How to invest and save for real lifestyle change
Property investors all face the same question at some stage of their investment life. Whether you’re just starting out and own a single buy-to-let property with positive cash flow, or you own a multi-million-pound portfolio, you will have to decide on how to spend your extra income.
Property investment is one of the highest generating income-producing vehicles. You can give your income a real boost by diversifying your property portfolio with a hotel room investment. It could pay you in the region of 8% per year from month one. If you sell a property, you could have thousands in property investment profits suddenly deposited into your bank account.
How you choose to spend the income from your property investment is a decision that will affect your financial future. In this article, you’ll read about five ways that savvy property investors spend their rental income and profits.
1. Pay off your debt
Okay, you’ve heard this advice a thousand times before. Pay off your debt before you do anything else. The reason it’s true is that debt is the number one killer of wealth. However, there is good debt and bad debt.
For example, without a buy-to-let mortgage, you wouldn’t have been able to invest in property. Without that investment, you wouldn’t be facing the ‘problem’ of how to spend your income.
On the other side of the coin, your credit card balance could be costing you 20% interest (and more) every year. The average household debt in the UK is £7,300. The average interest rate charged on credit cards is 23%. For every £1,000 of credit card debt you owe, it’s likely to be costing you £230 per year. A £5,000 credit card balance will cost you almost £100 per month in interest alone.
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Paying off debt isn’t a sexy thing to do; you won’t have a shiny new car or super-fast tablet computer to show for your efforts. But you will have more money in the bank, and that will boost your ability to create wealth and spend your money in more appealing ways.
Paying off your debt will also help to increase your credit score – and that will make it easier to borrow to invest when you need to, and get you a better rate of interest on your borrowings.
2. Save for a rainy day
Now that you’re debt free before you do anything else with the income from your property investment put some rainy day money away. I’d recommend keeping a balance of three to six months of expenditure to one side. Trust me; you’ll need it sometime.
Save this money in a high interest, instant access savings account. If you get made redundant from work, your car breaks down, or an investment property needs a new central heating system, you’ll have the money available.
Your emergency fund helps to protect your lifestyle when you need a safety net, and your property investment income when maintenance and repairs are necessary.
3. Buy life insurance
It might seem another boring thing to do, but often the most boring things are the ones that are most necessary to protect your wealth and grow your fortune.
Life insurance, of course, is all about protecting your wealth and guaranteeing that if the unthinkable (and inevitable) does happen, your loved ones will be financially secure. If you died tomorrow, how would your spouse and children pay the monthly bills? Will they be able to enjoy the lifestyle they do now or the lifestyle that you would want them to?
You might want to consider contributing to a funeral plan, too. It will make sure that your family isn’t lumped with a large bill from the funeral director at a time when they’ll be least able to cope with it. (Did you know the average cost of a funeral in the UK is £3,675? Makes you think, doesn’t it?)
4. Secure your children’s future
All parents want their children to do better than they did. You can help to ensure this by using some of your property investment income to save for them. There are various ways to do this, and various reasons to do so.
For example, if your savings have built up to, say, £50,000 or £100,000, you might decide to use a hotel room investment strategy to pay for their degree education and keep your capital intact.
If your children are younger, how about opening a junior ISA and investing for their long-term future? The money becomes theirs when they reach 18, and anyone can contribute. It could be their 18th birthday present from the whole family: what a way to celebrate adulthood!
5. Go on that holiday of a lifetime
The most important thing in the world is living. Think about the lifestyle you desire, and how to spend your money to achieve that. Me? I like to travel, explore different places, meet different people, and experience different cultures. It is something I enjoy most when my family are with me.
With no debt, a six-month financial safety net behind you, your family’s future secured, and your children’s future taken care of, you’ll be surprised how many holidays of a lifetime you can afford to take.
Remember, property is a lifestyle investment
The only reason to invest in property is to create the lifestyle you want. That’s it, no other reason. The potential for property investment to create a consistent income stream is what makes it such a great lifestyle investment. How you choose to spend that income is your investment in your lifestyle.
Contact one of our team today on +44 (0)207 923 6100, and discover how other investors have created their lifestyles with property investment.