How To Recycle One Property Deposit Over and Over

Imagine a world where you could use your property deposit over and over again.

Not buying just one property, but multiple. Multiplying your rental return. Multiplying your capital gains. Multiplying your ability to get to your financial freedom figure.

Today’s topic will be on ‘recycling’ your deposit.

Lenders love lending us money. Funny that… But it’s true. We often worry about banks being keen to have us as a customer, but the truth is they are more than happy to give us money, especially if it’s backed by security like a property.

Banks, like any other business, have targets. A given bank will be aiming to have a set number of new mortgages on their books every month. This is further divided up by the different types of mortgages. Commercial, residential, home owner, investor and so on.

So they will have no issue, if all the relevant criteria are met, in giving us what we are after.

And what is that I hear you say?

Well, when we buy a property, we have to follow the golden rules of property investing.

So… Step 1. Buying under market value… This is an artful process (and one we delve into further in our upcoming course), but basically we want to find out what the market value is in a given area for a particular property type. Then we want to find a ‘motivated seller’ i.e. someone who wants to get rid of their place asap for whatever reason. Getting that property at the right price is part, finding the right seller and part negotiation. But it definitely is possible.

Next we want to add improvements to force appreciation.

The property when you buy it is worth as much as its worth. You’ll know you’ve gotten a great deal, cause you did your homework correctly in step 1. Also from our homework, you’ll know what makes a property in your area go for higher prices.

So.. step 2 is to add some value to that property to raise its price. This could be a whole range of things. Generally the simpler the better and less risky. We can then have the place re-valued by a property valuer who will happily tell our bank that due to the improvements our property is now worth ‘whatever’. If we have done our steps right, we should now be 20% over the original market value. Remember, that’s not the price we bought it at, which should have been 20% under market value, but the market value. Which we ascertained by doing our market research.

This leads us on to step 3 the ‘remortgage’. Which is what my little story at the start was all about. Banks will be very pleased that you have improved the properties value and are now able to borrow more against it. This helps with their numbers. So we should never be shy about asking the bank to do our remortgage!

So we get the money out. Or more than likely we’d have a pre-approval ready to go when we find our next one. But the point is we have our deposit available and ready to go!

Step 4. Is to find another property and do it all over again. This time around should be even easier, because you’ll have the rental income from your first property this time around too. Banks love someone with even more income to lend to!

I hope that illustrates how we do things. If you are interested in learning more, we’ll be deep diving further into the whole topic in our upcoming masterclass.

Originally published at www.propertyconfessions.com

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