How to build a property empire by recycling your deposit

We all have a finite amount of cash, and that puts a ceiling on the total size of your portfolio: when the money for deposits runs out, the only way to buy more is to hope the market rises so you can refinance.

Unless, that is, you “recycle your cash” – which is really nothing more than either buying below market value or forcing the appreciation (or both). It’s harder work than just buying a top-notch property at full market value, but it’s the route to capital preservation – and puts you in control of when you scale.

In this episode, we discuss…

  • The two main, inter-related mechanisms that underpin recycling your cash
  • The timeframe in which you can typically refinance
  • How to finance this type of project
  • The barriers to doing it successfully
  • Why it’s so worthwhile

We also shared an example to explain the general concept:

  • You buy a property for £100,000 by putting in a £25,000 deposit and taking out a 75% loan-to-value mortgage with Lender A for £75,000.
  • Later, you get the property revalued at £133,500, allowing you to take out a mortgage for 75% of the new value from Lender B – which works out to a loan of £100,000.
  • You pay the original £75,000 back to Lender A and put your initial £25,000 back in the bank to use again.

This lowers your cashflow (because higher mortgage = higher interest payments) but increases your ROI (because you have less money left in), and leaves your loan-to-value ratio unaffected.

And most importantly it allows you to build a larger portfolio because you won’t need to find so much money for deposits.

We’ve shared lots of handy Gmail extensions in the past: little browser add-ons that allow you to do cool things like see who’s opened your emails, and schedule meetings with ease.

Mixmax is a new super-extension that combines the functionality of many of the tools we’ve talked about in the past – and plenty more besides – all in one place.

Divorce cases are being re-opened due to the property boom, reports The Telegraph.

It’s a touch depressing, but does raise some interesting concerns around the structure in which properties are bought and how to divorce-proof your portfolio.

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