This chapter will explain the simple formula of how, from a relatively small capital outlay, you can become a property millionaire. If you follow this advice you could have a very successful business that will provide you with full-time employment, a good income, an inflation-proof pension and a new career path.

Raising Money

In the last few years there has been a huge growth in specialised mortgages for the property investor, including buy to let, second homes, self build and investing in properties abroad. It is now much easier to raise money, as many of these schemes are not solely related to the applicant’s income. Self certification has freed the potential investor from relying on being able to borrow solely on multiples of declared earnings and can now take into account earnings from other areas – including letting income.

Opening Doors To New Investors

This has meant that all sorts of people who otherwise would not have had the credentials to raise money conventionally, can now legitimately do so and at an affordable price. This, in part, has been responsible for the huge increase in property investors. Other contributory factors are that property has outperformed the Stock Market over the last few years. Pensions have lost value and, more importantly, people want to take more personal responsibility for their own investments.

How To Get On The Property Portfolio Ladder

Obviously before you can buy your first investment property you need to have accumulated some capital – but not as much as you might think. The great thing about investing in property is that you don’t have to fund the entire investment with your own money, as you would if you bought shares, for example. However, you will have to use some of your own money as the lender will require a deposit, but this can be as little as 15% of the purchase price.

First Steps

In order to be a successful property investor, you need a plan and some access to capital. This is not a ‘get rich quick’ scheme and has to be approached in a businesslike and professional manner. Cash flows must be prepared and emotion must be kept firmly in check.

How To Get A Nest Egg

You must ask yourself how much capital you want to commit to this project and how you are going to raise it. Unless they have been left a sizeable inheritance, won the lottery or had an endowment policy mature, most people will not have a lump sum of capital at their disposal. However, if you already own your own property you may be able to re-mortgage and raise money on the increased value. Caution is needed, as you will need to meet the higher mortgage repayments, but in order to speculate, you have to accumulate and there is a certain degree of risk to all investments. This is certainly true of the property market but the trick is, as ever, to think it through and be prepared for the downside.

When Should I Sell To Maximise Profit?

Although you can sell a property soon after you have renovated it or bought it off plan, the most effective way of investing in property is to hold on to it for at least five or ten years. If you do that then obviously the property should, at best, pay its own way or, at least, provide you with an operating profit. This is ‘buy to let’ and in order to do this there is a specific mortgage.

Buy To Let Mortgages

Over the last five years there has been a revolution in the mortgage market which allows small investors to buy properties with products specifically designed for the small landlord. The big mortgage lenders have created specialised companies to deal with the explosion of interest in the buy to let market. This business is now worth £31 billion per year and as it is a very competitive market, there are good deals to be had. (See Chapter 4 for more on buy to let.)