Turn £25,000 Into £100,000 In Less Than Five Years

Pile of Money Property investment offers many differing options, strategies and possibilities. The level of your success depends on which you choose and how you use them. To achieve the greatest results, in the shortest space of time, I recommend a combination of the three most critical elements. If you follow this specific formula you can make £100,000 cash profit from a starting point of just £25,000 working capital. Better still, this can be achieved in under five years.

So, what are these three winning elements?

1. Leverage - using other people's money to finance your investment
2. Forced appreciation - buying Below Market Value (BMV) and adding value through renovation and best and highest use
3. Velocity - using the property cycle to your advantage to buy and sell at a profit in a short space of time

Now let's look at how these factors work in more detail and, most importantly, how you can use them to turn £25,000 into £100,000 as fast as possible.

Leverage

Leverage is the single biggest benefit of savvy property investment. Use other people's money to buy the property and cover interest payments and outgoings with rent from your tenant. You will also benefit from capital growth.

For example, you buy a £100,000 property at 75% leverage. This means you put in £25,000 of your own cash. Your outgoings are covered by your tenant's rent payments. Your property grows at (our expected) rate of 5% pa.

In five years your £100,000 property will be worth £127,628. Your profit is £27,628 and you receive over a 110% return on your capital because you only put in £25,000 of your own money.

To achieve this same return, without leverage, would take you 15 years.

Forced appreciation

The second element works through two different strategies:

a) buying BMV
b) adding value through renovation, achieving the 'highest and best' use.

Buying BMV

So, if you buy a £100,000 property at 30% BMV (our typical discount from market value) you have a purchase price of £70,000. We assume, again, your property grows at 5% pa over five years. As you purchased at £70,000 and your property is now worth £127,628, you receive a profit of £57,628 in the same five years.

If you just purchased the property for cash, with no leverage but the benefit of a BMV price your return would be 82% over the period.

Renovation and highest and best use

The second leverage strategy is to add value through renovation and make the best possible use of your property. Using this strategy means you benefit from what would have been the property developer's profit.

For example, you buy a large Victorian house in a poor state for £150,000. You complete a renovation to turn the house into flats. It costs you £25,000, making your total investment £175,000. However, the value of your property is now £210,000. This gives you an immediate profit of £35,000.

Before we move on, let's have a quick look at what happens when you combine leverage with buying BMV.

Leverage and BMV combined

You purchase a £100,000 property at 75% leverage and 30% BMV. Your property grows at 5% pa for five years and is now worth £127,628. You purchased for £70,000 so have made a profit of £57,628. You only put in £17,500 of your own money. Your return increases to a massive 329% and now your investment strategy is becoming very special!

However, let's not stop yet because at Axis we frequently add one extra ingredient to the investment mix which makes typical investment returns simply extraordinary. We are going to consider the impact of bridging finance.

Bridging

Your buy a £100,000 property, with a 75% mortgage, buying at 30% BMV, i.e. £70,000. With the right bridging structure you are lent the deposit and the capital required from you can be either very little or sometimes nothing at all.

So, using the same growth of 5% over five years and working from a £57,628 profit, this gives you an incredible infinite % return! Simply put, if you contribute zero capital to an investment your return will be infinite - and you'll never do better than that.

To understand this more clearly, let's recap and compare.

Bridging, leverage and BMV = infinite % return
Leverage and BMV = 329% return
Leverage only = 110%
BMV only = 82%
Purchasing for cash without strategy = 27.6%

What do you want your investments to achieve?

With me so far? If yes, then very good. If no, then don't worry too much as we take care of all this for clients as most of our investment property is packaged with a Low or No Money Down structure.

Now it is time to move on one more critical consideration for profitable investment - velocity.

Velocity

The value of velocity is both logical and apparent, but often overlooked. Clearly, if you grow your asset value at 5% a month instead of 5% a year, your capital will dramatically increase.

The ways to do this are simpler than you might think. Here are three useful approaches:

1. Purchase at the bottom of the property cycle and sell at the peak.
2. Purchase, add value through renovation and then sell - we call this Rapid Cash Profits and this is our specialist investment strategy for Memphis, USA.
3. Take advantage of special situations in the market. Again, in the USA, foreclosed stock has sold at just 25% of peak pricing. This 'correction' is overdone and capital growth over a three to five year period is typically 200% or more in such scenarios. States like Florida can offer returns like this.

We are always looking for unique situations in the market from which we can profit and our tailored strategies for different areas were designed for this very purpose. More information about Rapid Cash Profits, Accelerated Capital Growth and Robust Cash Flow can be found elsewhere on this website.

So, how do I turn £25,000 into £100,000 in under five years?

Easily. We combine these powerful accelerators, strategies and special situations for the fastest possible growth. Of all the options, we particularly our Rapid Cash Profits strategy, which at the moment provides the highest return of any property investment we can find. Our clients enjoy a target 25% return on investment in just six months. If you do this twice a year, reinvesting your profits as working capital, you can make an incredible 56% profit on investment in just one year.

Do the numbers and you'll find that using this rate of growth, you can turn £25,000 into £125,000 - giving you a net profit of £100,000 before tax in just under four years. By anyone's measure that is spectacular.

To find out more about our strategies and how we can make them work for you, become an Axis member - for free. Membership gives you access to our full range of invaluable, educational material (articles, podcasts, videos, webinars, workshops etc) and first alerts on our carefully selected properties.

Or, if you would like to talk to us in person, just pick up the 'phone and call us for a friendly, no obligation chat. Ask for our UK portfolio managers, Russell Bonner and David Ball, or our USA portfolio manager, Greg Glagow, on our USA Hotline: 0333 444 1440.

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