Saturday, 25 May 2013

Infinite Returns

Last week , in my blog "Financial Freedom" we spoke about how you can create an income producing asset which pays you whilst you sleep. A much better use of money and a way of getting your money working for you instead of you working for your money. The financially savvy know this and look for ways of leveraging their money to produce a repeat income.
Today's blog is about "infinite returns" and how property , as an asset, can produce infinite returns.
To introduce you to the concept - I am going to compare a property investment with a standard investment like a stock or a bond or a mutual fund for instance.
I am going to show you that over time, a property will produce an infinite return! Now what do I mean by an infinite return?
I mean the asset continues to grow with or without your initial investment.
Let's take a closer look at this idea.
Take a £50,000 investment in a mutual fund which produces 8% per annum over 20 years.

See how the curve of the graph increases and produces a nice return of 466% or £233,048
Take a £50,000 investment in property where the money forms the deposit required for a property worth £150,000 and this property value increases by 8%

See how the curve of the graph increases but , because our asset is 3 times the value of the deposit we are considerably wealthier than the mutual fund.
We produce 1098% or £549,144 return.
This is called "leverage" which means we have used the financial product and lending rules to allow us to acquire an asset worth 3 times our investment.
Now let me show you something that excited me so much the first time I saw it and made me realise the secret of the property investment
Spending your investment in property is totally different to any other investment - why? Let's take another look in more detail.
With our £50,000 investment in mutual funds , look what happens when we choose to spend some of the money - in the example below I have shown what happens when we spend £20,000 in year 9. A full 27% or £63,500 has gone forever because the fund no longer has the cash in it. We took it out.

However with a property investment, when we spend some of our investment ,by remortgaging, look what happens to our investment in the graph below. The bricks and mortar asset cares not for our withdrawal because it continues to rise in price over time and give us all but £20,000 of the previous graph with £549,144. Which is just a 3% drop in equity and still returns an impressive 1058%. Why is this so much better then? Its because the property price will rise with or without our money.

So taking this one step further, you can use some of your equity in an investment property , lets say £50,000, and effectively take back out all of your initial investment; which means your initial property is now , to all intents and purposes, FREE! 

Did that make sense to you? It might be hard to believe at first that you can own an asset worth hundreds of thousands of pounds and it has cost you nothing, but if you have got your deposit out then you have to accept that your investment is now free and producing a return. This means your property is producing an infinite return because your money is not locked up it is out and your asset is still producing.

Imagine using this knowledge to your advantage and building an entire property portfolio to achieve this idea of infinite return.

If you have the time - then I would really recommend watching our online Property School Presentation (Click Here) which is designed to walk you through the concepts and show you exactly how we do it for our clients - 10 properties over 10-15 years and financial freedom for those that are willing to use the knowledge, leverage our team and achieve their financial goals.
Thank you for reading this blog - I hope you have found it useful.

Please come back next week when I will be discussing "Creating a positive reason why to achieve our goals"

Have a great week


Sunday, 19 May 2013

Financial Freedom - what does it mean?

In my previous post "Passive Income" I covered creating an asset which paid you whilst you sleep.
Now we understand that it is better to create a passive income rather than a wage , because passive income does not depend on your effort, let's consider the reason why you would want one in the first place.
The reason is for Financial Freedom - what does this mean to you? Could it be one of the following?
1. Having enough money to sack the boss and follow your passions?
2. Having all your bills paid monthly by something other than your job?
3. Being able to do anything you want up to a certain level - i.e. go on lots of holidays every year, buy the house you want, be able to treat your family and loved ones?
4. Earn enough so that there are no financial worries at all?
Whatever your definition - we would like you to consider what wealthy means to you. There is a mis-conception that earning lots of money makes you wealthy - but what if you are spending all of the money so your efforts are required again and again? What if it means giving up all your waking hours and takes you away from your family and costs you your health to earn all those pennies? Are you wealthy then?
We like to think that once you have your bills paid and some additional money on top by an income producing asset then you are on your way to being extremely wealthy. Why ? Because now you have your life back and you can design a life of choice rather than of obligation.
Picture this - you need £2000 per month to cover your bills - but your rental income from your investment properties pays you £4000 per month. You can now quit your job or start something part time but much more in-line with your passions. Now think what you would do with your time? See your family and friends? Take up hobbies you thought you would never have time to do? Volounteer for a worthwhile cause of your choice? Travel to all the destinations on cheap deals because you can go at the drop of a hat? Help your friends and families by giving them your time? Keep fit because you have the time to enjoy the parks and sports clubs in your neighbourhood?
Does the concept of wealth equating to have your time and therefore your life back make any sense to you?
Take Ian Summersa paramedic from Cheltenham who, through getting his money working for him , using our services created a dream lifestyle - he has now moved to Spain with his wife Rachel and quit his day job and will continue to invest because the more passive income he earns the more choices he has. Its not about how much money you earn - its about the type of income you earn and how you plan to use it that makes you wealthy and financially free.
In my next blog I will be covering the concept of "Infinite returns" and how property can generate an infinite return.
Robin Campbell, Director Midas Estates

Sunday, 12 May 2013

Why Passive Income is the Best!

One of the subjects closest to our hearts here at Midas is the subject of getting your money working for you and not the other way round. We have been given mental programmes by our parents, our schools, the banks and the government which say "Go to school, get good qualifications, get a good job, work til you are 65 and then retire on your savings."

Think about it for a second - who benefits from this model?

The Banks? Yes! Because they can charge you interest on your mortgage for 25+years and you don't question this.

The Corporations? Yes! - Because they get to grow loyal employees who give them their labour for the best years of their lives.

The Schools? - Yes - because they are funded by governments to create loyal employees.

The Government? - Yes - because employers and employees taxes create funds

But how do you benefit really in this deal? Most people work in jobs they don't particularly like. Most of us would do something different if we could. Most of us pay our mortgages thinking we have no other alternative. Most of us spend our entire working life giving up the best part of our days to a job. Most of us don't question this model at all thinking it is normal and are unaware of an alternative.

Well let me tell you about a secret that a small minority of people have come to learn and that is passive income

This is income that is earned by an asset and pays you over and over again , a bit like a royalty.
Let me give you a few examples of a passive income producing asset and see if this gets you thinking.

1. Licensed software - created once and sold over and over again
2. Digital images - taken once and sold online or by print
3. Music - sold online or by CD
4. Books
5. Subscription business models - e.g. broadband, line rental, sports club memberships where value is given at fractional costs.
6. Investments - Equities - shares, funds, bonds, trusts etc etc - where a lump sum returns regular dividends
7. Investments - Property - where rental income is earned monthly
8. Network Marketing Businesses - where the efforts of your team as well as your own build a monthly income.
9. Online Information Businesses - selling your intellectual property or expertise over an over again via ebooks, webinars, audios, DVDs

The recurring theme with all of these ideas is that they pay you while you sleep - literally your money is working for you and not you swapping time for money.

Thinking about number 6 for a moment - Property Investment is often done without even considering it an investment - your home. Think about the equity in your property and ask yourself - did you work hard to earn that money? Unless you have changed the property since you bought it I suspect the answer is no. Could you have saved this money any other way? Well this is your money working for you and one of the best ways of growing a passive income in your life.

I recommend the following 2 books to read which will expand these ideas and give you inspiration - it certainly did for me in my life.
Robert Kiyosaki

Rich Dad Poor Dad - Robert Kiyosaki - in this book Robert explores the concepts behind wealth creation and compares mindsets of the employee, the employer and the investor and teaches you how powerful passive income is.

Property Investment

Start Late Finish Rich - David Bach - in this book David shows you how to tailor your life where it is today and start changing your finances whatever your age to increase wealth and become financially free.

In my next blog we are going to cover the subject of "Financial Freedom" and what it means , especially when you have a property portfolio to create the life you choose, instead of the life you are forced to live.

Thank you for reading this blog.
Wishing you every success

Robin Campbell, Director Midas Estates