Property vs. Savings accounts
Hey everyone,
God I feel like 20 questions recently, but I have got to ask if anyone else has read the property investment savings accounts piece?
Well I know I have and I was shocked. It really put things into perspective for me.
Let me explain.
In the article they struck a direct comparison between the impact the 2.5% interest rate cut has had on property investment and on savings accounts. And it made a really valid point.
In their example they took the Halifax’s 6% interest rate and compared it a monthly repayment on a property worth £100,000.
Take a look at this:
Halifax 6% savings rate: put £100,000 into the account and you would make a £6,000 profit in interest in a year. 3 bed property worth £100,000: bought at a 6% rate for over 30 years it would cost £599 a month. Now equate that the average monthly rental for this type of property is £801, and people could make £9,612 a year (and that’s just from one property!).
Compare them this way and property is by far the better way to boost your savings.
I know that the Halifax scenario looks pretty good, but who do you know who has got £100,000 lying around to put into a saving account? I know I don’t know no one, and I’m an investor!
But here is the other thing – and I am sure you have heard this one: the Bank of England have been rumoured to be planning to cut interest rates down to 0%.
If that’s true, it will spell great news for tracker deals and fixed rates, but savings accounts… ouch! You’ll barely be earning anything.
So what are we to take from this information? Well, I know I am now more personally motivated to get stacking and investing. If my savings account cannot offer me profits, I’m going to let my properties do it.
Anyways, I thought I’d fill you all in and see what you thought.
If anyone else has got an opinion on this, please let me know. I’m in two minds on whether to give up my savers account for the moment and put it into my properties…
I think your completely missing the point, you would be loaning money to fund an asset that is depreciating massively, and will continue to do so for the short term, purchasing the property in the future, when prices have returned to sanity, would see a massively reduced cost for the asset.
You can’t really be an ‘investor’ not that the terms means anything anymore.
What a good idea! But 3 huge risk factors:
a) the house is likely to loose value perhaps by 2% a month if recent trends continue
b) you may have difficulty in the downturn getting a tenant to pay £800 a month. If that ratio worked on the house I was renting I’d be paying 4 times what I am paying so don’t really think £800 a month is realistic – plus there will be bills and you will have to pay estate agent and you might have some empty weeks
c) interest rates are likely to go up in the medium term so unless you can get a 25 year fixed rate mortgage then you are very exposed.
D Collins that is just your opinion on this matter, just because you don’t want to take a risk doesn’t mean its not worth it
Also I am not saying by any means this is a definite must do investment I was just trying to illustrate a point or possibility, you get that right?