Property Investment Confusion

[PaulPri]

Hey all, I'm very new to property investment, as you're about to find out. But as a concept, I simply don't understand how anybody makes money doing this. My primary interest is in the BTL market, I know many entrepreneurs that pursue this as one part of their portfolio, I would ask them, but I don't really want to seem as clueless as I am.

For example: Let's say that I have a job that pays £20,000 p/a and have a goal to own multiple properties to accumulate passive income over time to replace my job. Let's say, 10 - 20 years.

I find a property selling at £60,000 and also assume that I can rent this for £450 per month. Mortgage repayments of £161 p/m on a BTL 75% LTV.
It would take 11 years and 1 month for this to pay for itself. At which point, this would be pure profit and I own an asset worth £60,000.

However, during this 11 year period, it's unlikely that a bank would loan me more money to buy another property and at the end of this period, i'm stuck with an asset which makes me a small amount of money with most of my money locked into a brick and unable to spend.

My understanding is the above, could somebody help expand my knowledge or point me in the right direction, please.

 

[realdeals]

Why would a bank not loan you money? You already have a house which is largely if not wholly paid off with continuous rental income. If you acquire another property by remortgaging the first one you will have two rental incomes and your pay back time would/could be shorter. In the meantime you should hopefully has seen some capital growth on the first property.

It is all about collatoral and long term income streams.

 

[Valeria_in_Sardinia]

You can also make a profit by reselling the property, for instance, if you added value to the property by renovating it or if you buy in a "good location", somewhere on the fringes of a good area that, in time, can become part of that good area.

 

[FWL]

Capital appreciation is key here, as is the growing equity you will have in the property in years to come. These are "assets" which you can use as collateral to borrow funds to acquire additional BTL properties creating additional cashflow, etc. If you make your assets work for you, you wont just be stuck with one BTL property.

 

[Longterminvestor]

As you pay down the cost of earlier properties, when they are fully repaid then the rental income from those properties and any future properties can be used to pay down mortgages even quicker. Cash flow and capital appreciation should play into your hands in the longer term if managed correctly. Remember, do not be afraid of debt, used properly it can be extremely lucrative.