In this post we look at the advantages of holding your property and renting it out for the long term.
The simple fact is, that if we owned a cow and decided we should slaughter it for meat. Then the value of the cow will be extinguished with your final bite.
It’s true you can make profit with the sale of the cow, but once it’s gone it’s gone.
But if the owner of the cow decided to milk the cow, then they would be creating a continuous revenue stream, while still holding onto the asset of the meat for an eventual sale.
But the owner of the cow can also breed the cow to make other cows, and double his initial investment. He can even choose to repeat the process and make himself a fortune on the strength of thinking outside of the box.
The same strategies can be applied to property.
Just like the owner of the cow, a property investor can make quick cash flipping houses.
But if he chooses to rent the property after he has finished renovating, he can milk the asset every time the property becomes more valuable.
If the property is the cow, then money is the milk.
Every time your property goes up, you have an opportunity to go back to the bank and ask them if you can borrow more funds against the increase in your properties value. Then you take that money, and use it as a deposit for another purchase.
You can repeat this process as long as the property market is rising, and currently it is rising fast.
Even in a recession, if you wait for the market to bounce back, which it inevitably will, and then you are still making money through rent, while you hold the asset.
When your property rises to around 10% - 25% more than you paid for it, borrow that amount in the way of a re-mortgage.
This is leveraging to buy property using the bank as your investment partner.
So what’s in it for them, you may be thinking?
Well, banks know that property is a safe investment. They also get interest payments every month from the borrower (You).
But what you get out of it, is cash to buy investments, and the payback of the loan is then deducted from the monthly rental yield you collect from a tenant.
The fact of the matter is, the tenant pays the bank their interest and covers the mortgage payment for you. You should also be taking a handsome profit after outgoings too.
So before you flip houses, stop and think about whether you should hold, rent and repeat for unlimited earning potential.
I hope you have found this tip helpful
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