When you were younger, did your parents and grandparents tell you about all of the advantages of putting away money in a savings account? But how times have changed. Today's savings accounts are mere shadows of their former selves, acting more like financial traps than investment opportunities.
The truth is, the best interest rates on savings will still make you poor in the long run. Savvy investors understand this, and are looking to better investments like rental property.
Savings accounts have always been touted as a stable investment that provides a reasonable return with almost no risk. However, because current interest rates are so low, the typical savings vehicle isn't really earning you anything at all.
It's true that interest rates fluctuate, but at the time of this writing, the best rate we found on a high interest savings account was 2.67%. It's been a long time since interest rates on savings exceeded 3%. And that's not likely to happen again at least for another few years.
At the same time, inflation in the UK has been over 5% for some time. That means the best interest rates on savings are not even keeping up with inflation. It also means you are actually losing money when you look at the overall bigger picture.
If there is any good news, it's the fact that inflation has slowed to a more moderate 2.7% for the second quarter of 2013. So now your high interest savings accounts are losing less than they were before. But they are still losing.
While traditional savings vehicles continue to underperform, property investment is an option you can use to turn things around. The idea behind this strategy is to build wealth over the long term by acquiring bargain properties, renovating them, and then opening them to the rental market.
The beauty of property investment is that you do not have to be a professional investor to make it work. Yes, you can use money supplied by other people to purchase and renovate your home. You do so by taking advantage of buy to let mortgage financing offered by banks and building societies.
The key is to find properties at prices 25% to 30% below market value. Fruitful Property can help with this; we are experts in finding excellent values for our investors. When properties can be had at bargain prices, investors start making money right away through equity.
Once a property is renovated and rented, the investor enjoys monthly income for as long as he or she holds on to the property. Over a period of 10 years or longer, it is possible to not only pay off the mortgage but also increase the property value. Over several decades, an investor could double his/her money or better.
The most important thing for you to understand about property investment is that it is stable. The bank can do what they want with interest rates, but people will always need housing. Even as the best interest rates on savings have remained flat, rental rates have increased approximately 3% during the same period.
Fruitful Property believes in effective property investment because we see it first hand. Buy-to-let properties provide a comparatively high yield, very manageable risk, and the opportunity to build a solid portfolio that will secure your future. If all of your extra money is tied up in a savings account, consider investing in property for greater returns.
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