There are many kinds of investments that one can make, but among the assets class, from stocks and shares, derivatives, bond, trading and all, properties stand out because of its benefits and that’s why I want to share the reasons I chose properties with you now, to help you get some clarity about this investing opportunity.
Reason Number 1: Cash Flow
I invest in properties for cash flow. Cash flow is my main reason, but why is cash flow so important? Cash is king – you probably know how it feels when you make money every month, it’s like having someone that pays you a salary, but in property, it’s even interesting because you are making money why you are sleeping, and this is very important to me as a property investor.
Imagine that you make an extra £200-£300 from a property every month and you have ten properties, which make £2000 – £3000 per month. That means you are generating £2000 extra cash flow from your property investment every month, this is enough to replace your income, enough to tell your boss I’ve had enough.
Cash is flow is king but there are other strategies even if you don’t want to buy out rightly, you can choose to control a property if you don’t want to buy it, you could decide to rent from an estate agent and this property will still give you cash flow, if you choose to do multi-lets, a lot of people think it is until they own properties that they can make money from it – no. You can make money from a property that you don’t own out rightly and these are strategies that we teach in our property master class.
Reason Number 2: Tax Advantage
I invest in properties because of Tax advantage. I’ve heard many people say that the reason they don’t want to invest in real estate is tax and this makes me laugh because if they know what they need to know, they should embrace the tax system in this country for property investors.
There are a lot of incentives for people who invest in real estate; you just need to know what you need to know. Don’t take my word for it, you can Google tax advantage in the UK for property investors and you’ll see that there are advantages for investing in properties. One example is if you sell your main residence, the property you bought from 10-20 years that you used to live in, if you sell this property, you are not going to pay anything called a tax. There is no capital gain tax for such investment; you can walk away without paying a dime on tax.
Even if you are a buy-to-let investor, and you want to sell some properties, every year there is a capital allowance that you can enjoy. Also, if you buy a property for you and your wife, that means there is an allowance for two people which is about £22,000, that is £11, 000 per individual. What that means is, if you buy in joint names when you sell, there is £22,000 in tax rebate or allowance for you. A profit of £11,000 per person each time you want to sell that property and that’s why we advise people to buy in joint names. And even now with cooperation, if you buy the company name, it’s another scenario; you might be able to save even much more from tax. We reveal a lot of these in our property master class.
Reason Number 3: Leverage
I also invest in properties for leverage. Leverage is the miracle of investing in real estate. I have never seen any investment or business you want to do that you can leverage as you can do in property investing. Today if you go to the bank and say that you want to buy a property, as a first-time buyer, you might be able to get a 95% mortgage or a 90% mortgage depending on your status, income or credit record.
But if you want to buy stocks and shares, you can’t get a penny from the bank, leverage is very important when you are investing in real estate, and because a lot of people don’t know how to do this, they think it is difficult. It is not, in fact, there are other sophisticated strategies to use other people’s money. You can have a joint venture with other people to invest in real estate. Two, three or four people can come together to invest, there are lenders out there that will allow many individuals to invest together.
This is the power of leverage, using other people’s money to create wealth for you. It is not difficult, but if you don’t know this, it looks difficult. Leverage is what has helped me to build a significant portfolio for myself and within two years you can refinance and grow your portfolio, if you do this well, then you can get to the level where every two years you can increase your portfolio.
Reason Number 4: Instant Discount
I invest in properties for an instant discount. This is where one’s negotiating skill comes to play. People buy property and they don’t realize that they can actually pay a cheaper price for it just like every other thing they buy when you go to Tesco, you buy at discount, you go to the car dealer you buy at discount. In the same way, when you are investing in property you can also buy at discount but there are some things you need to know so that you don’t buy the way everybody is buying. It actually requires doing the work because there are many ways you can acquire properties at a lower price.
If you want to buy property at a discounted price, then you want to be looking for people who want to relocate out of town. You want to look for people who have just been bereaved, you want to look for people who want to downsize or upsize, among other ways, these ones are likely to sell cheaper. Sadly but truly, you want to look for people who are going through divorce and people whose property has just been repossessed. Or you might even have to look for property that is in bad shape, which needs renovation. While it is true that it might not be easy to find these kinds of people, if you put in the work, you will definitely find them.
This is what smart investors do; they learn to buy at a discount. But if you can’t do the work, you can buy from property ‘sourcers’ – these are people who source for properties at discount and charge you for the service, trust me, this is always worth it.
Mastering the art of buying at discount is the winning formula for property investing.
Reason Number 5: Legacy
My number 5 reason for investing in properties is legacy. I invest in properties because I want to leave a lasting legacy for my family and loved ones when I eventually pass on. This is because I want them to have something to inherit. I know am going to live long but when I finally die I want to give something of value back to my children, great-grandchildren and humanity as a whole.