Refinance This is relatively straight forward, most Buy-to-Let lenders will allow you to borrow more if the rent is sufficient to cover the mortgage plus a bit. They will stipulate that the rent is 130% to 150% of mortgage payments. They will also want a revaluation and administration fee. The big proviso for the plan…
Wait for prices to go up This is the crunch part of the plan. If prices don’t go up, the plan won’t work (unless you bought substantially below market in the first place). I’ve heard it said that house prices double, on average, every seven to ten years. Looked at another way, average house prices…
Let it out at a rent that covers all costs This isn’t necessarily as easy as it sounds, because yields and capital growth often work against each other. It is generally true that the higher the yield, the less expectation there is in the market of capital growth. Conversely, the higher the likelihood of capital…
Is the plan I outlined in the Part 1 to make unlimited tax free wealth realistic? Actually, I think it is, but there are a few practical issues which need further thought and attention if the investor is to stay on track. Let’s have a look at these now under these headings: Buy a property…
Robert Allen, self made American property millionaire and guru, in his excellent book ‘Nothing Down for the 1990s’, suggests an interesting plan by which we can all retire early and live off a plentiful supply of untaxed income. Does this sound too good to be true? Well, actually, it probably isn’t, although there are some…
In the end it comes down to simple supply and demand. Demand for property is increasing with changes in society – there are many smaller family units and singles who want to live alone, a trend that is set to continue. And demand for property is increasing with the explosion of legal immigration, especially from…
The most obvious implication is that property works best when treated as a long-term investment. This is why I, and others, champion the view that once you have bought a property, unless there are compelling reasons for doing so (and these might be personal as well as property related) you really should never sell. If…
Now let’s apply these principles to property. With every year that property prices increase, the increase builds upon the increase of the year before. In other words price growth is compound and not linear. I’m sure you know what I’m trying to say but let me explain anyway According to the Nationwide, average house prices…
For me, the key thing is to be on the right side of compounding, and to be the beneficiary and recipient. Now, when you study compounding you’ll find some strange phenomena. Before we look at its impact upon property let’s look at a couple of simple financial examples. Let’s suppose you deposit £100 in the…
Ultimately it’s a question of degree. If your cash flow is haemorrhaging uncontrollably and you are going to go broke in a few short months, then I agree this is not a good strategy. But if you can cover the negative cash flow, either from other income or, even better, by setting aside some of…