THE REINVESTMENT CYCLE

If you're serious about property, reinvestment is a key strategy that you can't afford to ignore.


In our video, we show you how the strategic use of reinvestment can turn an initial of £140,000 into over £800,000. Understanding the reinvestment cycle will help you to build your property portfolio, diversify your risks, and maximise the return on your investment. Simply put, it means remortgaging a successful investment property so you can use the money it has made to invest in more properties.


We take the example of Tom. Tom has a property in Islington UK, which he bought in 2009. He paid 40% of the value as his deposit, and got a mortgage for the other 60%. Tom, in fact, made a good investment. The value of the Islington property has grown significantly. That means, Tom's equity in the house is now greater but his mortgage remains the same size. If Tom sells the Islington property now, it would certainly make some money. He would also have to pay capital gains tax on the profit.

On the other hand, with advice from IP Global, Tom realises he is in the perfect position to choose a reinvestment strategy. He decides to go for it. Using the increased value of his Islington property, he gets a new, bigger mortgage, which he uses to pay off the original one. Now he has some money to work with. We call that releasing some of his equity.

So, now, Tom has his property in Islington, a mortgage for 70% of it, and a lump sum that he can use to diversify his portfolio. In fact, Tom is able to invest in two new properties in different markets to diversify his portfolio and mitigate risk, each with their own mortgage. Now he has three properties, and some money in his pocket. All Tom has to do now is wait.

Tom's original Islington property continues to grow in value, as do his new properties in different markets. Let's look at the expected results after a total of 18 years of investment. Once the mortgages and initial investment have been taken into account, the original Islington property has done pretty well. If that was Tom's only investment, he would still have made a reasonable amount of money. However, Tom's diversified portfolio of three properties gives him significantly higher return and reduces his investment risk. His return on investment is 576% over 18 years. That's over £170,000 more than Tom would have earned if he had simply sat on his original investment.

Of course, now that Tom has a portfolio of properties, he has lots of options. He can release his capital to enhance his lifestyle, or support his family. Tom could even choose to begin the reinvestment cycle again with one or more of his properties. Sign up to download an investment brochure to understand more about property reinvestment cycles. Get serious about property. Make your investment strategy work for you.

Get in touch with IP Global for any inquiries you might have about refinancing or property investment.

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