Over the years, property investing has become harder. Tax laws are more complicated, mortgage rates have risen, and it seems like politicians have it in for landlords. So is property investing actually still worth it in 2024? Well, to answer that question, I'm going to tell you a story about an investor called Harry. Harry was one of the pandemics winners with lower expenses and taking advantage of a booming job market, he soon ended up with a pile of cash sitting in his bank account. And following the advice of his friends and family, he decided to invest that money in property. It seemed straightforward enough. He shopped around, found the affordable house, secured a mortgage, made the purchase, rented it out, and every month he enjoyed a little bit of extra income. Easy. He thought for certain that in 20 years, the value of the house would increase, his tenants would play off his mortgage and need a retire of his gains. But fast forward to today, and the future doesn't look quite so bright. Out of nowhere, after 14 years of sitting at close to zero, mortgage rates suddenly with the fixed rate he took out for two years, at a rate of 3% about to expire, he'll now be lucky to secure a rate for anything less than 5.5%. Meaning, the monthly payments Harry has to make to the bank have increased dramatically. He's not profiting from the house as much as he thought. Well, he thinks rents will go up in future and at least I'm still making some profit for now, but come the end of the year, he gets a nasty shock. What Harry didn't realise is that as an individual property owner, the cost of his mortgage doesn't count as an expense he can deduct, before calculating the profit he needs to pay tax on. In essence, Harry finds himself paying tax on a phantom profit that he's not actually receiving. So, Harry crunches all the numbers and to his horror, realises he's actually losing money rather than turning a profit from his property. But it doesn't stop there. Things go from bad to worse. When one day, Harry checks his bank account and sees that the rent that was due hasn't arrived. It turns out, his tenant has lost their job and can't pay. Luckily, their contract is due to end in a couple of months. Anyway, so as the tenant refuses to leave, Harry waits and applies to the court for what should be a straightforward eviction notice. Unfortunately, though, because Harry hadn't done his research, the court throws out his application. Why? Well, he'd failed to serve one specific document to the tenant in the giant bundle of paperwork he handed them when they moved in, so he has to put it right and apply again, adding months to the process. But in a way, Harry's lucky. Once the rent is reform bill comes into force, the quick process that he was relying on won't exist at all, meaning that even if he'd done everything right, he could still expect it to take months and months to get his property back. By now, understandably, Harry has thoroughly had enough, so he decides that his whole property lack just isn't worth it and it's time to sell up. But there's another problem. Because mortgage rates have risen so fast, all the buyers in the market have suddenly disappeared. So, Harry's house just sits there empty while he's still walking out thousands for his mortgage and council tax. If he wants to sell, he'll have no choice but to cut the price. To make matters worse, even if he manages to sell for more than he bought it for, his capital gains tax allowance has been slashed, meaning he'll pay tax on almost all his profit. And to add insult to injury, property gains are taxed to higher rate than anything else. So, by the time you take into account the stamp due to when he bought the capital gains tax when he sells, the tax on phantom profit when his property was rented out, and all the expenses went in. For instance, Harry has made a painful loss on what was supposed to be a simple no-lose investment. Okay, so Harry got unlucky in some ways, but his situation is far from unique. There are thousands of investors currently wishing that they just stock their money into the stock market instead. So, does that mean property investment is over? Would you be insane to get into property investment in 2024? Well, not necessarily. There are five factors, some in your control, some just a matter of market timing, that could make property investment more appealing than it has been in years. I'll run through those factors, and when we get to number five, I'll put it all together for you to help you decide if property is right for you now, because it won't be for everyone. Harry was unlucky. He bought just as interest rates came off an all-time low, that it got on for so long, it seemed like they'd stay there forever. In fact, they increased further and faster than anyone had anticipated. The good news is that today, it's already happened. Rising rates are always a risk for investors, and even though the signs are that mortgage rates are already dropping into 2024, and they may go lower still, there's always the risk that they'll increase again, but another 150% increase in the cost of the average five-year deal that we've lived through recently never say never, but it's vanishingly unlikely. Central banks know they would almost certainly bring down the entire financial system. So, if you do your calculations and your property purchases work for you today, chances are they'll still be profitable 10 or 15 years down the line. Also, don't forget that rents have risen significantly over the last couple of years, due to a supply demand imbalance that shows no sign of changing. Meaning your income will likely continue to grow enough to cover any potential future increase in rates. As Harry found out to his cost, if you're an individual property owner, you could find yourself shelling out more than you should in tax. Sometimes, paying an effective tax rate of more than 100%, but there is a way you can get around it. You can buy as a company. A company can offset its full interest costs against expenses, reducing its taxable profit, and it then pays tax at a lower rate than an individual who's in the higher rate bracket. It's still expensive to extract money from the company to spend personally, which means it's not right for everyone. But if you're investing for the long term, it's an attractive option that insulates you from the nastiest aspect of property taxation. Harry was unlucky with his timing and also with his tenants, but it wasn't just bad luck. The legislation that investors need to comply with has exploded over the past decade, but many people haven't caught up. They keep on taking the casual attitude that worked in the past, making silly mistakes and getting themselves into all kinds of trouble. Honestly, you'd be amazed by some of these self-inflicted problems people write into our Sunday Times column about. Some don't even have written tenancy agreements. So you can always get unlucky, but you can limit the impact by taking a professional attitude and understanding your responsibilities. You can also reduce your chances of having a bad experience by controlling what you buy and where you buy. Speaking from experience, lower end properties in less desirable areas tend to attract more than their fair share of problems, whereas if you spend more to buy something higher end in a stronger location, you'll attract a larger pool of quality applicants. Then it's just a case of choosing the strongest applicant and reference checking them thoroughly. I know it's not easy to keep this disciplined, because cheaper properties do tend to offer higher rental yields, but trust me, I've seen it in my own portfolio and it isn't subtle. It's the handful of objectively less desirable properties that cause a solid 90% of the problems. It's pretty clear that over the years, politicians have done a lot to discourage property investment. In Harry's case, we saw three separate taxes, where property investors are disadvantaged compared to anyone else, and he fell foul of the mounting pile of laws that are added to every year. And it does seem to be getting worse. The renters reform bill will make it even harder to remove tenants who aren't paid, as well as introducing yet more cross-least schemes that landlords will need to comply with. But call me crazy and many people will disagree, but I feel like we're coming to the peak. The reason is simple, politicians might not like it, but they do need the rental sector. If private landlords vanish, they won't be replaced by social housing and corporate investors overnight. And if the whole sector didn't exist, it wouldn't magically make everyone able to own their own home. The shortage of rental stock is obvious from the giant increase in rents over the last couple of years. Of course, even if what I've said is true, that doesn't mean it's popular. Bashing landlords is a vote winner, whether it makes sense or not. But we'll have a general election by the end of this year, and whoever comes to power will have time and political breathing spaces to make unpopular decisions, which may involve easing up on landlords. I know, I know, hope isn't a strategy, but even if things don't get any better, if you're willing to put up with current taxes and laws, I don't see it getting much worse. Alright, so even with all that information, you might be thinking, this sounds like a laugh hassle. I just want to invest casually for a bit of side income so I get a quick return, and property investment doesn't sound worth it. And if this is your mindset coming in, I agree with you, it might not be worth it. Because purely it's a way of generating a bit of extra income, it is a lot of work, and there are easier investments you can make that you'd expect to generate a similar return. And over the short term, even an increase in the value of your property is in no way guaranteed. Over one to two years, they might increase, but they might also fall, or even crash. But when we stretch the time horizon to 10 to 20 years, property is highly likely to be a phenomenal investment. And it doesn't rely on only wild assumptions, just basic economic principles. If you buy a property with a mortgage, the amount you need to pay back is fixed, or a £100,000, and you'll need to pay back £100,000 at some date in the distant future. But if you use that load to buy £150,000 property, that property will go up in value over the long term, purely because of inflation. In 20 years, even if it only went up in line with inflation at 2% per year, which is what inflation is supposed to be, it would go from £150,000 to £223,000. And if it went up in line with what inflation has actually been over the past 20 years, which is 3.4%, it would go from £150,000 to £293,000. That's virtually doubling in value. And because your debt is fixed, all of that increase is yours to keep. And to make things even better, the interest payments are not that debt, are covered by the rental income. So they're not a true cost to you. So is investing in property still worth it? Well, for many people, yes, the ability to use leverage in the form of a mortgage in a relatively controlled, predictable way is unique to property, and makes up for a lot of the drawbacks. And as I've said, many of those drawbacks are either in the past, or can be avoided by setting yourself up properly in the first place. Of course, it won't be a steady ride. Prices will fall at times, and you will have challenges to work through. But if you play the long game and ride out all the waves, your investment will eventually pay off. And less that is, you make the mistake of buying an absolute nightmare property, which is always a risk, especially for new investors. So how do you avoid it? Well, watch this video next, where we'll talk you through all the classic signs of a deal you do not want to be doing. So you can avoid making a bad investment in 2024.