Do you know what business are you looking to get in to?

If you answered property then you'd be wrong, as property is just the vehicle that supports the real business you become involved in when investing in property, you are getting into the 'Borrowing Business'. This is a business, which allows you to live off of OPM (other people's money) by that I mean the banks money, which is in effect 'our money' as the bank doesn't lend its own money. Why would they after all as money depreciates faster than they can charge interest on it.

Why investing in property isn't 'a bit better' than other investments it's 'unbelievably better'

For example: -

Lets say you have £200,000 to invest.

You could by shares with that money, you've had a hot tip from Fred who works at the paper shop, he overheard it from Bill when he was buying his paper and he thinks Bill works in a bank.

You decide to invest £100,000 in stocks and shares and £100,000 in property

So you buy your £100,000 worth of shares (forgetting commissions) and what do you have a £100,000 worth of shares that's what.

Lets see is there anything you could do to improve the possibility of you making money once you had invested,

After thinking about it praying that the stocks would go up was about the only thing you could try, therefore making this sort of investment the 'Buy hold and pray' method of investing, I don't know about you but I like investing in things that I can effect the value of.

Now lets say that over a period of time (from 1 minute to 7 years) those shares go up by 20% you have now got £120,000, that makes you're return on investment (ROI) 20%. Of course that's assuming you make a gain, but lets assume that for the purposes of this.

You cash out and you have you're money back and your £20,000 profit you now get to go and spend it, oh I forgot the CGT (Capital Gains Tax), currently at 40%, so your real cash out is £12,000 making your ROI 12% still that's not bad is it in the world of mediocre investments. Yes they'll be dividends on it as well, but I am going to ignore them for now as they really make such a small difference that I don't want to confuse the subject.

Lets now take a look at an investment prop (property)

As before you have £100,000 to invest

So you only need to put 15% deposits in your properties, as the bank will help you with your investment by loaning you the rest.

So allowing for all other costs and re-furb lets call it £25,000, which means you can buy 4 props

So you buy your 4 props for £400,000 and what do you have?

Well you might have lost money and bought badly so they could be worth a mere £300,000 probably not though as the bank wouldn't have loaned on it in the first place, they really are quite a good safety net for you getting it wrong.

Or you could have made money and bought well and they could be worth £540,000 if you got lucky or more simply just did

your research and understood the market.

Let's see is there anything you can do to affect the value of the property, you could paint it and increase the value by 25%, you could tidy the garden and add £15,000 of value to it, you could spend a lot of money on it if you wanted to needless to say there are positively thousands of things that you can do to effect the value of your investments, a lot of them as I say in my book, hardly costing anything.

Now lets say that over a period of time (from 1 minute to 7 years) those props go up by 20% you have now got £648,000 with

outstanding loans on them of £340,000 so you have £308,000. That makes a return on your investment of 208%.

You don't cash out and sell, instead you re-finance and pull out 85% of the total value less outstanding mortgages £210,800 then you pay the tax due on that money £0 that leaves you with £210,800 which you can do with what you like.

So: - stocks 12%

Props 208%

The winner therefore is property by making 17.3 times as much money

And of course you still have the properties after all selling them would just be daft.

That means that to have achieved the same return form investing on the stock market you would have had to stump up

£ 1,733,000

Gearing correctly is simply the most important thing to understand about the borrowing business, 'You are in the borrowing business and by borrowing you make money on other peoples money'.

So lets move on from here you've had your profit on your shares after Tax £12,000 and your profit on property £110,800

And you have your original investment back of £200,000

In the next period of time what profit do you think you'll make on your original 2 investments if there value goes up a mere 10%

Shares go up by 10% your profit £0

Props go up by 10% your profit £54,000

Making your ROI for shares 0% and you ROI for props 'Infinite' yes I did say 'Infinite' as at this stage your investment in those properties is nothing.

So now you think where shall I invest my money now. As you now have £322,800 to invest, you think shall I do what the professionals tell me and 'diversify' my portfolio or shall you do what I advise and 'focus' your investments.

On the same basis as before if you invested in property then your return in cash after the period of time would be £685,100 less tax, making it £685,100.

This is forgetting of course that you have now and always have had a passive income coming from it.

This is all thanks to the facts that You are using borrowed money

You can affect the value of your investment.

Leverage is the backbone of the backbone of Property Investing.