| Why should you become a property financier? To | | | | The developer takes his plan to the bank who like it |
| answer that I need to ask you another question. | | | | and provide him with 80% of the funding for the |
| Why do you invest in property? | | | | project (just like Buy to Let mortgages, a bank will |
| You probably have the following three reasons. | | | | not provide 100% funding) on the basis that the |
| 1. It gives you chance to make outstanding profit | | | | bank will take a first charge over the property. The |
| potential through using your bank's money | | | | developer therefore needs to obtain a further |
| 2. It provides you with a steady monthly cash flow; | | | | $40,000 in funding. |
| and | | | | This is where you come in. |
| 3. Provided you buy sensibly it is a safe investment!!! | | | | You look at the developer, the site, the plans and |
| However you also know what are the absolutely | | | | the area and think that this house will have no |
| worst things are about being a landlord. | | | | trouble for selling at $350,000. You agree to lend the |
| 1 You have to put up with annoying tenants and pay | | | | Developer (or lend part of the money in a syndicate) |
| the costs for all repairs to the property after they | | | | the $40,000 on the basis that you receive a second |
| have trashed it!! There are also other large costs | | | | charge over the property after the bank (this |
| involved in owning property. | | | | basically means that if the property is sold, the bank |
| 2. You can tie up a lot of cash - as much as 20% of | | | | is entitled to its money first and then you are entitled |
| the value of the property. | | | | second). Because you are taking a second charge, |
| 3. Property cycles can last as long as 20 years. We | | | | your risk is greater and therefore you are entitled to |
| are now in the middle of a housing bust. If you have | | | | charge a high rate of interest on your $40,000. |
| bought or are thinking about buying now you might | | | | This is the juicy part!!! |
| not see much cash from your property until you sell | | | | Typically, as a private investor you will be looking to |
| in the next 10-15 years. | | | | receive 2-4% per month on your money. 4% on |
| In short, although I love property, it also has its | | | | $40,000 is a whopping $1,600 per month you will |
| headaches. This is why I love being a property | | | | receive in your pocket, every month for the life of |
| financier!! It gives you the freedom of investing in the | | | | the loan. Now that is what I call explosive cash flow!!! |
| safe property asset class and provides you with | | | | And what have you done - nothing other than |
| fantastic monthly cash flow. So what is property | | | | carefully check out the investment and the |
| financier. In short it is a person, or group of people | | | | developer. Of course you don't get to keep the |
| (commonly called a 'syndicate') who lend money to | | | | property at the end of the project, but you do get |
| property developers in order for the developer to | | | | your money back plus a dynamite return and you did |
| use the funds to build a new property or to improve | | | | not experience one property related hassle!!! Your |
| an existing property to significantly enhance its value. | | | | investment is also fairly safe in that you will have |
| For example the property developer finds a site to | | | | carried out your due diligence on the project AND |
| build a house on. He knows he can buy the land and | | | | you have the second charge. |
| build the house for $200,000 and sell it for $350,000. | | | | |