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Find Property Investment, everything you would need to no about buying, selling and moving house. From your first viewing to settling into your new home. We endeavour to bring you up to date advice. To register for our free advice alerts click here.

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The property market may not have the liquidity of the stock market, but it is less volatile. And bricks and mortar have generated consistent yields year on year. According to figures from FPDSavills Research, the total net return on prime central London property was 18.6% last year. In the UK, the total net return was 16.3% - a strong performance given that equities showed a loss last year.

Research by Knight Frank and University of York also indicates that over the past five years, the total return on prime London property was 122.6%. Similar rural property showed a return of 110.4% with the equities producing a far lower return at 72.3%.

Example 1, “As the Nasdaq and FTSE indexes have faltered over recent months, residential property has become an increasingly attractive investment," says Harry Jackson of Bradford. "Net rental yields of more than 5 % are now achievable and compare very favorably with other investment opportunities." So people who may have invested in the stock market before are either balancing their portfolio by putting their money into both property and equities or pulling out of the latter altogether.

Example 2, "This time last year, I was about to put all my investments into the stock market, in particular an assortment of dot.com companies," says Ian Fleming, who runs a successful public relations company. "Watching what was going on in the stock market, I got very nervous and deliberated for weeks about whether I should buy a house or put my money into shares. Thank goodness I opted for bricks and mortar."
Mr Fleming bought a two-bedroom modern semi-detached property for just under £80,000. He rents it out for £500 a month, and she has already seen a good increase in his capital outlay. "In one year, the property is now worth around £90,000, which is an increase of more than 12%. The shares I was considering have fallen by up to 70%," he says.

Example 3, another important advantage property has over equities is its ability to increase your rate of return. "If you put £100,000 into equities, historically this will perform well over time, but if you borrow two or three times that amount and put it into property, you can do much better," says Hugh Obbard of property investment company Hugh Obbard & Associates.

Example 4, if you had invested £100,000 in property five years ago, with an increase in value of 122.6%, that money would be now worth £222,600. However, if you had geared up and borrowed £200,000, then your money would be worth £667,800, with the rental income covering all costs including interest repayments.

People are increasingly turning to property as an alternative to annuities and personal pensions. The rental return provides the pension income, and as long as they buy well and invest in good quality property, they will see capital growth too. "But you must stick to quality prime areas that have a proven value," says Harry Jackson.

Unlike equities, property is also a tax-efficient way for people to pass on money to their children. It also has the advantage of being a tangible asset. When equities are looking exposed, as they are at the moment, the tendency is to turn to things more tangible. The only problem with property is liquidity. If you need to get your money fast, then if it is in equities you can trade, just by a click of a button. Property is never that simple.

"If you take the decision to move out of equities, you have to take a long-term view because trading in property is expensive," says Hugh Obbard. "Property has its own cycles, but they are relatively contained. As equities have shown recently, people have enjoyed a tremendous amount of excitement over the past three years and some people have made a lot of money, but in the past few months, the reverse has been true. This should remind people that having a balanced portfolio is what it is all about."

The hidden costs of buying and maintaining a second home

It is a dream for many people – owning a second home, often in a place with happy associations and memories. However, the main reason that second homes are a badge of affluence, and are often owned by older people, is that they can be extremely expensive, both to buy and maintain. Currently there are thought to be about 250,000 second homes in England and Wales.

In popular areas such as the Norfolk coast, estate agents estimate that 75% of their customers are people wanting second homes, with the demand driving prices up by about 30% in the past two years. For a property you are not intending to use fully, this is a steep premium to pay.
Here are some areas to consider if you're thinking of buying a second home.

Mortgage
You'll have to pay the valuation fee, the booking fee and probably an arrangement fee as well as the actual cost of the repayments.

According to figures released at the start of 2001 by lender Paragon Mortgages, average mortgage loans for second homes have risen from approximately £45,000 to over £60,000 in the last two years. These are large amounts of money to pay back on top of a first mortgage.

According to Paragon's figures, this represents a rise in the average value of holiday homes to around £90,000.

Legal costs
The purchase of a second home will obviously incur legal costs, including stamp duty on the purchase of properties over £60,000, land registry fees and various search fees.

Insurance
You'll clearly need buildings insurance, and will probably want contents insurance, which is recommended, but not compulsory.

Maintenance
If you intend to be away from the second home for long periods of time, you'll need someone to keep an eye on the place regularly, to make sure it's secure, and to do any maintenance that might be needed. You'll probably also need a gardener to keep the grounds tidy and under control, unless you want to spend all your time at the property gardening. Both of these are extra but unavoidable costs that need to be factored in.

Furniture
It may seem obvious, but for a second home one needs a second set of furniture, as well as cutlery, a cooker, fridge, television, carpets, linen and so forth. Buying and maintaining these will be twice as expensive as it would be for one home.

Vehicles
If the second home is a long way from your main residence, you might choose to get there by air or rail, and keep a second car at the home. Obviously this can be expensive, and if the vehicle isn't run regularly, maintenance costs can be higher. Insurance, if the car is garaged and is kept in the rural area and not in a city, can be cheaper though.

Security
If the property is regularly left uninhabited for long periods of time, insurance companies might insist on extra security measures to prevent theft and damage. These measures, which can be expensive, can include heavy-duty steel or aluminum shutters and locks and burglar alarm systems, which are not only expensive but will need full-time monitoring, so incurring ongoing costs.

Any property that has stood empty for some time is a potential target for squatters, who can be an expensive and time-consuming problem.

One of the biggest problems with squatting is that it is not technically a crime, but is treated by courts as trespass. This means a squatter can't be arrested for occupying a property. And once in, a squatter can defend their rights to live there, which can make eviction a messy and prolonged affair.

Utilities
You'll need to pay quarterly standing charges for gas, electricity, the telephone and the television license fee, even if you're not using them all the time. These add up over time.

Council tax
With the council tax system, you pay only 50% of the tax due on the house which is not the main residence. (In Wales, where there are a large number of holiday homes, the figure is only 25%.) The local authority will decide which it thinks is the main residence, although you can appeal against this.

However, the Liberal Democrat Party last year stoked the debate on second homes by publishing a discussion document calling for an end to 50% council tax on them. They argued that councils should be able to force people buying houses they were not going to live in all the time to ask for special planning permission. The document said the "increased immigration of wealthy and more affluent people" had forced house prices up and cut the amount of affordable housing to local people.
Such a change in council tax structures could bring a county like Cornwall an extra £5 million for education and social services, so there are many who would like to see changes.

Buy-to-let
Buying a property to let has been around for a long time but it is only relatively recently that it has become within the reach of ordinary people.

In the past mortgage lenders charged commercial rates of interest and imposed additional surcharges on mortgages for buy-to-let properties and so this excluded most people on an average income. However, this situation has now changed thanks to the Association of Residential Letting Agents (ARLA) who initiated the introduction of a new type of mortgage which not only takes into consideration the current occupational earnings of an individual but also the earning potential (rental income) of the property to be let. This means that many more people can now afford to take out an additional mortgage on an investment property.
Not only is this good news for potential private landlords but it is also good news for the private rental market which in Britain lags significantly behind many other countries.

Buying to let can be an excellent investment if you do your homework and choose your property carefully. Just like any other commercial business you should learn as much as you can about the letting business and check out the local property markets and competition before taking the plunge. If you buy an unsuitable property in an unsuitable location you may be disappointed by the financial return. But buying a property to let is usually considered to be a good and reliable form of long-term investment from which you stand to benefit both in terms of the rental income potential and possible increase (capital growth) in the market value of the property.

Long or Short Term
When you first let a property you need to decide on what terms and for how long you want to let the property. If you are not living in the property, a property is usually let as a full assured tenancy or as an assured short hold tenancy.

A long or full assured tenancy typically allows the tenant to stay as long as he/she wants whereas a short or assured short hold tenancy allows you to get the property back at the end of the agreed term (or within six months if there has been a breach of the tenancy agreement by the tenant).

If you are new to letting, you may prefer to start with a short hold tenancy because you can, if necessary, repossess your home after the agreed period. And, you will also find that for this reason, most lenders prefer a short hold tenancy. You can always extend an assured short hold tenancy for another agreed fixed period at the end of the initial term or you can decide to allow the tenancy to continue as a periodic tenancy for as long as you want.

Even though a full assured tenancy gives the tenant more security there are circumstances in which you will be able to get your property back because the law is there to protect you from a bad tenant. A court can order repossession on a number of mandatory and discretionary grounds.

Information about assured and assured short hold tenancies is available from the Office of the Deputy Prime Minister or you can go along to your local Citizens Advice Bureau for help and advice. Or take a moment to complete our Quick Enquiry Form and we will arrange for someone to contact you.