Carnegie was a self made millionaire. He was famous for quoting that more money has been made in Property than all other investments combined. 90% of millionaires had done so through Property. However with this great and true statement seen more people lose money in property.
I have seen so many times those who say they have a portfolio of X million. They are so proud of their X million portfolio or their X number of properties. However the reality is how leveraged is that portfolio…..what is the net return? There is a gent whom I came in contact with, who owns a very large portfolio of Professional HMOs. All is good ….they are cash flowing…except one Massive problem. He does not have equity in his large portfolio of Professional HMOs. An inevitable bump in interest rates could implode his Professional HMO portfolio. Prices do not always go up. There are times prices go down.
Another story I am aware of is a group who also own a large group of Professional HMOs. There only issue is they are on interest only. In 1994 interest rates SPIKED…no warning…no newspaper articles. The over in debted lost everything. History has a way of repeating but not always in the exact context.
Do you remember 2010? Could not give property away. Now today and especially in Salford there are out of town buyers paying ridiculous prices. Even more interesting is I see a preponderance of listings on Spareroom.co.uk offering 2 weeks to 1 month free.
Getting back to a property millionaire. I believe a property millionaire is measured by net cash flow generated by his portfolio. You do not have to have 100s of property or Professional HMOs. I recently met a gent with 10 Professional HMOs in better areas of Liverpool. He has had them for years. Some of the properties are free and clear with out a mortgage. Some have super low LTVs. This 10 HMO properties drip off cash and income for him and his wife.
Property millionaires are made over time….Solidly and patiently. Compounding & paying down loans. Professional HMOs enhance this process by the high income generated.
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