd, you will be able to earn 9% tax free on our standard peer to peer loans or 10% tax free on our peer to peer new build development loans.

The fixed interest rates compare favourably with investments offered on other peer to peer platforms.

As with all loans, your capital is at risk, however, we mitigate the risks, as our loans are all secured against property*, whilst many other platforms make unsecured loans to businesses with no security.

At present, we operate under an FCA interim permission. Our application for full permission, which we submitted in October, is still being processed by the FCA and we will not be able to offer the ISA until the FCA have finished doing that.

Once we are fully authorised, you will be able to invest up to the ISA limit each year (currently £15,240) and you will be able to maximise your returns by transferring any ISA balances you hold with other providers to a House Crowd ISA if you choose to do so.

We expect to be in a position to launch the ISA within the next few months and will let you know as soon as we have news.

If you would like further information about how the Innovative Finance ISA works visit:

https://innovativefinanceisa.org.uk/

*Risk warning: Interest payments are not guaranteed if the borrower defaults. The value of property can go down as well as up and your capital is at risk. If the secured property cannot be sold for more than the amount of the loan you may lose some or all of your capital.

In respect of Peer to Peer investments, The House Crowd is authorised and regulated by the Financial Conduct Authority under interim permission number 665205 to conduct peer to peer lending activity in the UK.