Ajay Ahuja Blog on Seminars, ROCE, and Property Prices

Seminars are the life blood of our business.  We have a lot of people who want to know more about property investing but specifically investing in below market value properties (BMV).

As soon as someone gets grip with the Return On Capital Employed (ROCE) calculation you can start seeing the shift in people’s thinking.  You look at £5,000 very differently once you know what it is.

Not sure what ROCE is? This is all about how much your capital makes for you.  So if you invested £5,000 of your capital in a bank account you would get a 2 % return.  So your return on capital is 2%.

If you invested £5,000 in a BMV property worth £80,000, the property returned a £200 per month profit and rose by 50% over 5 years then your ROCE would be:

Profit for 60 months = 60 x £200 = £12,000

Capital Growth = 50% x £80,000 = £40,000

Total Return = £12,000+£40,000 = £52,000

So average return is £52,000/5years = £10,400 per year.

Capital invested is £5,000 so the return is:

£10,400/£5,000 = 208%

So compare 208% per year with 2%.  It is not hard to see how you can become very wealthy if you invest in property that produces a monthly cashflow but more importantly rise in value.

So how can you be sure that the property will rise?  Well it is really REALLY easy to assure yourself that property prices will rise.  You just have to get your head around the concept that property is guaranteed to do one thing:

Rise in the LONG TERM

So property prices may fall this year, next year, even the year after next.  So what?  I ain’t selling!  The only time I am selling (if ever) is when prices are in excess of what I paid for it.

So will property prices be higher in 20 years time?  I am no psychic or Russell Grant or anything but I reckon property prices will be higher in 20 years time don’t you?