FUNDING
Not all of us have a nice little nest egg that we have been sitting on for the preverbal rainy day, most find it difficult to balance the accounts by the end of the month, so how do you find the money to invest in your future by buying an investment property. Well, please forgive us for stating the obvious; you are more than likely sitting inside it while you read these web pages. If you own your own home then you will probably be able to raise some funds on the equity you have in it, you have to remember here that house prices in the UK have been on a steady increase over the last few years and even those doubting Thomas’s that have been forecasting a house price collapse have been forecasting for quite some time now. However, in 2006 prices rose by an average 9.4%. I heard on BBC breakfast news last week that house prises are rising by £265 per day on the average house that’s £265 per day since the start of this year. So at the time I write this the average house has made you and extra £31,800.
So now to use these increases, the way to do this and to keep your home safe is simple really. You will need to contact your financial advisor in the first instance, the reason we say this is that IFA’s have access to many 1000’s more mortgage products than lets say your bank or building society and they will probably not charge you as much for their services as the latter organisations do. So, we are going to raise our stake by increasing our mortgage, well if you haven’t done this for a while or you haven’t taken advantage of switching your mortgage to another provider so that you get a better deal then you will probably be in for a surprise. If you want to add lets say £40,000 to your mortgage, you will probably only see a small increase in your mortgage payments and when you work out that your property is rising at the rate it is then in the grand scheme of things the increase is negligible. Another tip here is for you to try and find one of those flexible mortgage schemes, you will see why later.
Now we have the funds to pay the deposit and legal’s and any other costs we might incur so let’s go get our investment property. The way we do this for the first time is to try and find a good development that offers a high return on our investment as well as offering us the easiest and best terms we can find. Cyprus is good for this example, in Cyprus mortgages are readily available and the system is not unlike ours in the UK so lets say we have found a nice 2 bed apartment that will offer us a good income from rentals as well as a positive growth during the build period. It costs £101,000, you would need to pay a 20% deposit of £20,200. On top of this you will need another £5000 approx for solicitor fees, local taxes and furniture although you do not need to furnish the apartment until it is complete, the remaining balance is paid by an 80% mortgage arranged through a Cypriot lender. (You will not however start to pay this until the development is completed in 2 years time). When the apartment is handed over to you, if we assume the anticipated growth, the apartment will have appreciated by approx £35,350 so if we now re-mortgage the property we can pay off the amount we borrowed on our home as well as reducing the payments if we have a flexible mortgage, as well as allowing us to take the money back and use again in the same way to fund a second investment property thus increasing our portfolio, our profits, our net worth, and retirement fund as well as having a small income from the rental of our apartment in Cyprus.
It really is this simple!
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