Sounds amazing does it not? It does if you do not have a full grasp of semi advanced mathematics but considering I spent the best part of my late teenage years studying double maths at A-level (both A grades) and Economics and Maths at LSE (London School of Economics) AND qualifying as a chartered accountant it comes to no surprise that you can make astronomical returns through property investment.
I know this because:
a) I know the theory AND
b) I have achieved it!
The returns I have made from property in the last 10 years is thus:
Starting capital: £500
Net Equity: £10,000,000 a.k.a. £10m
Return over 10 years = £10m divided by £500 = 2,000,000% That is 2 million percent. And trust me this is a real figure. If I really told people that you could make a 2 million percent return over 10 years no one would believe me but it is true.
Anyway, that is history and I took extreme risks to get that sort of return which I would only recommend to very few investors who were young, had little to lose and had no dependents. But what about now? What can some make in the next 5 years say. Well let us look at it and go through it with the help of my scientific calculator (which is always by my side!).
If we go by the national statistics and press properties are at 90% of prices 12 months ago. So a property 12 months ago for £100k can now be bought for £90k. If I said we would average 5% growth over the next 5 years from 12 months ago (in effect 4 years from now) our £90k property would be valued at:
£100k x 5% compounded for 5 years. This would bring the property value at £127,628.
If we bought the property for £90k putting down a 15% deposit (the usual amount for a buy to let mortgage) then you initial investment would have been:
£90k x 15% = £13,500
If you were to sell the property you would make a profit of:
£127,628 – £90,000 = £37,628.
This would mean your return on capital would have been:
£37,628 divided by £13,500 = 279%.
Sounds big eh? To turbo boost this return if you borrowed £13,000 to make the investment in the first place and only put in £500 then your return would be:
£37,628 divided by £500 = 7,526% return over 4 years.
Now these are the returns I am talking about. And remember this is off a modest growth of 5% p.a. over 5 years from 12 months ago. If we base it on historics (I know it is redundant to do this but just for clarity as no one really knows what future growth is going to be) and property price rises were 20%+ per year you start hitting the millions of percent returns.
So what do I reckon? Well I think you know. Property is the only investment vehicle which the man on the street can make very high returns. I want to point out that the government is well aware of the housing shortage that is being faced. Builders aborting projects is VERY bad news as there will be a real shortage of homes in the future. This will cause property prices to remain high and rents to remain high.
I really can’t emphasise this enough. If you look at any big residential landlord that invests time in researching the residential property market they are all of the same opinion.
If you want help with building a highly geared property portfolio read some of my advice books.