How quickly will I get my initial investment back?

How quickly will I get my initial investment back?

I've heard a few times people who are new to property investing will ask the question how soon they'd get their initial investment back and this raises an interesting mindset question which I thought I could try to shed some light on.

What's curious about this particular statement is that it is stacked with meaning and implications that the property market is unstable or untrustworthy, such that it's important to get the initial investment back.

Conversely if you put your money in a bank savings account you don't often hear people asking the bank how soon they would get their investment back. This isn't a concern because people believe that banks are inherently trustworthy, despite the numerous stories of bankers bonuses, bankers causing the financial crash of 2008 etc.

In fact, property is far more trustworthy and safe as an investment than leaving your money in a bank savings account.

What's even more ironic is that whilst you might feel safe leaving your money in the bank, the bank is going out there, taking your money and using it to prop up the property market by lending it to people who are willing to invest in property.

By paying you as the bank savings account holder 2% on a good 2yr fixed ISA, they can effectively lend the same money to someone else, let's say a BTL landlord and charge on average 4-5% for the loan, making a good 2-3% profit in the meantime using none of their own money.

So really what I'm saying is that you shouldn't be asking the question of when you'll get your initial investment back when you invest in property. The pertinent questions are ones about yield, net annual returns and what the cashflow forecast is going to be. That's the real money, over the lifespan of your property ownership, you'll make more than enough to cover your initial investment, even if it doesn't cashflow well, equity gains over a long period are more than likely to double your initial investment.

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