I have touched on this subject as I do not want to dwell on it however it is becoming official that house prices are on the way up.  If the BBC are reporting it then it is pretty much out there and expect the feel good factor to soon follow:

http://news.bbc.co.uk/1/hi/business/8181945.stm

Please read this article.  It makes a lot of sense. 

Again I would like to say no one can predict with any great accuracy however the most important thing is you make money from property.  You do this by:

1.  Buying a property for less than you sell it for

2.  Renting a property for more than the mortgage payment

That is not rocket science what I have just said however it is amazing how many people forget that.  I suppose because most people are not investors, accountants or professional landlords they would not grasp this basic concept.  The basic concept being:

REAL CASH!

With regards to point 1 above the key word is sell.  I do not care what my property is worth now as I am not selling.  Commentators love to point out how much equity I have lost or in fact the negative equity that might be staring back at me in my portfolio.  Oh gosh NEGATIVE EQUITY! Should I slit my wrists now?

Negative equity is completely irrelevant to an investor who invests in the long term.  This is because prices always rise in the long term.  If this changes (like deflation kicks in) then EVERYTHING comes down in price including wages!  If deflation comes along we are all in trouble.

With regards to point 2 I always bang on about that.  Positive cashflow.  Invest in a property that makes more than the mortgage payment.  Now I have to admit.  There is an exception to this rule.  Let me explain by way of an example:

Lets say I found you a property worth £50,000 for £30,000 and it could rent out for £300 per month.  Would you be interested?  I hope you would say yes! 

Now before you say "I do not have £30,000!" what about if I told you I could get you a £30,000 loan to buy the property.  Would you be still interested?  Again I would hope you would say yes.

Now if I said this £30,000 is going to cost you 12% interest which equates to £300 per month would you still be interested?  Now probably 85% of you would have dropped out by now.  The 15% of you that would say yes can I say you will become very wealthy if you have this attitude to borrowing.

The reason for this is because this £30,000 property will rise back to £50,000.  When? Who knows.  However it will rise back.  It will either get dragged up slowly with wage inflation or catapulted back up by all this pent up demand (most likely) for property.  If you buy this property you can expect to make £20,000 profit at some point, probably quite quickly.

You also get to hold a £30,000 asset for zero cost as the rent will cover the excessive mortgage payment (£300 rent - £300 mortgage cost).

So if we multiplied these figures by 10.  Would you buy £300,000 worth of property with no money and hold out for the boom to make £200,000? In say 12 months?

Now this is the scary thing.  I can get 100% finance at 12%.  No joke.  100% FINANCE!  I cannot say too much at the minute but these are the sort of products which will make certain people extremely rich.  You will not see this finance from any broker.  It will not be mass market.

Now I want you to think about whether you can take on a 12% mortgage.  It is not for everyone.  However if you have a good income, so you can handle the negative cashflows when they occur, then this could be for you. 

I will definitely keep you informed.  It is reserved for clients only.  If you have been considering becoming a client then request a callback.  If ever this is a time to be one of my clients then this is it!

For those who want to learn all about no money down property investing consider getting my training package delivered to your door. 

Speak soon.

Ajay

Posted on: 7th Aug 2009