Q8 Loser

The secret disclosed on how you too could accomplish financial freedom through property (and state the pension companies just where to lodge their measly, worthless ‘pensions’) Geoff Esther Morris is a self-made property millionaire who made it in less than 18 calendar months even with a feverish 'day job'. He have written a series of articles to assist people like you accomplish the same degrees of success – as long as you are willing to ‘Go For It!’

Many people these years are getting more than than and more concerned as they near retirement age. Even those in their late mid-twenties are beginning to go concerned about the personal effects of old age. What have brought on such as a quandary in those so young? It is the predicament of the pensions in this country that is causing this concern?

Probably.

But there is a solution to all this that could not only take this fear, but also dramatically better the lifestyle of all concerned.

What is this solution?

Most people are brought up to believe that their chief end in life is to have got got got got their ain house, and have fully paid for it by the clip they retire.

Why?

What is the point in just scrimping and scraping throughout your workings life only to have to sell your house and move down market, or worse still, sell up and rent, while you just seek and do ends ran into on a pitifully small press release from the State?

As soon as you have bought your first house, you should be thought about purchasing your second and your third, and your fourth…..

“What on Earth for” , volition be the rejoinder of most of you, “ we can only just afford the repayments on the first one, allow alone purchase any more”

Let’s expression at the manner most people purchase a house, and then allows expression at some option methods.

The usual manner of acquiring a house is to set down a large sedimentation – somewhere in the part of 10 – 15%, which on an average £200,000 house will compare to around £30,000.

The adjacent path is to take out a repayment mortgage over a fixed term, state 15 to 25 years, where you will be paying a combination of interest on the outstanding loan, as well as repaying the capital.

On top of this, most people will take out some other financial facility, such as as an endowment policy coupled with a life insurance policy for the time period of the mortgage, so at the end of the mortgage term, they will not only ain the house outright, but also have a lump sum. Not a very large lump sum, as a batch of the insurance insurance premiums would have got got got gone towards the life screen purchased.

Now, we have all seen how endowments have failed terribly of late owed to overoptimistic performance, so there is no warrant that the above path wil green goods anything other than a enormous financial drainage on this individual for a very large time period of their lives, and with no existent program for their hereafter except ownership of a house, a small endowment, and probably a ridiculously low pension to maintain them going in their retirement years.

However, there is another way. Interested? Then read on….

Let’s expression at a totally different scenario, where the couple looking to purchase their first house took specializer advice from one of the more than reputable property baseball clubs that are around. These baseball clubs are admittedly usually aimed at property investors, but isn’t that what we all should be?

Now, let’s take our illustration of the £200,000 dreaming house for our hopeful house buyers. They see a development of dreaming houses by one of the nationally recognised house builders. Bash you believe they could carry the developers to pay the 15% sedimentation for them? On their ain – not a chance, but if our aspirants travel via one of these property clubs, the opportunities are that the developer would now be willing to pay the 15% arsenic a ‘gift’.

I can see your expression now. “Not A chance” you say. But it makes happen, and we can arrange introductions to make this possible.

So, you now have got got bought your house, and instead of having to happen £30,000 deposit, aluminum you have to do is get your self a mortgage.

Now, when you travel into a house, especially in your early years, the opportunity of you staying there for the term of the mortgage is very unlikely. You may change jobs; you may desire to travel to a different area, or there may be many other ground why you will desire to travel within a few years. So, the house you have got bought is only a impermanent residence, and you could almost handle it as a rental property – but with one large large difference.

Whether you paid the deposit, or whether you got this ‘gifted’ sedimentation from the developers, this money, this equity in the property is YOURS. And not only that, it is a historical fact that house prices, given time, will always increase.

So as this is a ‘temporary’ abode, why travel for a mortgage that includes a repayment component in it? Why not travel for what is known as an interest only mortgage? What this is then is a loan where you never pay back any of the rule of the loan, but only the interest on it. You will have got to pay back the capital at the end of the term, but we will be showing you how easy that tin be achieved a small spot later.

Your state of affairs now is that you are paying the barest minimum mortgage repayment, but are also sitting on a considerable amount of INCREASIING equity! You make not have got to pay for an expensive endowment policy, although a life policy may well give your other one-half a comfortableness blanket.

But now look at another effect, which is called ‘Leverage’. With a no-money down feather deal, the leverage is enormous, but see the lawsuit where you bought a £200,000 house and set a 10% (£20,000) sedimentation down on it. If the house travels up in value by 10% the equity in your house will have got increased by some £20,000. Now, your initial investing was £20,000, so you will have got DOUBLED your investing in 12 months. Not bad huh! Try doing that at your local Bank, or even if you dare, the Stock Market!

So, let’s state house terms went up by just 5% per annum over the adjacent 2 years. This would intend an addition in your equity (equity being the difference between the value of your house and the amount of the mortgage on it). This would intend you now owned an extra £10,000 after the first twelvemonth (5% of £200,000) and £21,000 after the second twelvemonth (5% of £210,000 + £10,000 from the former year). This would intend that your house was now deserving £221,000, of which you now owned (£221.000 - £170,000) which come ups to some £55,100.

Wow! £55 Thousand that belongs to you!

Now, let’s make something with this money!

With a good clean credit record after the last 2 old age (assuming you had no defaults on your mortgage payments) you could now refinance your house. You could travel to your existent lender (if you have got a punishment time period in your mortgage), or you could travel to any other lender and negociate up to 90% (subject to your financial status) of THE new value OF YOUR HOUSE.

90% of £221,000 is £198,900. So you can let go of nearly £30,000 out of the equity in your house. And the best thing about this money is it is totally tax free! No capital additions to pay and no income tax! If you don’t believe me, talk to an accountant.

Many people have got got in fact done this, but have then spent the money on new cars, boats, holidays and the like, but once the money is spent in this fashion, it is gone for ever.

But how about if you went and bought another house, this clip as an investing property?

You never know, your friendly developer may be persuaded to give you another talented deposit, in which lawsuit you could purchase respective more than houses (your lone disbursal being legal fees, broker’s fees, and postage duty, which on a £200,000 property would come up to around £5,000). In this case, with your £30,000 you could purchase another 6 houses!

But how make you travel about purchasing all of these houses? And how, if they all have got £170,000 mortgages on them are you ever going to ran into the repayments. Assuming an interest rate of 5%, that would be about £700 per property per month! £4,200 per calendar month mortgage! Heaven forbid. How would you kip at nighttime with that degree of debt to your name?

Some old age ago this would have got been impossible as there was no existent financial system that would enable an individual to make this. However, now, you can get what is known as a ‘Buy To Let’ mortgage, where lenders will usually impart up to 85% of the property in question, as long as the awaited rental income will cover the repayments , plus a bit. The ‘plus A bit’ be givens to change from lender to lender, but you can very quickly get an reply from lenders on whether they will ran into the loan. Also, if you are going to get a ‘gifted deposit’, there are only a few lenders who will offer 85% of the listing price, so once again, you will need to utilize a property baseball club or a broker who is used to this situation.

So, you are now the lucky proprietor of 6 investing properties, as well as your ain house.

You also have got got a committedness to pay 6 investing mortgages as well, and we totalled that as being some £4,200 a month!

But – you don’t desire to have to pay that make you? No! You get tenants in, who very kindly pay the mortgage for you (plus a spot for your pocket and 10% Oregon thereabouts for a managing agent to look after the tenants). You can also take out insurances to cover loss of rent, damage, legal fees on disputes, so it is eminently possible for you to go an ‘armchair’ investor landlord.

However, you now ain 6 investing houses, not one. You have got already seen how equity can construct up in your ain house. So let’s look at each of your investing properties.

If each property was deserving £200,000, and you got a 15% talented sedimentation on each one, you are already looking at an equity of some £30,000 in each unit.

If each property increased in value by just 5% per annum, that’s £10,000 from every unit.

Just look what you would be gaining. You would now ain a property portfolio of 6 investing places worth £1.200,000 of which you would have got instant equity of around £180,000, and this would be increasing (at just 5%) of some £60,000 every year. Without combination this increase, if you sold all of your investing places after 10 years, you would walk away with well over THREE living quarters OF A million POUNDS!

So, make you still believe that – whatever the cost – your chief aim in life is to pay off your mortgage?

By all means, have got got this purpose – but lone after you have made so many other additions that you can really afford this luxury.

This is just one in a series of enlightening intelligence articles issued by Geoff Morris.

Others include:

• “How to generate an income in extra of £30,000 per annum without leaving your Day Job” • “How to profit from Off-Plan property purchases and what pitfalls to watch out for” • “How to utilize a SIPP (Self Investing Pension fund) to turn your portfolio and protect it from the Tax-Man!’’

Other articles can be viewed by just signing up to his property investing page at www.propertyprofits4you.com