FOUR SHIRES v HOMES & INTERIORS
SMALL INVESTMENTS... BIG RETURNS?
Nigel Baker of Knight Property Portfolio explains how to get the most out of a carefully planned property portfolio
It really is possible to invest in property for a very small sum, yet realise very big returns without needing a mortgage (so no worry about the computer saying ‘no’) and also without the need for a deposit (so very cost effective).
If you happen to have very little mortgage on your home, we at Knight property Portfolio can help to set you up financially for life, as a remortgage will be around 5% per year, yet our property investing will return you about 60% per year. If for example you had £15,000 in the bank, just sitting there doing nothing, with inflation at 5.6% (but in reality nearer 10%), by leaving your money where it is, it is actually shrinking in value each year by anywhere from £843-£1,500, depending on which statistics you actually believe.
If you have equity in your house, again it feels good to have a low mortgage, but the equity can be put to far better use, where it is actually going to increase quite substantially, enabling you to pay off what you borrowed in the first place, but to also have a large surplus as well. Inflation will erode this debt for you, without you having paid off a single penny and we all know that eventually the value of your house will go up, eroding more of this debt.
With inflation at 5.6% and for an investment to be working for you, you need an annual return of at least 15%, otherwise the investment is actually costing you money. Our annual return actually averages 60%.
For those looking for cash flow and excellent returns midterm, you DONT need a mortgage, DONT need a deposit and yet for a small investment of £15k, plus legal fees of about £2K, each deal can offer you a £50-70k return. If you have existing property with equity then it’s possible to release some
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of this and the large cash returns can not only then repay the release, but can give you a large cash surplus, as well as an average 60% return on equity in your house - way more than the borrowing costs of a remortgage of about 4-5%
investments SMART
The following is an example of a live deal at the moment where we have agreed to purchase the house from the vendor for £200k and sell it to a tenant buyer for £250k.
We agree to buy the house for £200k but in 7 years time so that the investor can make some money, but in the meantime the vendor no longer pays the mortgage or other outgoings on that house. The investor is responsible to pay, but this is passed onto the tenant buyer.
The tenant buyer pays to the investor a 5% fee which the investor keeps, but this fee does come off of the purchase price on completion, so the investor receives £12,500 (5% of £250k) in this case.
The tenant buyer also pays the investor rent which on this deal is £900 and the investor pays the mortgage which is £700 leaving a £200 per month profit over a 7 year period. The tenant buyer is responsible for ALL maintenance and repairs etc and so this is pure profit and does not come off of the purchase price in the future.
The tenant buyer also pays an agreed amount as a ‘top up’ to go towards the purchase price in the future and again in this case it is £200 per month for 7 years which also goes to the investor, but does come off of the purchase price in the future.
At the end of the 7 years the tenant buyer completes with the vendor as the contract is assigned to them (to avoid the investor in any property tax like stamp duty) and they hand over the money from the mortgage lender in the future having
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