Attention – Property Investment Can Seriously Improve Your Wealth (Part 2)

In this article we are going to discuss how you can add value to property and how getting into debt is actually a very good plan that can make you very, very rich.

When you buy real estate, you acquire an asset that will increase in value, or “appreciate” over time. On average, real estate investments double in value every 7 years. Buy a £60,000 property today and in 7 years it will probably be worth approx £120,000. That sounds good to me. Even better is the fact that unlike investments in big companies’ shares, you can directly influence the value of your property asset. You will never be able to influence the business decisions of a large public company by buying a few shares so the value of your investment is entirely in the hands of the company directors and the market they operate in. You had better enjoy watching from the sidelines.

In the world of property investment, you get off the sidelines and become your own “Most Valuable Player”! Your actions can determine what happens to your investment. By arranging simple and inexpensive renovations you can substantially increase the value of your real estate investment. You see, spending a small amount of money on a property can cause a disproportionate increase in the overall value of the property. Then again, perhaps you could see an opportunity to add even more value to your property investment by doing a larger development. You could build an extension, a conservatory or a “granny annex”. Maybe you’ll decide to knock the original investment down and hire a construction firm to build a big block of flats (paying them afterwards of course). Increasing the value of your property investment by spending money on it is termed “forced appreciation” and this is a major advantage of real estate over other asset classes (shares/bonds etc). It is easy to learn how to spot opportunities to add value, thereby making yourself richer. You just need to get some simple “property investment education”.

One of the greatest truths in property investment is that your greatest asset is time (and property investment education). Forget about cash reserves and contacts etc because time goes hand in hand with inflation. It is inflation that will passively increase the value of our property investments and rents. It is inflation that will reduce the burden of our mortgage repayments.

Inflation is the property investors friend and it makes him rich.

What will your mortgage payments be on your investment property 7 years from now? They will certainly be less of a burden to you as time passes, as inflation erodes the real value of your repayments.

For example, consider an investment property today with a mortgage interest repayment of £500 per month and rental income of £700 per month. That’s £200 per month profit, so this year you would make a profit of £2400. Not bad.

In 5 years or so, your monthly mortgage interest repayment will not have changed much from the £500 but the monthly rent may have increased to £900 per month! That means a monthly profit of £400 and an annual profit of £4800 on just one property! This dramatic increase in profits with time is due to the fact that your interest repayments will be worth less and less with time but rents will increase. Marvellous. We like the sound of that.

The miracle of inflation means that your profit margins will increase year on year. How many such properties would you need to replace your current income?

Have you heard the scary news stories about the growing level of private debt in the UK. Maybe you think that you shouldn’t be taking on debt at the moment, or at any time. Maybe you think that getting a buy-to-let mortgage sounds reckless.

Well, I’d agree that you shouldn’t be taking on any “bad debts” but you should be taking on as much “good debt” as you can! You see, there are two sides to the debt coin: a good side and a bad. Let’s just define what they are.

Bad debt is taken out to buy a “liability”. A liability is anything you buy which is taking money out of your pocket.

Liabilities include cars, motorbikes, holidays and new televisions or stereos. These are things that are costing you money and will never make you any money in return. Average Joes who spend their money like this are never going to be rich. Their debts will grow and their interest repayments will consume their cash. They spend all their money on consumables.

On the flip side, let’s look at good debt. Good debt is taken out after careful analysis and consideration, to acquire “assets”. Assets, in contrast to liabilities, put money into your pocket and make you richer. They are things that appreciate in value and provide you with positive cash flow. Assets put money in your pocket again and again and again; perhaps forever!

It should be obvious that it is very important to pay off any bad debts as quickly as possible and refrain from taking on further bad debt. You should definitely be taking on good debt to buy assets. Enough said.

I hope that you are enthusiastic about the potential to make millions in the world of property investment. I would encourage you to check out the free property investment education which is available online so that you can arm yourself with the best skills and techniques to make your first million. If you are still hungry for information, you should read the next article in this series.

Source by Dr Bradley Tomkins

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