Why Buy Now?
I feel that even now, at a time when relatively high interest rates within UK and Ireland may be jamming the door shut for the heavily mortgage reliant resident purchaser, the door has swung freely open for the opportunist international and the domestic mortgage free/cash rich investor. The secret to success, if you want to call it that, is for the buyer to be in the right place at the right time, and in a position to act expeditiously and aggressively. With a number of property investors already out there snapping up the bargains, time poor home buyers will be left with the scraps.
There are also two many glass half empty organisations publishing reams of doom and gloom on the property market. If an investor has the gift, and the richest ones usually do, to take a step back and have a look at what the current climate is actually telling us it isn't all that bad.
According to TSB/ESRI house prices have declined by 4.7% in the last 12 months. If we look at this in comparison to the 36% drop in the ISEQ general index since last February then this is positive news as far as our clients are concerned. From an investment perspective we are finally seeing a glimpse of realism in what has been an over inflated market for too long to remember. A house should only be worth what a buyer will pay for it and not as much as a vendor demands for it. For investors, this means that a 10-15% bid below asking price must be taken seriously and is a far cry from the bidding wars that regularly took properties 25% above their AMVs 12 months ago. It's so important to remember that a large number of the wealthy elite in UK and Ireland at present are the home buyer generation from the 80s who bought when the market was at its lowest.
Who is investing?
What we have found though is that up to even 6 months ago there was a growing interest in the higher end of the property market from an international audience. At one stage the demographic was split between the USA, UK and Ireland at 50%, 35% and 15% respectively. Uncertainty in the US economy and the decline of the dollar has halved even the initial enquiries from our American market. My belief for the year ahead is that interest from the UK and from the domestic investor will increase. Renovations and remodelling of high end property is a great way to add value to a home and we would envisage that many investors will be requesting us to look for these opportunities.
Economic growth here in the past decade has made UK and Ireland one of the most desirable places to live in the world. Long gone are the days of high emigration and, thankfully, expats and their families are returning to this beautiful country. UK and Ireland has so much to offer and improvements to the country's infrastructure mean that more and more families are happy to reside outside of the major cities and commute on a daily basis if necessary. This has, however, increased the demand for properties with designated helicopter pads! Of course, being able to move outside of a major city commuter belt also allows buyers to pick up so much more for their buck.
What's the next step for an investor?
Acquiring a dream property should be an enjoyable process. Every person has different lifestyle aspirations and these should be managed to deliver a very special home at the end of the project. Sometimes this is simply finding the perfect property but sometimes this is redesigning a property to exact requirements.
However, property investing can be an expensive and energy sapping process for the time poor or international buyer. Giving up your annual vacation or holiday, or even your weekends to trawl estate agents all over the place will squeeze the enthusiasm out of most of the buyers! In these circumstances, a good property investment consultancy will prove both cost efficient and sanity preserving for their Clients.
Regardless of whether an investor or home buyer uses a service such as ours I would always advise buyers to approach any property investment remembering that we are in a buyers market. Negotiate hard and do not be afraid to walk away if a property is valued above what you believe it is worth. I think you will be surprised at how many call backs you receive on a Friday afternoon.
Should You Buy a Property in Thailand?
South East Asia has always had a special appeal for me. I first began spending time there about 5 years ago. I love the organised chaos of the roads in Bangkok, the food that is cooked right in front of you, and the haggling at the markets. Amazing.
Altogether I have spent over 3 months in Thailand and I have so many fond memories, add to that the fact that it is halfway to Australia and QANTAS offers a stopover of only 45 minutes which gets you to Oz quicker. It's a great destination.
I usually spend a week stopover on the way back to the UK. It gives me a break after 2 gruelling weeks with the family and friends and the 2 hour massages for around £7. What more could you want? :)
So naturally l thought if I'm spending so much time here l might as well buy a property. Then naturally if I am prepared to buy and have done extensive research why wouldn't my investors also buy as well?
Having looked into Phuket property before the tsunami, I thought I would check out Pattaya (pronounced “Pat-e-ya”) which is only around 1 hour 20 minutes drive from the new international airport in Bangkok (the capital).
Pattaya is a seaside town (tick-These ticks and crosses are my due diligence) with a new highway which will mean it will only take around 45 minutes to get to and from the airport. (tick).
Pattaya has 3 distinct property markets.
The first is the local market. The properties are priced between 1 and 3 million Baht (70 Baht to £1) So £15,000 - £45,000. Sounds good right. Well maybe not. Unless you are a local it's unlikely you would buy at this level.
You could only rent to locals and the investment returns I don't feel would be great enough. (Cross)
The second and most interesting market is the 20 to 30 million Baht. £285,000 - £430,000. Incredible you say? Well thats what I thought too. In fact forget incredible — l was downright shocked. But this is the market of the off plan speculators. In my books, another word for 'speculator' is 'gambler' and hopefully you know by now what I think of gamblers.
I do believe you can make money on these, but only by 'flipping' before completion but obviously there are no guarantees with prices already so high. Incidentally, this market has seen an incredible amount of growth so that waterfront apartments are as expensive as central London, Sydney or New York. (Cross)
I feel that this market has been driven by paper gains rather than underlying fundamentals. I see this happen quite often, and it's one of the reasons I deal in properties 99% of people would rent.
The final level is the 5 to 9 million Baht. So £70,000 - £130,000. This is the retirees' and expats' market. You would be more than happy with these houses. 3-4 Bedrooms, large open spaces, ensuites, parking and best of all - air conditioning.
These I feel would be ideal for investment and present your best opportunities. (Tick)
Rentals are great as a lot of major multinationals have offices in Bangkok and the expats are happy to commute up daily or it's cheap enough to rent a place in Bangkok during the week while spending the weekend home in Pattaya. (Tick)
As an investor in Thailand the first thing you have to realise is that you cannot own land (Cross) so at present you have two choices: either buy in the name of a Thai company and have Thai nationals who own it (but you have a signed deed saying you can replace the Thai nationals at any time). It's a reasonably secure way of buying.
The other way and the way that is becoming more accepted is a freehold/leasehold similar to what we are use to in the UK. A lot of new builders are structuring ownership this way.
BUT… The Thai government has an unfortunate habit of changing laws so you may find yourself at the wrong end of a change. They made a decision early in 2006 that effectively stopped or severely curtailed foreign ownership (Cross) and the stock market began to spiral downwards so rapidly that they changed the law back by day's end. This sort of government backpeddling is a potential warning sign. (Cross)
The country has had 18 coups since 1932, although the past 15 years have seen none until 2006. Whilst they have all been peaceful coups, they still create political instability. (Cross) On the other hand a coup to a Thai person is probably like on of our Labour politicians voting with the Lib-Dems so it's not that big a deal in reality.
Most coups have been backed by the King. Thai people have an amazing allegiance to their king, wherever you go in Thailand you will see him, and as long as the King has backed the coup everything is alright. (Tick)
The King is the real power in Thailand, he has been an active participant and a representative of the people, and is a stable force in a thriving country. (Tick)
The problem Thailand faces is that the King is getting old and may one day pass the throne onto his young son who is renowned for irresponsible antics. So no one really knows just how he will take to the position of King or whether the people will take to him. This could cause an instability in the investment market. (Cross)
One of the biggest things overlooked when inexperienced investors seek out exotic new investment regions is how to get your money back. Oftentimes the capital growth is fantastic, so your £20,000 investment doubles and doubles again (so you now have £80,000). This is a paper profit until you actually sell it or remortgage it.
So the essential question is not often will I make money? but how will I get paid? or who will sell it for me?, who will buy it from me?, how much tax will l pay?, how much will I have leftover? Or if you don't want to sell it how will l make the equity work for me?.
Often the answer is you won't. You won't remortgage it and you won't sell it, or if you do you'll need to accept considerably less than you want for it.
In Thailand mortgages are very tight. The Asian economic crisis hit Thailand particularly hard, and in fact they've only just now started continuing a number of concrete highways which stood unfinished and vacant above the ground level. These massive highways stretch for miles with no entrance and no exits and are amazing to see.
The bottom line is Thai banks don't trust farang (foreigners) so you might be made to jump through hoops just to get a 50% mortgage. And if you thought getting a mortgage was hard, try remortgaging. So that kind of leaves selling as the option which kind of goes against our entire philosophy.
All in all, I decided that it would be better to rent out a 5 star hotel or villa on the beach for 2 weeks a year than to own a property which has so many variables.
If you are interested in buying in Thailand, you can definitely make some money but as always 'Do your due diligence?' I am happy to give you the research that we undertook before I went if you are interested.
Live with passion,
Brett :-)
PS. I love Thailand and if you get to go make sure you hire a bike and get out into the real Thailand rather than just around the cities and tourist places. The people are lovely and the food is soooo good.
------------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
Altogether I have spent over 3 months in Thailand and I have so many fond memories, add to that the fact that it is halfway to Australia and QANTAS offers a stopover of only 45 minutes which gets you to Oz quicker. It's a great destination.
I usually spend a week stopover on the way back to the UK. It gives me a break after 2 gruelling weeks with the family and friends and the 2 hour massages for around £7. What more could you want? :)
So naturally l thought if I'm spending so much time here l might as well buy a property. Then naturally if I am prepared to buy and have done extensive research why wouldn't my investors also buy as well?
Having looked into Phuket property before the tsunami, I thought I would check out Pattaya (pronounced “Pat-e-ya”) which is only around 1 hour 20 minutes drive from the new international airport in Bangkok (the capital).
Pattaya is a seaside town (tick-These ticks and crosses are my due diligence) with a new highway which will mean it will only take around 45 minutes to get to and from the airport. (tick).
Pattaya has 3 distinct property markets.
The first is the local market. The properties are priced between 1 and 3 million Baht (70 Baht to £1) So £15,000 - £45,000. Sounds good right. Well maybe not. Unless you are a local it's unlikely you would buy at this level.
You could only rent to locals and the investment returns I don't feel would be great enough. (Cross)
The second and most interesting market is the 20 to 30 million Baht. £285,000 - £430,000. Incredible you say? Well thats what I thought too. In fact forget incredible — l was downright shocked. But this is the market of the off plan speculators. In my books, another word for 'speculator' is 'gambler' and hopefully you know by now what I think of gamblers.
I do believe you can make money on these, but only by 'flipping' before completion but obviously there are no guarantees with prices already so high. Incidentally, this market has seen an incredible amount of growth so that waterfront apartments are as expensive as central London, Sydney or New York. (Cross)
I feel that this market has been driven by paper gains rather than underlying fundamentals. I see this happen quite often, and it's one of the reasons I deal in properties 99% of people would rent.
The final level is the 5 to 9 million Baht. So £70,000 - £130,000. This is the retirees' and expats' market. You would be more than happy with these houses. 3-4 Bedrooms, large open spaces, ensuites, parking and best of all - air conditioning.
These I feel would be ideal for investment and present your best opportunities. (Tick)
Rentals are great as a lot of major multinationals have offices in Bangkok and the expats are happy to commute up daily or it's cheap enough to rent a place in Bangkok during the week while spending the weekend home in Pattaya. (Tick)
As an investor in Thailand the first thing you have to realise is that you cannot own land (Cross) so at present you have two choices: either buy in the name of a Thai company and have Thai nationals who own it (but you have a signed deed saying you can replace the Thai nationals at any time). It's a reasonably secure way of buying.
The other way and the way that is becoming more accepted is a freehold/leasehold similar to what we are use to in the UK. A lot of new builders are structuring ownership this way.
BUT… The Thai government has an unfortunate habit of changing laws so you may find yourself at the wrong end of a change. They made a decision early in 2006 that effectively stopped or severely curtailed foreign ownership (Cross) and the stock market began to spiral downwards so rapidly that they changed the law back by day's end. This sort of government backpeddling is a potential warning sign. (Cross)
The country has had 18 coups since 1932, although the past 15 years have seen none until 2006. Whilst they have all been peaceful coups, they still create political instability. (Cross) On the other hand a coup to a Thai person is probably like on of our Labour politicians voting with the Lib-Dems so it's not that big a deal in reality.
Most coups have been backed by the King. Thai people have an amazing allegiance to their king, wherever you go in Thailand you will see him, and as long as the King has backed the coup everything is alright. (Tick)
The King is the real power in Thailand, he has been an active participant and a representative of the people, and is a stable force in a thriving country. (Tick)
The problem Thailand faces is that the King is getting old and may one day pass the throne onto his young son who is renowned for irresponsible antics. So no one really knows just how he will take to the position of King or whether the people will take to him. This could cause an instability in the investment market. (Cross)
One of the biggest things overlooked when inexperienced investors seek out exotic new investment regions is how to get your money back. Oftentimes the capital growth is fantastic, so your £20,000 investment doubles and doubles again (so you now have £80,000). This is a paper profit until you actually sell it or remortgage it.
So the essential question is not often will I make money? but how will I get paid? or who will sell it for me?, who will buy it from me?, how much tax will l pay?, how much will I have leftover? Or if you don't want to sell it how will l make the equity work for me?.
Often the answer is you won't. You won't remortgage it and you won't sell it, or if you do you'll need to accept considerably less than you want for it.
In Thailand mortgages are very tight. The Asian economic crisis hit Thailand particularly hard, and in fact they've only just now started continuing a number of concrete highways which stood unfinished and vacant above the ground level. These massive highways stretch for miles with no entrance and no exits and are amazing to see.
The bottom line is Thai banks don't trust farang (foreigners) so you might be made to jump through hoops just to get a 50% mortgage. And if you thought getting a mortgage was hard, try remortgaging. So that kind of leaves selling as the option which kind of goes against our entire philosophy.
All in all, I decided that it would be better to rent out a 5 star hotel or villa on the beach for 2 weeks a year than to own a property which has so many variables.
If you are interested in buying in Thailand, you can definitely make some money but as always 'Do your due diligence?' I am happy to give you the research that we undertook before I went if you are interested.
Live with passion,
Brett :-)
PS. I love Thailand and if you get to go make sure you hire a bike and get out into the real Thailand rather than just around the cities and tourist places. The people are lovely and the food is soooo good.
------------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
The Best Time To Buy Is...
Now.
Yes, it's a cliche, but allow me to explain why it holds true in all markets.
In our business we love property values that grow quickly because it builds our portfolios and makes our investors happy with their decision to purchase. The flip side is that while this is happening the demand for property is good and developers offer less discounts which means you need more money to invest in property and therefore less people want to invest (or at least the sales are more painful for them.)
The trick is to view a constant return that you will achieve.
So — when developers give you the big 15% discount, the market is probably stagnant, so you'll see a net return of 15%. But when the market is galloping, your capital growth will be at say 7% and your discount will be lower at say 8%-10%. Your net return may be around 15%-17%.
Either way you are making around the same return even though you might not see it.
Of course, this is a massive over simplification since there are so many factors that l have overlooked but the important thing is this: you are going to need to invest some money. How much will depend on the market and the structure.
If you buy in a stagnant market then you get in cheap but you have to cash flow the ongoing costs so it's good for your capital and bad for your cash flow. If you buy when it's a hot market it costs you more capital but because of the growth your cash flow is better.
I hope this explains why the answer to the age old question of 'When should you buy?' is always Now, today, right this moment!!
-------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
Yes, it's a cliche, but allow me to explain why it holds true in all markets.
In our business we love property values that grow quickly because it builds our portfolios and makes our investors happy with their decision to purchase. The flip side is that while this is happening the demand for property is good and developers offer less discounts which means you need more money to invest in property and therefore less people want to invest (or at least the sales are more painful for them.)
The trick is to view a constant return that you will achieve.
So — when developers give you the big 15% discount, the market is probably stagnant, so you'll see a net return of 15%. But when the market is galloping, your capital growth will be at say 7% and your discount will be lower at say 8%-10%. Your net return may be around 15%-17%.
Either way you are making around the same return even though you might not see it.
Of course, this is a massive over simplification since there are so many factors that l have overlooked but the important thing is this: you are going to need to invest some money. How much will depend on the market and the structure.
If you buy in a stagnant market then you get in cheap but you have to cash flow the ongoing costs so it's good for your capital and bad for your cash flow. If you buy when it's a hot market it costs you more capital but because of the growth your cash flow is better.
I hope this explains why the answer to the age old question of 'When should you buy?' is always Now, today, right this moment!!
-------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
The 2 greatest concepts in property!
Lets look at the 2 most important financial principles that will guarantee you become a Set and Forget property millionaire.
The first is Leverage, it is the lesser of the two but means that we can use the second much more effectively. Leverage from a property perspective means borrowing capital to invest. It will take the form of either a mortgage, personal loans, credit cards. I will leave the last 2 out and focus exclusively on the mortgage aspect.
A mortgage represents huge capacity for leverage.
Say you had saved £10,000 assume you could buy a property with this and that property after a year was worth £20,000. You have made £10,000 or 100% return on investment.
In this example you have not used any leverage.
Now lets say you took that same £10,000 and went to a bank and borrowed £90,000 at 10% interest rate. Then using the £10,000 and the amount borrowed you bought 10 properties with your £100,000.
At the end of the same your each of your 10 properties has doubled to £20,000. You have just made £100,000 less interest of £9,000 (£90,000 x 10%) so £91,000. So without leverage you made £10,000 and with it you made a cool £91,000. Hopefully you can see why leverage is such a great facility.
The second and more powerful concept is Compounding. Albert Einstein said of compounding that it was the 8th wonder of the world. I am inclined to agree.
Compounding works like this, you invest £1 as a child and each year you are paid 10% interest. So at the end of:
» Year 1 - £1.10
» Year 2 - £1.21
» Year 3 - £1.33
» Year 4 - £1.46
» Year 5 - £1.61
» Year 10 - £2.37,
» Year 15 - £3.83,
» Year 20 - £6.16,
» Year 25 - £9.92,
» Year 30 - £15.98,
» Year 35 - £25.74,
» Year 40 - £41.45,
» Year 50 - £130.08
Now think for a moment if you added £1 at the end of each year. The results would be outstanding:
» Year 10 - £20.12
» Year 20 - £69.73
» Year 30 - £198.39
» Year 50 - £1,397.69
You will notice that what would have taken 32 years will now take just 10 years. Then think about after 50 years the results are amazing. £130 versus £1,397. You will notice that in the first few years you will not notice much effect but as the years go on the effect is massive.
The reason compounding works is best explained in my all time favourite book on finances. The Richest Man in Babylon by George C Classon. How therefore may we put our gold to work?; My first profitable investment was a loan I made to a man named Aggar, a shield maker. Once each year did he buy large shipments of bronze brought from across the sea to use in his trade. Lacking sufficient capital to pay the merchants, he would borrow from those who had extra coins. He was an honorable man. His borrowing he would repay, together with a liberal rental, as he sold his shields.
Each time I loaned to him I loaned back also the capital increase, but its earnings likewise increased. Most gratifying was it to have these sums return to my purse.
I tell you, my students, a man’s wealth is not in the coins he carries in his purse; it is the income he buildth, the golden stream that continually floweth into his purse and keepth it always bulging. That is what every man desireth. That is what thou, each one of thee desieth; an income that continueth to come whether thou work or travel.
Great income I have acquired. So great that I am called a very rich man. My loans to Aggar were my first training in profitable investment. Gaining wisdom from this experience, I extended my loans and investments as my capital increased. From a few sources at first, from many sources later, flowed into my purse a golden stream of wealth available for such wise uses as I should decide.
Behold, from my humble earning I had begotten a hoard of golden slaves, each laboring and earning more gold. As they labored for me, so their children also labored and their children’s children until great was the income from their combined efforts.
If you would like a simply definition - Compound Interest is the interest which is calculated not only on the initial principal but also the accumulated interest of prior periods.
Understand and use both these concepts and you are a huge step towards that armchair.
Live with passion,
Brett Wood
-----------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
The first is Leverage, it is the lesser of the two but means that we can use the second much more effectively. Leverage from a property perspective means borrowing capital to invest. It will take the form of either a mortgage, personal loans, credit cards. I will leave the last 2 out and focus exclusively on the mortgage aspect.
A mortgage represents huge capacity for leverage.
Say you had saved £10,000 assume you could buy a property with this and that property after a year was worth £20,000. You have made £10,000 or 100% return on investment.
In this example you have not used any leverage.
Now lets say you took that same £10,000 and went to a bank and borrowed £90,000 at 10% interest rate. Then using the £10,000 and the amount borrowed you bought 10 properties with your £100,000.
At the end of the same your each of your 10 properties has doubled to £20,000. You have just made £100,000 less interest of £9,000 (£90,000 x 10%) so £91,000. So without leverage you made £10,000 and with it you made a cool £91,000. Hopefully you can see why leverage is such a great facility.
The second and more powerful concept is Compounding. Albert Einstein said of compounding that it was the 8th wonder of the world. I am inclined to agree.
Compounding works like this, you invest £1 as a child and each year you are paid 10% interest. So at the end of:
» Year 1 - £1.10
» Year 2 - £1.21
» Year 3 - £1.33
» Year 4 - £1.46
» Year 5 - £1.61
» Year 10 - £2.37,
» Year 15 - £3.83,
» Year 20 - £6.16,
» Year 25 - £9.92,
» Year 30 - £15.98,
» Year 35 - £25.74,
» Year 40 - £41.45,
» Year 50 - £130.08
Now think for a moment if you added £1 at the end of each year. The results would be outstanding:
» Year 10 - £20.12
» Year 20 - £69.73
» Year 30 - £198.39
» Year 50 - £1,397.69
You will notice that what would have taken 32 years will now take just 10 years. Then think about after 50 years the results are amazing. £130 versus £1,397. You will notice that in the first few years you will not notice much effect but as the years go on the effect is massive.
The reason compounding works is best explained in my all time favourite book on finances. The Richest Man in Babylon by George C Classon. How therefore may we put our gold to work?; My first profitable investment was a loan I made to a man named Aggar, a shield maker. Once each year did he buy large shipments of bronze brought from across the sea to use in his trade. Lacking sufficient capital to pay the merchants, he would borrow from those who had extra coins. He was an honorable man. His borrowing he would repay, together with a liberal rental, as he sold his shields.
Each time I loaned to him I loaned back also the capital increase, but its earnings likewise increased. Most gratifying was it to have these sums return to my purse.
I tell you, my students, a man’s wealth is not in the coins he carries in his purse; it is the income he buildth, the golden stream that continually floweth into his purse and keepth it always bulging. That is what every man desireth. That is what thou, each one of thee desieth; an income that continueth to come whether thou work or travel.
Great income I have acquired. So great that I am called a very rich man. My loans to Aggar were my first training in profitable investment. Gaining wisdom from this experience, I extended my loans and investments as my capital increased. From a few sources at first, from many sources later, flowed into my purse a golden stream of wealth available for such wise uses as I should decide.
Behold, from my humble earning I had begotten a hoard of golden slaves, each laboring and earning more gold. As they labored for me, so their children also labored and their children’s children until great was the income from their combined efforts.
If you would like a simply definition - Compound Interest is the interest which is calculated not only on the initial principal but also the accumulated interest of prior periods.
Understand and use both these concepts and you are a huge step towards that armchair.
Live with passion,
Brett Wood
-----------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
How To Make Credit Cards Work For You
Interest rates have risen and fallen dramatically over the last few years. But credit cards have seen comparatively tiny reductions in their rates. The good news? You can save heaps on your credit card bill just by being smart about using your card.
People pay literally billions of dollars a year in interest from their plastic - making a credit card one of the most expensive forms of borrowing around. But it doesn't have to be that way. The reason they pay so much interest on their cards is because they use them incorrectly.
Interest rates are irrelevant when compared to how a credit card is used and whether the credit card utilised suits an individual's patterns of use.
There are basically two types of cards.
The normal credit card
The first is generally the most often used it has no annual fee and has an interest free period of up to 55 days after a credit card purchase has been made. After that period, however, interest charges are extremely high, normally around 19%. This is the card you will be most familiar with, it has a credit limit preset and you normally only have to repay 5% of the balance owing each month. The remaining balance sits there charging you interest.
What most people don't know is that when you withdraw cash, instead of receiving a period of interest free days, interest is charged from day one.
Furthermore, cash withdrawals are the last debt to be paid off so if there are other debts on the card and you think you have paid off your cash advance a day later and escaped the expensive interest charges you will find you are just paying off another debt on the card, leaving the cash advance there to accumulate interest. In most cases, the entire card must be paid off to avoid such charges.
The Charge Card
This leads me onto the second type of card. It's called a Charge card and although they look very similar to a credit card they are very different.
Firstly, everything you spend over the course of the month is charged in the normal way but at the end of the month you must pay the balance off in full. In this way you are getting full use of the banks money for up to 55days. Then you pay it off in full and the process starts again. Now often this type of card will have an annual fee. The most famous of the cards are the American Express and Diners.
Personally I use an American Express and a Natwest Premier Charge. Now the reason I use two cards is a concept called "factoring". Factoring is all about cashflow and you should be getting to know by now how highly I regard cashflow.
Now before we move on you need to understand this 55 days interest free period and its relation to statement dates.
Important dates in the credit card cycle
Once you receive your card there are two vitally important dates to remember. They are so important I actually alarm them in my phone each month. The first is the statement date and the other is your direct debit or payment due date.
Statement date is simply the date your statement is issued. All transactions up to that date will be due on the next payment due date and all after will be on the following month.
Now your payment due date in the case of a 55 day card will normally be 24 days after the statement date. 31days in the month plus 24 days till payment. A 45 day interest free card will be 31 days plus 14 days.
OK -- so why do I have a charge card. It comes down to factoring.
The concept of factoring
Factoring is most often used in business to create immediate cashflow. A business will invoice a client but not receive the payment for say 30 days. So the business will go to a factoring company who will pay the invoice immediately minus around 7-9% commission. So basically for this fee you get to use the factoring company's money for the 30 days.
Now with a credit card you spend the money but don't pay for it until the payment due date. So effectively you get to use the finance company's money for however many days that is. It keeps the cash in your account but doesn't cost you anything to do so.
Now the only thing left to consider is the annual fee on the charge card, because they can be hefty. I have the Amex Platinum which costs me £275 and the Natwest which is £195. So that's £475 per year or £40 per month. So I need to make a judgement call on whether I think it is worth £40 per month to use this facility. For me it is because I also use my Natwest Charge to buy houses and I get Air Miles points for it and it also comes with a £10,000 overdraft, the Amex I use for all my travel booking. Both of these come with other features which I use such as the travel insurance and purchase insurance.
Now the other option is to take the first type of Credit card and use it in the same way as a charge, set up the direct debit for the full amount each month. If you do this you effectively will be using the banks money for nothing. It feels so good to get something over the banks for once.
Now let's look at why I have two charge cards rather than one.
My statement date on the Natwest Charge is the 17th of the month and it is direct debited on the 6th of each month. The Amex is the 29th and the direct debit is the 10th of the month. So I use the Natwest between the 17th and the 28th and the Amex between the 29th and the 16th of the month. This means I am maximising my interest free days from each card.
Now on the whole this formula works fine but sometimes the Amex is not accepted so I then use the Natwest but I accept this as part of doing business.
Cashless society
I use my credit cards for every purchase imaginable, another feature about cards is that when you purchase something using your card, if say the Merchant doesn't provide you with the service or product you ordered then you can charge the amount back and then it is on the merchants back to prove they gave you the service. Try doing that with cash. They are a lot less likely to care about what you think about their service once you have paid cash. It is also a much safer way to shop online.
Spend your money twice.
Credit cards also allow you to spend you money twice, firstly if you buy something using the card (that's the first time) and then when you get your statement (that's the second time). So once the statement comes in it allows you to track all your expenditures but it also reminds you of those stupid purchases you make. This is a great thing if you are trying to develop better spending patterns.
Psychology of a charge card
I prefer using Charge cards because every time I make a purchase I must remember that I have to pay for it at the end of the cycle. No excuses I must come up with the cold hard cash. This means that discretionary spending becomes harder because I cannot just say I will pay it back next month. It creates a simple discipline that supports my lifestyle goals.
Floor Limit on your Spending
The only other thing I do is that I place a limit on what I think about. What I mean by this is that I don't think twice if the purchase is under £300. I can make as many purchases as I want up to £300. Anything above £300 I will sleep on before I buy. Now maybe you are not at £300, I actually used to do it back in Australia at $50. So this meant that things like food shopping and restaurants I didn't have to worry about. Obviously as your portfolio gets bigger and you can afford more you can raise the spending limit.
Now I still sometimes regret the purchases I make when I get the credit card statement for the purchases under £300 but I don't stress about the adverse affect it may have on my lifestyle goals.
Finally, I look at it this way, every wealthy person I know has a charge card so their must be something about the charge card that works for them. Likewise every financially struggling person I speak to has multiple credit cards, it must be something they are doing that doesn't work for them.
Live with passion,
Brett Wood
---------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
People pay literally billions of dollars a year in interest from their plastic - making a credit card one of the most expensive forms of borrowing around. But it doesn't have to be that way. The reason they pay so much interest on their cards is because they use them incorrectly.
Interest rates are irrelevant when compared to how a credit card is used and whether the credit card utilised suits an individual's patterns of use.
There are basically two types of cards.
The normal credit card
The first is generally the most often used it has no annual fee and has an interest free period of up to 55 days after a credit card purchase has been made. After that period, however, interest charges are extremely high, normally around 19%. This is the card you will be most familiar with, it has a credit limit preset and you normally only have to repay 5% of the balance owing each month. The remaining balance sits there charging you interest.
What most people don't know is that when you withdraw cash, instead of receiving a period of interest free days, interest is charged from day one.
Furthermore, cash withdrawals are the last debt to be paid off so if there are other debts on the card and you think you have paid off your cash advance a day later and escaped the expensive interest charges you will find you are just paying off another debt on the card, leaving the cash advance there to accumulate interest. In most cases, the entire card must be paid off to avoid such charges.
The Charge Card
This leads me onto the second type of card. It's called a Charge card and although they look very similar to a credit card they are very different.
Firstly, everything you spend over the course of the month is charged in the normal way but at the end of the month you must pay the balance off in full. In this way you are getting full use of the banks money for up to 55days. Then you pay it off in full and the process starts again. Now often this type of card will have an annual fee. The most famous of the cards are the American Express and Diners.
Personally I use an American Express and a Natwest Premier Charge. Now the reason I use two cards is a concept called "factoring". Factoring is all about cashflow and you should be getting to know by now how highly I regard cashflow.
Now before we move on you need to understand this 55 days interest free period and its relation to statement dates.
Important dates in the credit card cycle
Once you receive your card there are two vitally important dates to remember. They are so important I actually alarm them in my phone each month. The first is the statement date and the other is your direct debit or payment due date.
Statement date is simply the date your statement is issued. All transactions up to that date will be due on the next payment due date and all after will be on the following month.
Now your payment due date in the case of a 55 day card will normally be 24 days after the statement date. 31days in the month plus 24 days till payment. A 45 day interest free card will be 31 days plus 14 days.
OK -- so why do I have a charge card. It comes down to factoring.
The concept of factoring
Factoring is most often used in business to create immediate cashflow. A business will invoice a client but not receive the payment for say 30 days. So the business will go to a factoring company who will pay the invoice immediately minus around 7-9% commission. So basically for this fee you get to use the factoring company's money for the 30 days.
Now with a credit card you spend the money but don't pay for it until the payment due date. So effectively you get to use the finance company's money for however many days that is. It keeps the cash in your account but doesn't cost you anything to do so.
Now the only thing left to consider is the annual fee on the charge card, because they can be hefty. I have the Amex Platinum which costs me £275 and the Natwest which is £195. So that's £475 per year or £40 per month. So I need to make a judgement call on whether I think it is worth £40 per month to use this facility. For me it is because I also use my Natwest Charge to buy houses and I get Air Miles points for it and it also comes with a £10,000 overdraft, the Amex I use for all my travel booking. Both of these come with other features which I use such as the travel insurance and purchase insurance.
Now the other option is to take the first type of Credit card and use it in the same way as a charge, set up the direct debit for the full amount each month. If you do this you effectively will be using the banks money for nothing. It feels so good to get something over the banks for once.
Now let's look at why I have two charge cards rather than one.
My statement date on the Natwest Charge is the 17th of the month and it is direct debited on the 6th of each month. The Amex is the 29th and the direct debit is the 10th of the month. So I use the Natwest between the 17th and the 28th and the Amex between the 29th and the 16th of the month. This means I am maximising my interest free days from each card.
Now on the whole this formula works fine but sometimes the Amex is not accepted so I then use the Natwest but I accept this as part of doing business.
Cashless society
I use my credit cards for every purchase imaginable, another feature about cards is that when you purchase something using your card, if say the Merchant doesn't provide you with the service or product you ordered then you can charge the amount back and then it is on the merchants back to prove they gave you the service. Try doing that with cash. They are a lot less likely to care about what you think about their service once you have paid cash. It is also a much safer way to shop online.
Spend your money twice.
Credit cards also allow you to spend you money twice, firstly if you buy something using the card (that's the first time) and then when you get your statement (that's the second time). So once the statement comes in it allows you to track all your expenditures but it also reminds you of those stupid purchases you make. This is a great thing if you are trying to develop better spending patterns.
Psychology of a charge card
I prefer using Charge cards because every time I make a purchase I must remember that I have to pay for it at the end of the cycle. No excuses I must come up with the cold hard cash. This means that discretionary spending becomes harder because I cannot just say I will pay it back next month. It creates a simple discipline that supports my lifestyle goals.
Floor Limit on your Spending
The only other thing I do is that I place a limit on what I think about. What I mean by this is that I don't think twice if the purchase is under £300. I can make as many purchases as I want up to £300. Anything above £300 I will sleep on before I buy. Now maybe you are not at £300, I actually used to do it back in Australia at $50. So this meant that things like food shopping and restaurants I didn't have to worry about. Obviously as your portfolio gets bigger and you can afford more you can raise the spending limit.
Now I still sometimes regret the purchases I make when I get the credit card statement for the purchases under £300 but I don't stress about the adverse affect it may have on my lifestyle goals.
Finally, I look at it this way, every wealthy person I know has a charge card so their must be something about the charge card that works for them. Likewise every financially struggling person I speak to has multiple credit cards, it must be something they are doing that doesn't work for them.
Live with passion,
Brett Wood
---------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
How do you create income from property?
The question I pose to most of my clients when I first meet them is how do you create income from property? I get many different answers but in actual fact there are only 3 main ways of creating income from property.
Direct property cashflow
Most people associate income from property as being an excess of rent over expenses. Whilst this is one it has one big drawback -- income tax. As you are earning income from your property in excess of expenses you will pay tax on your profits. This is one of the reason we aim for maximum leverage from our property to ensure we avoid income tax.
Selling your property
The other way you can earn large chucks of cash is to sell your property. Doing this you will be liable for capital gains tax on the increase in value over any allowances. The capital gains tax rulings change often so you will need to speak to a professional about this. The benefits of this are that you have cash unencumbered once you have taken into account the tax.
Re-mortgaging Your Property
The final way and definitely the best way of avoiding any form of taxation is to refinance or re-mortgage the property and use the extra capital for whatever purpose. As you are using debt to fund your income you will NOT be subject to income tax or capital gains tax.
In truth all three methods will be employed as you build your portfolio of properties and begin to generate the lifestyle you want.
---------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
Direct property cashflow
Most people associate income from property as being an excess of rent over expenses. Whilst this is one it has one big drawback -- income tax. As you are earning income from your property in excess of expenses you will pay tax on your profits. This is one of the reason we aim for maximum leverage from our property to ensure we avoid income tax.
Selling your property
The other way you can earn large chucks of cash is to sell your property. Doing this you will be liable for capital gains tax on the increase in value over any allowances. The capital gains tax rulings change often so you will need to speak to a professional about this. The benefits of this are that you have cash unencumbered once you have taken into account the tax.
Re-mortgaging Your Property
The final way and definitely the best way of avoiding any form of taxation is to refinance or re-mortgage the property and use the extra capital for whatever purpose. As you are using debt to fund your income you will NOT be subject to income tax or capital gains tax.
In truth all three methods will be employed as you build your portfolio of properties and begin to generate the lifestyle you want.
---------
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.
Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.
For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
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