The 3 ‘P’s Of Your Mortgage Application

The actual process of receiving a mortgage offer is quite simple. It hinges around three key points. As long as you get the tick at all 3 stages there should be no reason not to get your mortgage approved.

The stages or ‘P’s are simply – Person, Property and Proposition

The first to remember is that a cross on any of the ‘P’s will mean a decline.

Person

This is based firstly on your credit score from your credit file. Your credit score is a function of any number of bits of information about your previous and current financial history. Each of the bits of information is given a weighting to come up with your credit score.

This is then used to make a decision. It may be ‘Approved’, ‘Referred’ or ‘Declined’ at this point. This stage is a computer based decision.

If you are ‘Referred’ it simply means that your application has to go to a real person in order to be approved. Referred is nothing to worry about. Unless you have a premium credit score or are perhaps known to the funder you are likely to get referred.

A decline at this point is a bad thing and in all honesty will mean you need to take a serious look at your credit file. There is obviously something seriously wrong with it.

Property

The biggest determinant to the success of this aspect is the property survey or valuation. In the case of a Buy to Let investment the survey has two vital pieces of information that will make or break the deal – the ‘property valuation’ and the ‘rental valuation’. In the case of a residential home it all rests on one thing only – the property valuation.

Ok so I am not going to go into more detail than to say as long as you get ticks on both the property valuation and the rental valuation you are almost there.

The final thing is all of the other variables and comments on the report. The trick to this is to consider what a lender would consider a good risk. Anything that may prohibit a quick sale will be viewed negatively.

Proposition

The final step is the proposition. This comes down to the lending criteria of the funder. There are so many criteria each lender has for their products; in fact they all supply a booklet for each product.

Now assuming your credit file and valuation are fine the Underwriter will check your supporting documents. This is the point at which they will raise queries which must be answered prior to the final formal mortgage offer.

With all their queries answered nothing should stop you from your mortgage offer.

Lending Prudently:

At the end of the day getting your mortgage comes down to one final all important ‘P’;

Prudence – quite simply is the funder lending ‘Prudently’;

As long as the funder can stand up in court if they have to repossess your property and be seen to have ‘lent prudently’; they are likely to approve your mortgage.

Think of it this way, if a lender gives a person with no money and no job a mortgage and after 2 months the person stops paying the mortgage. The bank attempts to repossess the property and the person takes the bank to court. In court the bank may run into problems because as the man rightly says ‘How could you expect me to make payments on time when I have no job and no money?’;

The funders are very aware of this possibility and take many precautions prior to completion to ensure you ability and commitment to repay the amount borrowed.

Live with passion,
Brett

Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped 1000s of investors to get on the property ladder and build successful property portfolios.

Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.

For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.

In Search Of The Perfect Property Deal

One of the most damaging limitations that a beginner investor faces when building a property portfolio is the dreaded perfect deal.

As if trying to find the a property wasn’t enough the budding investor now has to find the perfect finance, the perfect solicitor, the perfect area, the perfect rent, the perfect growth prospects, the perfect builder, the perfect sales consultant, the perfect club, the perfect interest rate – everything has to be nothing short of PERFECT.

So how do they achieve this? ln short, you simply don’t and despite everyone’s best intentions you won’t.

I have been in property one way or another for over 9 years l am yet to find the elusive perfect deal. I have however consistently made money from property and built a substantial portfolio of properties, despite every single property that is part of this portfolio being imperfect in some way.

So what’s the motto – Be realistic but practical. Do your due diligence using the various guidelines l have suggested to buying, holding and selling property but don’t use these as a excuse for procrastination.

My simple 3 month rule applies in these circumstances. lt simply states:

You have 3 months to purchase a property – any more and you are procrastinating, any less and you are not researching.

Practically, this means that you don’t have to buy the first property you see, you have 3 months but likewise it is better to buy anything than to sit around waiting for the perfect deal (which if we’re honest we’ll admit doesn’t exist)

I have a very dear friend whom I would love to see successful, he has had a sizable deposit for the past 3 years. When property was galloping upwards he complained that property was too expensive, now that it is stagnate, he complains it might crash.

Despite my best educational efforts and demonstrated performance he is still to own a property. Interestingly enough, one of the first properties I purchased in a development that he also had the opportunity to buy has now gone up £30,000 which isn’t bad for a property that costs me £100 per month. At the time I bought it was an imperfect property, funnily enough it still is, but £30,000 isn’t bad for “imperfect”.

The real question comes down to one of what really is my first purchase?

Despite my best intentions to find the best deal every deal I also understand that crudely your first property should teach you process and allow you to overcome emotion firstly and secondly it should make you money.

I believe that as long as you get the education & experience under your belt on your first the money will follow.

So be sure to ask lots of questions then you can get onto making money.

Brett Wood is an author and off plan property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.

Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.

For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.

How Do You Create Income From Property?

The question I pose to most of my clients when I first meet them is how do you create income from property? I get many different answers but in actual fact there are only 3 main ways of creating income from property.

Direct property cashflow

Most people associate income from property as being an excess of rent over expenses. Whilst this is one it has one big drawback — income tax. As you are earning income from your property in excess of expenses you will pay tax on your profits. This is one of the reason we aim for maximum leverage from our property to ensure we avoid income tax.

Selling your property

The other way you can earn large chucks of cash is to sell your property. Doing this you will be liable for capital gains tax on the increase in value over any allowances. The capital gains tax rulings change often so you will need to speak to a professional about this. The benefits of this are that you have cash unencumbered once you have taken into account the tax.

Re-mortgaging Your Property

The final way and definitely the best way of avoiding any form of taxation is to refinance or re-mortgage the property and use the extra capital for whatever purpose. As you are using debt to fund your income you will NOT be subject to income tax or capital gains tax.

In truth all three methods will be employed as you build your portfolio of properties and begin to generate the lifestyle you want.

Brett Wood is an off plan property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.

Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.

For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.
Article Directory

Should You Ever Pay Off Your Property?

This question needs to be broken into two questions. Should I ever pay off my home? Should I ever pay off my investment properties?

Let’s deal with the home first. Yes you should pay off your home eventually because it is a non tax deductible expense if it relates to your principle place of residence. OK, so that was the accountant speaking in me and since l am a very poor accountant lets put my investor hat back on.

The extension of this answer is that until you have built up a significant enough portfolio to maintain momentum in your portfolio you will have no choice but to leverage your home. I think it is safe to say that most people have a home with significant equity especially if you have owned it more than 2 years. This equity is the key to build wealth.

By accessing this equity and using the leverage of a mortgage on your buy to let properties you can turn £100,000 equity into a million pound portfolio. The sole purpose you do this is to gain the advantage of capital growth. Until such a time as your portfolio self sustains its growth you cannot afford to pay off your mortgage. Once you have developed your portfolio then and only then can you take your principle place of residence out of the investment portfolio.

OK, now the investment properties. You should never pay your mortgage down on these, always opt for interest only because your mortgage balance will stay the same throughout but your value will double, effectively halving and more your mortgage.

When you consider that the biggest challenge with building a portfolio is maintaining cashflow, why would you pay additional money into the property when you know that it’s going to double in the next 7-10 years. You are far better reinvesting the cash flow in further property. Long term this more effective use of your time. It also limits the amount of tax you pay.

Brett Wood is a successful off plan property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.

Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.

For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.

New Build Vs Off Plan Property – Which Is Better?

Firstly let’s look at how I define each of these terms.

New build is classified as a development that is within 3 months of completion or has completed but has not yet been tenanted. Off plan is a development that is longer than 3 months out from completion or where the property has not moved earth yet.

Now some people may say that off plan is simply property “off the plan” or property which has not begun being built and technically they are correct, but let me explain why I consider it very different.

It’s all about structure.

My definition is not really based on time it is based more on the fact that in most cases with newly built property you can exchange and complete at the same or within a short time. This simply means that if you have structured correctly your money will go into the property and come out very quickly, effectively realizing your gain at purchase and exponentially growing your return of investment.

In an off plan scenario you would normally be expected to place a 5 or 10% deposit on exchange and then wait for completion which could be up to a couple of years later. Only at this time could you realize a gain from the property, prior to this it is simply a paper gain.

Hopefully now that you have a grasp of the two concepts we can move on to working out which one presents a better return. After all, that’s all that should matter in property investing.

The answer is quite simple — It depends on the market. You need to look what the market is doing. This in property is what we call your strategy meeting the market. Choosing the appropriate strategy for the market

Let’s consider two very different property markets and two different types of property and the relative results they achieve. The stagnant market

If you purchase an off plan property that is due to be completed in 18 months time and place a 10% deposit down at exchange, you would expect that because the market is stagnant the property will not increase in value over that period.

So therefore you have paid 10% and made effectively no return over this period but you have also taken a risk that the values, rentals, or market may change making it hard to get a mortgage. No looking so good for our off plan scenario.

On the other hand if you had purchased a new build property you would have paid your 10% deposit and within a short time received your 10% allowance upon successful completion back. Your actual cash tied up will be significantly less than the off plan scenario. This extra cash can then be used to purchase another property.

Therefore if you purchase off plan in a stagnant market you are likely to buy one property as opposed to new build where, for the same cash input you could buy perhaps three times as much property. Clearly in a stagnant market new build is a better proposition than off plan property. The galloping market

The same two properties purchased in a galloping market would mean that the new build is still a decent proposition except that you now have to consider that you have a mortgage to service. It will certainly go up in value more than in a stagnant market and because interest rates are low your cashflow is eased.

Now consider the off plan. You still secure with a 10% deposit but over the course of the build program your property may have increase in value by say 10%. You don’t have a mortgage or cash flows to worry about.

Now here’s the power of off plan in a galloping market. Say the property is worth £200,000. You place a £20,000 deposit on it. Now if it goes up 10%, it goes up on the entire value (£200,000) not just your deposit so you have just doubled your money before you have even completed. (£200,000 x 10% = £20,000)

So consider the above before you go and get sold a heap of rubbish about how great off plan is.

There is no doubt that in the right market and the right circumstances it is a fantastic proposition but don’t caught up in the hype of the sales pitch and thinking that doubling your money before completion is easy. This is where working with a professional portfolio manager will make you job so much easier, they will explain the pros and cons of each decision.

——-
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.

Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.

For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.

How To Find An Extra £200 To Pay For An Additional Buy To Let Property

Before I helped people build property portfolios I used to help people work out their financial problems and debts, setting them back on the path to financial security.

I developed some very simple ways to do this. “Simple”, but not often easy. They required two critical things that you absolutely must develop if you are to be successful in life: discipline and re-education. Now this article is not about either of these qualities but unless you have discipline I can tell you, you will find the following task very hard indeed.

Firstly, don’t pay too much attention to this article’s title. It’s there to grab your attention. £200 is a notional figure. Change it to whatever you want it to be.

This is a simple step-by-step process to find extra money within your existing income. Just follow the steps without actually trying to cut down on your spending, after you have completed this you can take a serious look at what you should really be spending your money on.

The origins of these activities are from the book The Richest Man in Babylon by George C. Clason. It is required reading for everyone from the youngest to the oldest of us. I have read this book at least 30 times over the past 15 years. It articulates many of the disciplines that I have developed and that I see in so many successful people. In particular I love the following quote from the book, it sums up exactly where most people are in their lives financially.

If you have not acquired more than a bare existence in the years since we were youths, it is because you either have failed to learn the laws that govern the building of wealth, or else you do not observe them.

This is a potent reminder that we firstly must learn the laws and then put them into practice.

Follow the steps exactly and good luck. Ok – let’s get started:

Read the entire article through twice. For the next 30 days you only have 1 task which is Step 1. Once you have completed this move on and implement Step 2. Don’t try and jump ahead.

Step 1 – track your current expenditures for 30 days.

Remember to be honest with yourself. In order to fully complete this exercise you should track your expenditure over a 30-day period. This will open a can of worms in your thinking. You will begin to realize how much money you spend without ever thinking about it. It is generally this undisciplined spending that holds you back from being financially free.

Most people fail or stop this process after about 4 days. If you fail to track everything, stick too it as best as you can. I have tried and failed numerous times, in fact I can honestly only say that I succeeded once. It’s unfortunate but for those people who don’t track everything you will miss the very things that you need to be made aware of.

This process of writing down all your expenditure is more of a mental process than a financial one. You see most people have become so numb about spending that they don’t even realize they are doing it. This process will simply give you the awareness of where your money goes.

Track every expenditure for a full 30 days, as you do it think about each pound or dollar you spend. You will begin to realize that some of your expenses are essential others are not so essential. For now you don’t need to change your habits just observe the mental process you go through.

Step 2 – “pay yourself first”

This is the most basic of financial disciplines and one that I would argue will slingshot you to financial freedom quicker than any other single thing.

For this I want you to buy The Richest Man in Babylon. Read it and then begin to think about what it says. The book only takes about three hours to read but it will change profoundly the way your think about money.

I still to this day pay myself first and it is the single most profound reason for my financial situation today.

All you need to do for this step is calculate what you earn each month after tax and then work out 10% of this figure. This is what you will pay yourself first.

If your after tax income is £1800 the you would put aside £180. Pay yourself first £180, before you pay anyone else including the credit cards, banks, or any other person or organization.

As soon as you get paid your income simply take this £180 and deposit it into an account that is separate from your normal account. Make it harder to get too, that will stop you giving into temptation or (perceived necessity). It will take some effort but you will make do on the remaining amounts.

The power of just this £180 is in the way it focuses your mind away from the fact that you have so many debts and no savings. It changes the way you think from debt-ridden to small-time saver. Even the smallest of savings feels better than the biggest of debts. This positive affirmation sends a clear signal to your brain that you are now a saver and with savings you can open yourself up to investment opportunities. With investments you are thinking at a totally new level. It won’t be long and you can truly start to make a huge difference.

In my experience my people can do this for about 3 or 4 months but then they find some good reason why they should borrow it and pay it back, next payday. This never happens. Trust me you will not. This is why it is often good to place it somewhere where you need someone else to access the money. I used to have a 2 to sign with my mother and Mum knew the rules behind allowing me to withdraw money. I needed a clear business plan.

Step 3 – Mapping your cashflow

The third step is simply to group each category of expense into either -

• SURVIVAL – absolutely essential. Without it you could not survive, obviously
• REQUIRED – required is something you must have to function as a member of civilized society, and
• DISCRETIONARY – discretionary is those things that make your life happy and fulfilling but if you didn’t have them you would still survive.

OK, for the first time through only look at the discretionary. Make a list of all the discretionary spending over the 30 days and then choose the ones you can truly do without. We will focus on these first.

Now the best way to change your habits is to focus your energies on a few things rather than a lot. By focusing you get the brain thinking creatively about ways you can adapt and compromise. This is a great facility the brain has.

Make sure you write down what it is you want! NOT what you don’t want!

BE CREATIVE

The come up with ways of making sure you don’t spend more than you are allowed.

I remember back to when I did it last, I wanted to stop spending $200 per night when I went out to nightclubs. (I was in Australia at the time) So I never took any cash out with me and then I restricted the amount I could take out of the Cash Machine to $40 at a time. It was so infuriating to have to make so many trips to the cash machine that I actually decreased my spending to around $80.

The other thing I did was to drink with my left hand rather than my right. It slowed my drinking rate down considerably. That was a trick I learned from a mate who used to run quit smoking seminars.

Once you choose your thing or things then come up with these little systems. A system is just a way of focusing your energies. Try them, they really work.

Try this for a few weeks and see if you can make some changes. It won’t be easy, but the results are worthwhile.

——-
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.

Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.

For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.

How Many Properties Before My Portfolio Will Run Off Its Own Steam?

A great question from one of my investors:

Hi Brett,

A little question was nagging me today Brett. In the current UK property investment circumstances, how many properties (or in cash terms if you prefer) do you consider as being the “tipping point” for a momentum to ensuring one can achieve the 7-10 properties without further leveraging one’s other resources such as one’s residential equity, other saving, other loans etc? In other words, is there a point where you consider a portfolio as having developed a self-sustaining momentum to ride on on its own steam but not having to wait for yonks for the equity to grow?

Great question! OK – the easy way to answer this questions is this: “it varies”. The harder way I will detail below but it still leads to the same answer as before.

There are so many factors at play in your portfolio that no-one can say exactly when your portfolio will run off its own steam.

Strategy

This is always the starting point for every portfolio answer. The strategy you use will depend on the results you achieve. If you are prepared to put the time in researching and finding deals, developing relationships with agents then you can probably pick up a deal here or there. The specific strategy I use is a new build one. This means that I choose having lots of time over some of the best deals that are out there.

Let me explain what I mean. If you are prepared to put the time and effort in you can search down some fantastic deals. Now normally these are simply one property here and one property there. The deals are everywhere but you need to put a lot of time and effort into finding them. More often than not these deals are better than any property club or investment consultancy could ever provide and the reason for this is simple. Property investment clubs need to do bulk deals so they simply cannot provide the best of the best deals as they lose sometime in the volume. Now what you lose in the deal you pick up in the ease of purchase and the fact that you are putting very little time into the deal. This frees your time up for Lifestyle. For me lifestyle is more important than constantly pushing for the best deal.

So it will depend on the structure you adopt, if you are doing all the work and searching a deal here or one there then this will decrease the time to momentum, if you are using a property club then it will be increased.

Structure

How you structure the deal is vital. Using a property investment club, means that you can structure the deal in such a way as to put in as little money as possible so you have more to purchase more property. Doing it yourself means that you will be putting in the full amount so you will require more time to momentum. Now this last statement will raise a lot of controversy in some circles and I agree if you know what you are doing and are happy to “walk the line” you can structure with minimal outlay but for the average investor this would be a line not worth walking.

Stage of Cycle

This is fundamental, assuming you are in the galloping stage of the cycle you will normally create significant equity and move to a position of momentum. If you play your cards right, by the end of this cycle you will be able to operate your portfolio under its own steam. Of course this always depends on your circumstances and the amount of risk you have managed. Let’s face it over the course of the galloping cycle your property should double in value.

Equity Available

This the major determinant as to how fast you can grow your portfolio. If you have £100,000 you will be off and racing a lot quicker than £25,000 and £500,000 will give you a massive head start.

Income or Cashflow

If you have a £100,000 income versus £18,000 you will also be able to move a lot quicker.

There are a few more that we could speak about but in truth the answer to your question is simply it depends, there are so many aspects and variables that you can only work this out with an experienced portfolio manager and a great understanding about the market.

I believe that you can set yourself up in the position that your pension is secured with 1 cycle or 7-10 years. I truly believe this and this is why I focus on taking all of my clients from 0 – 10 properties, providing all the education, experience, and support they need along the way.

How long it takes? Well, thats really up to how much you want it? And that’s a different topic of discussion.

——-
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.

Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.

For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.

Do You Have A “Dinner Party” Portfolio?

When they’re starting out, investors are inundated with opportunity. On websites. At tradeshows. In the mail. It’s everywhere. Cyprus, Croatia, Spain, Florida, Estonia, Las Vegas, Bulgaria, Thailand, Germany, Goa, France, Hungary, UK and so many more. It’s a candy store for the budding property investor with so many outstanding opportunities to choose from.

The experienced professional investor knows that most of the countries are simply distractions or ways to easily line the pockets of salespeople… and to lose money.

Let me introduce one of my investors – “Tina”. She has an awesome “dinner party” portfolio, meaning that around the dinner table she can hold her own with the best of them.

She owns a great place in France on a 17 year leaseback, a wonderful Spanish apartment only 10 mins from the beach, a main street apartment in Auckland, New Zealand, an off plan Dubai apartment, a Bulgarian ski chateau, a Northern Cyprus apartment to die for with views of the Mediterranean from the bedroom, an apartment in central Berlin (that’s on the infamous east side only minutes from Alexanderplautz). She also has 3 apartments and her own home in the UK.

After I met with her, it was obvious that her investment strategy consisted of buying whatever sounded good. In fact, she was blissfully unaware of the fact that her portfolio was a ticking time bomb.

Tina was in:

• 8 different property markets, with
• 7 different languages, and
• 8 different property laws, and
• 10 different letting agents, and
• 8 different market cycles.

If that wasn’t enough she needs to understand the mortgage products of 8 different countries so she can access her equity as well as 8 different taxation laws. Are you starting to get the picture?

I have always loved Warren Buffet’s investing ethos, especially his opinion on diversification:

Diversification is protection against ignorance… It makes very little sense if you know what you are doing.

You see I have always been a fundamentals investor. One of the things about fundamentals is that once you understand a market and begin making money in it you simply keep doing it, you DO NOT think well I made some money, so what’s the next challenge? You persist, you build systems to make it easier for you to make money, you build better relationships and as a result you make more money, easier.

That’s the essence of my ‘Set and Forget’ philosophy

The only time you even consider going into a different market is once you have built a solid foundation in the first. That’s what being a fundamentals investor means.

You see Tina had bought one property everywhere without any fundamentals, she never cared about questions like:

• when my French property goes up in value over the 17 years how to I take the equity out?
• When I try and sell my Bulgarian property once they join the EU who will buy it?
• How much capital gains will I pay?
• How many inner city Auckland flats are coming online at the same time as my flat?
• Who will either buy or rent my Dubai flat once it’s ready in 12 months?

It’s questions like these Tina had no idea how to answer. She had simply been attracted to the initial deal. This is one of the best ways to be assured of losing money.

Property investment is a small part buying and a big part holding. Don’t think that just because you got a good deal on the purchase that it is a good deal. You need to consider the holding, the re-mortgaging, and the disposing.

Only then can you truly say it’s a good deal.

——-
Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.

Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.

For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.

How To Make Credit Cards Work For You

Interest rates have risen and fallen dramatically over the last few years. But credit cards have seen comparatively tiny reductions in their rates. The good news? You can save heaps on your credit card bill just by being smart about using your card.

People pay literally billions of dollars a year in interest from their plastic – making a credit card one of the most expensive forms of borrowing around. But it doesn’t have to be that way. The reason they pay so much interest on their cards is because they use them incorrectly.

Interest rates are irrelevant when compared to how a credit card is used and whether the credit card utilised suits an individual’s patterns of use.

There are basically two types of cards.

The normal credit card
The first is generally the most often used it has no annual fee and has an interest free period of up to 55 days after a credit card purchase has been made. After that period, however, interest charges are extremely high, normally around 19%. This is the card you will be most familiar with, it has a credit limit preset and you normally only have to repay 5% of the balance owing each month. The remaining balance sits there charging you interest.

What most people don’t know is that when you withdraw cash, instead of receiving a period of interest free days, interest is charged from day one.

Furthermore, cash withdrawals are the last debt to be paid off so if there are other debts on the card and you think you have paid off your cash advance a day later and escaped the expensive interest charges you will find you are just paying off another debt on the card, leaving the cash advance there to accumulate interest. In most cases, the entire card must be paid off to avoid such charges.

The Charge Card
This leads me onto the second type of card. It’s called a Charge card and although they look very similar to a credit card they are very different.

Firstly, everything you spend over the course of the month is charged in the normal way but at the end of the month you must pay the balance off in full. In this way you are getting full use of the banks money for up to 55days. Then you pay it off in full and the process starts again. Now often this type of card will have an annual fee. The most famous of the cards are the American Express and Diners.

Personally I use an American Express and a Natwest Premier Charge. Now the reason I use two cards is a concept called “factoring”. Factoring is all about cashflow and you should be getting to know by now how highly I regard cashflow.

Now before we move on you need to understand this 55 days interest free period and its relation to statement dates.

Important dates in the credit card cycle
Once you receive your card there are two vitally important dates to remember. They are so important I actually alarm them in my phone each month. The first is the statement date and the other is your direct debit or payment due date.

Statement date is simply the date your statement is issued. All transactions up to that date will be due on the next payment due date and all after will be on the following month.

Now your payment due date in the case of a 55 day card will normally be 24 days after the statement date. 31days in the month plus 24 days till payment. A 45 day interest free card will be 31 days plus 14 days.

OK — so why do I have a charge card. It comes down to factoring.

The concept of factoring
Factoring is most often used in business to create immediate cashflow. A business will invoice a client but not receive the payment for say 30 days. So the business will go to a factoring company who will pay the invoice immediately minus around 7-9% commission. So basically for this fee you get to use the factoring company’s money for the 30 days.

Now with a credit card you spend the money but don’t pay for it until the payment due date. So effectively you get to use the finance company’s money for however many days that is. It keeps the cash in your account but doesn’t cost you anything to do so.

Now the only thing left to consider is the annual fee on the charge card, because they can be hefty. I have the Amex Platinum which costs me £275 and the Natwest which is £195. So that’s £475 per year or £40 per month. So I need to make a judgement call on whether I think it is worth £40 per month to use this facility. For me it is because I also use my Natwest Charge to buy houses and I get Air Miles points for it and it also comes with a £10,000 overdraft, the Amex I use for all my travel booking. Both of these come with other features which I use such as the travel insurance and purchase insurance.

Now the other option is to take the first type of Credit card and use it in the same way as a charge, set up the direct debit for the full amount each month. If you do this you effectively will be using the banks money for nothing. It feels so good to get something over the banks for once.

Now let’s look at why I have two charge cards rather than one.

My statement date on the Natwest Charge is the 17th of the month and it is direct debited on the 6th of each month. The Amex is the 29th and the direct debit is the 10th of the month. So I use the Natwest between the 17th and the 28th and the Amex between the 29th and the 16th of the month. This means I am maximising my interest free days from each card.

Now on the whole this formula works fine but sometimes the Amex is not accepted so I then use the Natwest but I accept this as part of doing business.

Cashless society
I use my credit cards for every purchase imaginable, another feature about cards is that when you purchase something using your card, if say the Merchant doesn’t provide you with the service or product you ordered then you can charge the amount back and then it is on the merchants back to prove they gave you the service. Try doing that with cash. They are a lot less likely to care about what you think about their service once you have paid cash. It is also a much safer way to shop online.

Spend your money twice.
Credit cards also allow you to spend you money twice, firstly if you buy something using the card (that’s the first time) and then when you get your statement (that’s the second time). So once the statement comes in it allows you to track all your expenditures but it also reminds you of those stupid purchases you make. This is a great thing if you are trying to develop better spending patterns.

Psychology of a charge card
I prefer using Charge cards because every time I make a purchase I must remember that I have to pay for it at the end of the cycle. No excuses I must come up with the cold hard cash. This means that discretionary spending becomes harder because I cannot just say I will pay it back next month. It creates a simple discipline that supports my lifestyle goals.

Floor Limit on your Spending
The only other thing I do is that I place a limit on what I think about. What I mean by this is that I don’t think twice if the purchase is under £300. I can make as many purchases as I want up to £300. Anything above £300 I will sleep on before I buy. Now maybe you are not at £300, I actually used to do it back in Australia at $50. So this meant that things like food shopping and restaurants I didn’t have to worry about. Obviously as your portfolio gets bigger and you can afford more you can raise the spending limit.

Now I still sometimes regret the purchases I make when I get the credit card statement for the purchases under £300 but I don’t stress about the adverse affect it may have on my lifestyle goals.

Finally, I look at it this way, every wealthy person I know has a charge card so their must be something about the charge card that works for them. Likewise every financially struggling person I speak to has multiple credit cards, it must be something they are doing that doesn’t work for them.

Live with passion,
Brett Wood——-

Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.

Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.

For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.

Should You Buy a Property in Thailand?

South East Asia has always had a special appeal for me. I first began spending time there about 5 years ago. I love the organised chaos of the roads in Bangkok, the food that is cooked right in front of you, and the haggling at the markets. Amazing.

Altogether I have spent over 3 months in Thailand and I have so many fond memories, add to that the fact that it is halfway to Australia and QANTAS offers a stopover of only 45 minutes which gets you to Oz quicker. It’s a great destination.

I usually spend a week stopover on the way back to the UK. It gives me a break after 2 gruelling weeks with the family and friends and the 2 hour massages for around £7. What more could you want?

So naturally l thought if I’m spending so much time here l might as well buy a property. Then naturally if I am prepared to buy and have done extensive research why wouldn’t my investors also buy as well?

Having looked into Phuket property before the tsunami, I thought I would check out Pattaya (pronounced “Pat-e-ya”) which is only around 1 hour 20 minutes drive from the new international airport in Bangkok (the capital).

Pattaya is a seaside town (tick-These ticks and crosses are my due diligence) with a new highway which will mean it will only take around 45 minutes to get to and from the airport. (tick).

Pattaya has 3 distinct property markets.

The first is the local market. The properties are priced between 1 and 3 million Baht (70 Baht to £1) So £15,000 – £45,000. Sounds good right. Well maybe not. Unless you are a local it’s unlikely you would buy at this level.

You could only rent to locals and the investment returns I don’t feel would be great enough. (Cross)

The second and most interesting market is the 20 to 30 million Baht. £285,000 – £430,000. Incredible you say? Well thats what I thought too. In fact forget incredible — l was downright shocked. But this is the market of the off plan speculators. In my books, another word for ’speculator’ is ‘gambler’ and hopefully you know by now what I think of gamblers.

I do believe you can make money on these, but only by ‘flipping’ before completion but obviously there are no guarantees with prices already so high. Incidentally, this market has seen an incredible amount of growth so that waterfront apartments are as expensive as central London, Sydney or New York. (Cross)

I feel that this market has been driven by paper gains rather than underlying fundamentals. I see this happen quite often, and it’s one of the reasons I deal in properties 99% of people would rent.

The final level is the 5 to 9 million Baht. So £70,000 – £130,000. This is the retirees’ and expats’ market. You would be more than happy with these houses. 3-4 Bedrooms, large open spaces, ensuites, parking and best of all – air conditioning.

These I feel would be ideal for investment and present your best opportunities. (Tick)

Rentals are great as a lot of major multinationals have offices in Bangkok and the expats are happy to commute up daily or it’s cheap enough to rent a place in Bangkok during the week while spending the weekend home in Pattaya. (Tick)

As an investor in Thailand the first thing you have to realise is that you cannot own land (Cross) so at present you have two choices: either buy in the name of a Thai company and have Thai nationals who own it (but you have a signed deed saying you can replace the Thai nationals at any time). It’s a reasonably secure way of buying.

The other way and the way that is becoming more accepted is a freehold/leasehold similar to what we are use to in the UK. A lot of new builders are structuring ownership this way.

BUT… The Thai government has an unfortunate habit of changing laws so you may find yourself at the wrong end of a change. They made a decision early in 2006 that effectively stopped or severely curtailed foreign ownership (Cross) and the stock market began to spiral downwards so rapidly that they changed the law back by day’s end. This sort of government backpeddling is a potential warning sign. (Cross)

The country has had 18 coups since 1932, although the past 15 years have seen none until 2006. Whilst they have all been peaceful coups, they still create political instability. (Cross) On the other hand a coup to a Thai person is probably like on of our Labour politicians voting with the Lib-Dems so it’s not that big a deal in reality.

Most coups have been backed by the King. Thai people have an amazing allegiance to their king, wherever you go in Thailand you will see him, and as long as the King has backed the coup everything is alright. (Tick)

The King is the real power in Thailand, he has been an active participant and a representative of the people, and is a stable force in a thriving country. (Tick)

The problem Thailand faces is that the King is getting old and may one day pass the throne onto his young son who is renowned for irresponsible antics. So no one really knows just how he will take to the position of King or whether the people will take to him. This could cause an instability in the investment market. (Cross)

One of the biggest things overlooked when inexperienced investors seek out exotic new investment regions is how to get your money back. Oftentimes the capital growth is fantastic, so your £20,000 investment doubles and doubles again (so you now have £80,000). This is a paper profit until you actually sell it or remortgage it.

So the essential question is not often will I make money? but how will I get paid? or who will sell it for me?, who will buy it from me?, how much tax will l pay?, how much will I have leftover? Or if you don’t want to sell it how will l make the equity work for me?.

Often the answer is you won’t. You won’t remortgage it and you won’t sell it, or if you do you’ll need to accept considerably less than you want for it.

In Thailand mortgages are very tight. The Asian economic crisis hit Thailand particularly hard, and in fact they’ve only just now started continuing a number of concrete highways which stood unfinished and vacant above the ground level. These massive highways stretch for miles with no entrance and no exits and are amazing to see.

The bottom line is Thai banks don’t trust farang (foreigners) so you might be made to jump through hoops just to get a 50% mortgage. And if you thought getting a mortgage was hard, try remortgaging. So that kind of leaves selling as the option which kind of goes against our entire philosophy.

All in all, I decided that it would be better to rent out a 5 star hotel or villa on the beach for 2 weeks a year than to own a property which has so many variables.

If you are interested in buying in Thailand, you can definitely make some money but as always ‘Do your due diligence?’ I am happy to give you the research that we undertook before I went if you are interested.

Live with passion,

Brett

PS. I love Thailand and if you get to go make sure you hire a bike and get out into the real Thailand rather than just around the cities and tourist places. The people are lovely and the food is soooo good.

Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios.

Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia.

For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188.