Why Property is free!

And how I figured it out!

A few years ago I was trying to work out how I could make or borrow a bit more money so that I could go into yet another business venture. So as there was no easy ready to go get-rich-quick-scheme, I decided to go down the fund-raising route.

While looking through the various avenues of fund raising and having the vast majority of them be little to no use, and almost all of the others un-palatable, this leaving just the usual suspects……. 'the banks' - which as we know are really easy to get money out of, especially easy for semi-high risk ventures.

So eventually I ended up with the only good possibility - pulling equity out of my home through a re-mortgage.

The first step was to know how much my only asset (as I called it at the time) was worth. Well I bought my first property on 29th September 1988, which as most of you know probably wasn't the worst exact day in history to buy a residential property in the UK, but it was within sight of the bull's eye.

Therefore I had managed, like so many others, to create a near perfect disaster with my first property venture. I spent the next few years in the now infamous 'negative equity trap', while all the people who rented property had a good laugh at my and others' expense.

Who could blame them, after all it looked like property was never going to rise in value again!

Well the nineties moved on very quickly for me as I was into my first business and enjoying all of its hardships. My girlfriend and I decided to get married, I had clung on to my bachelor status for the 7 years we had been together and she wasn't buying the 'we'll get married next year' line anymore.

Instead she had gone out and researched the idea and found out that to have a great wedding you need to plan it 2 years in advance. So anyway, I agreed to be tied down for the rest of my life K

Sorry I got off the point a bit there for a while, the point was I had to ask my brother to vacate the house that we had bought together so my wife and I could live there alone in marital bliss.

This was in Dec 1995 and we had made such a sound investment in the property that my brother actually had to give me money to get out of owning his share of negative equity. So we had owned it for 7 years and lost 28% of the value.

However, by spring 1997 the property was worth what we paid for it, and I re-financed in order to remove my brothers name from the mortgage. I didn't realise at the time but that meant in less than 18 months my property had gone up in value by 38%.

Even this obvious statistic didn't tell me what was going to happen in the next few years. Just out of interest it wasn't until 2002 that I went on to figure out that I had paid exactly double what the house was worth in 1988.

Anyway I digress, it was spring 2001 and I wanted money for my latest project, so I turned once again to my first house. I had moved several months before but had managed to hang on to it by the skin of my teeth; it truly was now my first real asset.

The property market was buoyant and even though I had pulled equity out of it to by my new home only 7 months before, it had risen in value again and I took a further £15,000 from it to use on my next project, which as it happens was the first property with my partner Greg.

I was at work when my IFA called me and said the value had come in ok and it was now valued for £130,000 and I had £110,500 mortgage on it. So from Dec 95 to March 01 the property had gone up in value 177%.

Later that evening, feeling particularly proud of my property acquisition prowess, I was explaining to my wife how clever I had been to hang on to the property.

When all of a sudden it came to me, I started to scribble down on a bit of paper all of the mortgage interest payments that I had ever made in my life and it came to £30,000 (after I took off capital repayments). I then added up what I had spent making our martial home lovely and that came to £15,000.

So I then added those 2 figures to the purchase price and came up with a total of £110,000. Which was truly amazing as not only did I have £19,500 of equity, but also every single payment I had made on the property had now not actually come out of my pocket, and in effect the house was FREE!

So it didn't cost me any money to buy that property I had just cash-flowed it until it was valuable enough to pay me my money back!

I now ask people regularly when they are complaining about their mortgage payments, 'what has your house actually cost you?' and when they work it out they all realise their homes are worth far more than they have ever put in, so they have to agree that their 'Property was free!', as it actually pays for itself.

Hence the title of my book, 'Money For Nothing And Your Property For Free'