May 11, 2013

How to Build a Property Empire with No Deposit

As a property professional, I often attend property networking events. Here I get to talk to the whole spectrum of property investors, from the novice landlords just starting out, to the veterans who control large portfolios. When talking to novice investors, particularly those who don’t even have their first investment property, I am often intrigued to find out what is holding them back. Usually, they are highly intelligent individuals. Usually, they have done a huge amount of research about property investing, participate in online forums and invest in property education. And usually they are paralysed by fear, which leads them to taking no action at all!

These individuals are always looking for the perfect time to invest, are obsessed with finding the perfect deal and are petrified that if they don’t buy at the absolute bottom of the market, that house prices will fall again, leaving them in a position of negative equity.

When I talk to these would-be investors, I usually ask the question “Why do you actually want to build a portfolio?” Usually, they tell me it’s because they want to plan for their future and that they worry that their current pension planning is woefully inadequate. I then ask them, “So it’s an income in retirement that you are looking for that comes from the cashflow of the properties that you own?” They always agree with me that this is ultimately what they are trying to achieve. I then ask them, “So what is it that is holding you back?”

There are usually two main reasons, the first of which is that they don’t have enough for a deposit. On a typical buy-to-let mortgage, lenders now require a deposit of around 25%. This also severely limits investors from growing their portfolio. The second reason is timing. The novice investor is so worried about house prices falling again in the near future, that they put off investing until they are certain that we have finally reached the bottom. The trouble is, they often then wait and wait, just to be sure the time is right. By then, normally they have missed out on the best deals to be had which have gone to the professional investors, and to add insult to injury now have to pay more for their deposits!

However, there is a relatively new approach to property investing that can allow you to build a portfolio and benefit from the cashflow (which is the ultimate goal for the majority of investors), but which does not require a mortgage, does not require a large deposit and which has zero-risk to the investor of suffering falls in property prices. When I tell newbie investors this, their initial reaction is “That’s impossible! How can you possibly buy a property with no deposit and no mortgage?”

My answer to this usually shocks them. You see, the truth is that I don’t buy the property at all. However, I do control it. And I make excellent cashflow from it each month. The strategy is called rent to rent. In a nutshell, what I do is find a struggling landlord and offer to rent the whole property from him as a commercial let. In our contract, I stipulate that I will be permitted to renting out the property on a room by room basis, otherwise known as multi-letting. The reason that I do this is that the rental yield is significantly higher when the property is rented out this way.

In my area, I normally pay £800 to per month for a property with 4 double bedrooms. It normally takes me less than a week to find a suitable property. I then rent each room out for £400 per month, inclusive of all bills. After all my costs are taken into account, I usually aim to make £500 per month cashflow from each property that I take over.

Now it does cost me around £3500 to refurbish each property up to the required standard, so the first 6 months or so is the break even period. However, after that it’s pure profit! Now think of it this way, what monthly income would you need in order to quit your job? When I ask this question, most people tell me that a £3000 per month passive income would allow them to become financially free. So if we assume I make £500 per property, this would mean that in order to quit your job, you would need just 6 properties. I did this in less than 6 months, so it is certainly achievable. The question is, how badly do you want it?

Francis Dolley is the UK authority on this unique rent to rent property strategy and now runs courses teaching students how they can successfully build a portfolio of properties that they don’t own, yet generate substantial cash flow profits each and every month.
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May 9, 2013

Debt consolidation can help you get out of the maze of debt

If you are facing troubles in keeping up with the payments on the multiple debts that you have, you can try out debt consolidation; so that all your multiple debts will get consolidated into a new single loan, with a lower monthly payment, at lower interest rate. There are two types of debt consolidation loans the unsecured and the secured loans. Unsecured loans do not require you to provide any collateral to take this loan, but you may have to pay a high interest rate. However, in case of a secured loan, you need to keep your house or any other property as collateral. If you can't repay the loan, your property may be taken away by the lender.

Benefits of debt consolidation loan

Debt consolidation have several benefits. Some of the benefits are mentioned below:

1) Reduced interest rate - For the consolidated loan you have to pay a lower interest rate. The most common secured debt consolidation loan is the home equity loan or the second mortgage that you take against your property. As you are putting up a security against your loan, if you fail to pay off the loan, the lender can take away your home without even suing you. So, secured debt consolidation loans are generally available with low interest rates.

2) Single payment - Instead of making payments to multiple numbers of creditors, after consolidation, you are required to make a single monthly payment in order to pay off your debt. Earlier, payment to one or more creditors could be missed out by you as it is problematic to maintain several creditors at the same time.

3) Lower monthly payment - As your interest rate has been lowered you have to pay lower amount of monthly payment to your creditor. Thus, you will be able to save money. However, it is important to pay off thedebt quickly; otherwise you may end up paying more toward the interest.

4) Get cash within short period of time - With debt consolidation loans, you generally get the cash within a short period of time.

5) Tax breaks - Earlier when you were paying interest to your credit card bills, you were not getting any tax benefits from those. But now, as you're paying interest to your mortgage, this can be used as tax write-off.

6) Helps you improve credit - Once you start making payments after the consolidation, your credit rating will improve as your credit history will build up.

Other than all of the above advantages, debt consolidation loans also help you avoid filing bankruptcy. It is true that bankruptcy helps you to get out of your debt problem but it hurts your credit score and lowers it by 200-350 points. For more information you can visit here
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