Financial strategy for a worry-free investment

Published on 13 February 2017

Getting to grips with saving versus borrowing, using interest rates to your advantage and the value of your currency choice is important when it comes to buy-to-let investment.

Borrowing can be useful

When testing the waters of investment for the first time, it is best to play it safe. However, one of the biggest misconceptions out there is that using savings to avoid borrowing is the best way to make a safe investment. In fact, borrowing frees up savings so that you have funds readily available when needed, plus you can make a larger investment that equals more returns. The only precaution to take is ensuring that profitability on your investment outweighs interest on loan repayments.

When investing in a classified tourism residence that benefits from an operating company, you can often know your percentage profitability from the outset. With a fixed rate loan, this will enable you to calculate exactly how much you receive after loan repayments so that there are no surprises in the long term. Also, with a large operator like the Pierre & Vacances-Center Parcs Group, rent can be guaranteed whether or not your residence is occupied, as their wide-ranging portfolio of tourism destinations will always provide an income.

Low Interest Rates

When it comes to borrowing, now is the perfect time to take out a loan on an investment. Since the crisis in 2008, intentionally lowering rates and quantitative easing (creating more money to stimulate the economy) have led to low interest rates across Europe. This is an ideal climate for borrowers, as investment returns can easily outweigh loan repayment interest. It is also an incentive to invest in solid assets such as property, as these have a surer value than monetary savings.

Look to the continent

Although sterling has been historically valued as higher than the euro, the recent political climate has seen drastic changes in the euro’s favour. Thanks to Brexit and recent US politics, the euro’s value has begun to rise (Source: poundsterlinglive.com). One way to benefit from the increasing value is to invest in foreign property. Residences on the continent can be bought cheaper than in the UK and over the course of the investment, your property will gain value – especially while the euro rises. Furthermore, when investing in a classified tourism residence, you can receive annual rent throughout the lease, so you do not have to wait until resale to see revenue. 

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