The questions I’m asked, more than anything – is “How can I get the best return on investment for my money?”
It’s really common – people have money, they want to invest it but they want to ensure that it works for them and that they earn their money back so they look into property. It’s low-risk and low maintenance.
I’ll give you an example; someone came to me, with £100,000 and said they wanted to invest it. Great. Let’s do that. But they wanted to invest it in one property.
Now there are a lot of people in the industry, you’ve got Mark Homer, Rob Moore, Samuel Leeds – they’ve all got different strategies, but ultimately – they all invest their money in property.
Here’s the thing – and this is my strategy – I told him to buy three properties. He didn’t quite understand it; you’re probably questioning it too so I’ll explain a little bit more.
With £100,000 you’ve essentially got 3 deposits. A lot of people try to avoid this because it means getting a mortgage and I’m a firm believer in this – a mortgage isn’t a bad thing!
But spreading your investment across 3 properties, you’re spreading your risk. But taking mortgages on for the properties, you’re minimising that risk even further. By putting a £30,000 deposit down on each property – you’re only risking £30,000. That means you have 3 opportunities to get your return on investment.
If you buy one property at £100,000 – you could be looking at a net profit of approx. £650. Great, you’ve got no mortgage so that money is all yours.
However – if you buy 3 properties, you could be looking at a profit of £650 per property (there are maths behind this – let me know if you want me to break it down further for you) so on 3 properties – that’s a net profit of £1350.
Let’s also look at the risks involved. If you have one property and it takes 2 months to fill, then you’re without rent for 2 months. However 3 properties with a vacant one for a couple of months – you’re still making profit on the other 2.
Suddenly you could be looking at £16,000 profit per year instead of £5400. Sounds good right?
And by having the mortgages, let’s face it, you’re pushing some of the liability over to the mortgage company too. So you’ve minimised your risk, increased your profit and you’ve grown your portfolio quicker than you planned.
And you’ve got 3 properties benefitting from appreciation. Any value that increases – that’s yours. You’ve only got to pay the bank back, what they lent you.