In chapter 6 of my book, Your Financial Freedom in Sight, I show you the biggest trick of the trade. How you pull your money back out. You learn that bankers will lend 75% of the money for your investment, and that means that bankers regard property as an extremely safe investment. You will read about keeping up with, and making yourself an expert on, the values both of property sales and rents in your area. We look at what good debt and bad debt are and discover that it is okay to have 75% debt on your portfolio. You learn that the important thing is to focus on return on investment, that is, how much of your own money is left in and how much cash you are getting each month. Of course, I talk a lot about mortgages, and that the best for this strategy are buy to let interest only mortgages. I also go over the reason for gathering all that price comparison data – it’s all about getting the valuation you want at the end of the process.
MY TOP TIPS
1. Know your values and get plenty of comparisons.
2. Borrow 75% loan to value – that’s the sweet spot between the lender’s comfort zone and you making cash flow.
3. Keep to the strategy for revaluing and you can reuse your capital.
4. Every time you revalue and pull cash out you are both reducing the money you have at risk, and increasing the return you are getting on that money. When you have no money left in the property your returns are infinite.
5. Good debt, bad debt. Bad debt is things like store cards, personal loans and purchases on credit cards that don’t earn you anything. Good debt is where your money is secured against a true asset that is something that is providing you with an income.
6. Having good debt against your portfolio reduces your tax liabilities both for inheritance tax and income tax.
7. The six month rule. Lenders won’t let you borrow a second time until you have owned the property for six months.
8. Get a good understanding of all the different kinds of mortgage products.
9. Know the rental values for your area because the lender’s valuer will find out what they are and base your loan on them.
10. Only use interest only mortgages. You will never need to sell so you will never need to pay off the original loan.
11. Make the first mortgage, the one to buy the property, a standard variable because you will want to change product after six months.
12. Keep using the same mortgage broker and their fees should come down. It’s also helpful to be using someone who knows you well and can represent you with the lenders.
If you’d like to learn more, download a free digital chapter of my book here, or get the full book for just the price of postage and packaging.
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