Going for growth

Return 'buy to let' contents

If you have not read the article on gearing please do so now and then come back to this page.

You understand gearing, and compound gearing, so you will see how when one sets up a  project for growth the objective is not to spend money but to reinvest every penny, using compound gearing and good buys to get the ideal properties, get them fixed up and let and move quickly forward.

So what can you do to make growth greater

• Rapid reaction to opportunities
• Understand areas that will appreciate
• Selecting the ideal properties within the area
• Buying at a good price
• Improvements that increase the value
• Progress every stage
• Start as soon as possible
• Put in as much capital as you can
• Add more capital at any stage if possible
• Reinvest all profits
• Have confidence to make it work
• Make as few mistakes as possible

The early stages is where you would normally go for growth and with a pension this might continue right up to retirement, or just before. However it would not make sense to go so tight before retirement that you ended up with more, come post retirement, than you could just never spend it. The balance has to be a quality of life improvement throughout life, plus a very good standard of life in retirement, however long it lasts.

The great thing from a pension perspective, is that you are never too old to get a pension through property while many will often be too old to be able practically to get a pension by other means. Added to this many middle aged people who have no pension do have equity in their home that is just idle, doing nothing for them at all, so this is completely possible, without them needing to spend a single penny from their current life style. With the franchise club service, you can get all the help you need on a profit share basis, so it costs you nothing to do and you know those working with you will produce the best they can as they are not charging you fees but get a share of what they make for you.

Windfall Profits

Windfall profits may improve your growth considerably. This could be brought about by:-

• Buying with a development plot
• Knocking an old building down and building a nicer one or several
• Changes in planning allowing a garden or paddock to become a building plot
• General improvements to the area
• Removal of a nuisance i.e. closure of a military base, rubbish tip etc.
• Extra demand, i.e. new university, employment
• Improved PR, local government, tourism, a star moving to live nearby, etc
• New town development
• Expanding boundaries of a town or city
• Changes in transport i.e. new station or road link making it more attractive to commuters
• When a new bypass is to be built and a noisy main road location is to become a quieter one
• Flood defences
• Buying when others are reluctant to i.e. when prices are rumoured to be going to fall
• Changes in supply and demand

You will see some of these you may be able to influence, others you may be able to predict. If you and a few others were to work together, then some you can even manufacture, as in the case of targeting a small place where property is lower than nearby and between you buying every property to become available creating  a shortage, that forces up the price, or choosing an area next to a popular place and then getting it improved, promoting it etc.

Valuation however can often be greatly influenced at minor cost, in some cases people will get a mortgage at 80% of initial valuation, then do the property up a bit, and get a new valuation to extend the mortgage to 80% of the new valuation, resulting in more than the cost of obtaining the property and a cash sum over. 

Switching to income over a period

Switching to income over a period involves doing basically nothing, you just don't re-mortgage or use the equity available, so the mortgage stays constant for its term, or you might even pay it off early. As prices rise, so do rents so you get an increasing rental income giving you income from the increasing surpluses, and eventually no mortgage, so get to keep it all. By this point however you will have to share some with the tax man.

In practice you may after a set point decide to divide up your properties into two piles, one to continue going for growth and some to move towards maximizing income. 

Another article looks at specifically going for income rather than growth. Some will at a point start switching to this model.

Return 'buy to let' contents