Property investing guru, David Kay asks us, “Why buy one property when you just as well could buy ten?”
For most beginning investors, buying ten properties at once sounds like jumping into the deep end without knowing how to swim; a venture only to be considered by the confidently experienced. But property-investing guru, David Kay assures us that it’s actually not that outlandish of an idea, even for first-timers. In fact, it’s one that can practically exponentially increase profits on a property investment in the same amount of time that it takes to capitalize on just one.
We’ll take his word on it, as that’s precisely how Kay started his own lucrative portfolio.
An expat in Thailand by way of England, Kay is the founder and director of Hua Hin based Thai Land and Property, a full-service real estate company with a niche specialty; helping foreign investors and homeowners achieve maximum returns on their local investment properties. Kay is also an extremely well-established private investor with around 250 properties in his portfolio and a reputation in both England and Thailand for motivating others to use simple, but powerful strategies to create their own wealth through property.
Although Kay has been investing in real estate since 1994, his professional background surprisingly began not with property investing but with his own highly successful advertising business. After a very profitable buy-out, Kay used a portion of the earnings to open his property portfolio. It was twenty years ago that he made his first purchases in real estate and within one day, Kay went from watching in the wings to owning ten flats.
“I remember I met with a friend for lunch that day, and casually said that I just purchased ten flats,” Kay recalls. “His jaw just fell open, but once I explained my long term plan, equity growth, and potential profits he asked me how to get started. We’ve been building our portfolios alongside one another ever since.”
Using Other People’s Money
Kay’s immense success in his investments, he says, can be largely attributed to the fact that he realized early on the benefits of financing his properties with “other people’s money,” as he likes to say.
“Using other people’s money to make an investment may not sound very well mannered, but it’s how you maximize profit,” Kay said, referring to bank loans. “Successful real estate investing requires a business mindset and at the end of the day, financing properties with bank loans is simply the most profitable and quickest way to make figures grow.”
Here’s a simple and straightforward example that Kay used to illustrate this point:
If you have ten million baht to invest in a property you could use that money to pay for one property to rent out over a period of ten years (typical growth rates in Thailand on properties of this price are 6.6% of the purchase price). At the end of the ten years, based on the top chart on the next page, your property will have earned you 8,948,378 baht in rental yield and capital appreciation.
Now, thinking bigger and referring to the bottom chart: With the same ten million baht you could split up your capital and invest one million baht into ten different properties which will grow at the same rates. If you can finance the rest of the upfront cost with 90 million in loans and can continue to pay off any interest with your rental income, you will watch your investments grow tenfold. After you subtract the 90 million you borrowed and you are left with 99,483,780 baht* in your pockets.
Buying Only Rentable Properties
Taking out such hefty loans may seem risky, but Kay said that the ability to rent out the properties will help to cover regular payments, making it a quite safe investment. As long as the payments are made in amounts higher than the interest rate you will start seeing an ROI right away, he explains.
When investing for a profit, always purchase a very rent-able property. Location, price and size (smaller apartments are easier to rent and tend to achieve higher yields) are three major factors that make a property rentable.
“When you buy land, all you can do is sit around and wait for it to appreciate (unless of course you can pick up a real bargain and ‘flip-it’),” Kay said. “With properties that you can rent out, you are never going to end up with less money because you’ll not only get the capital appreciation but an immediate ROI as well.”
Diversify and Do Due Diligence
Simply purchasing a property that is in a nice area with reasonable rent opportunities will indeed provide a return for the buyer, but to really make a profitable investment Kay says that extensive land-price research is imperative.
Using Kay’s strategy as an example, his properties are not located in just one promising area but all over the UK.
While identifying the areas to invest was not a quick task, he says that the method he used was nothing innovative or difficult to do. Visiting the Land Registry Office and collecting public information about property prices all over the country, he used a very simple visual tool to select his target areas.
“I first made a series of graphs based on information from the Registry to plot land prices over a period of 30 years; there was one for each city in the country,” Kay said. “Then I took a piece of cardboard, made a rectangular cut-out and placed it over the graph so it would only display ten years of pricing data.” This select vision allowed him to clearly identify where the steepest and most optimistic growth was.
“I’ve also found that following supermarket and mall chains is an extremely helpful technique,” Kay said. “I personally don’t have the capabilities or billions of pounds it would take to research which areas will grow in the future, but these big brands do. If they put a store in an area, I can trust they have looked into it and see major potential for development.”
Invest With Someone Who Invests in You
“For me, investing in property isn’t just about that one property,” Kay said. “It’s about investing in a way that allows you to turn a profit, make capital gain on the purchase, and then reinvest in more properties.
This method is what Kay says lead him to his personal success in investing, which eventually motivated him to open his real estate business, Thai Land and Property. The fact that the company invests in its investors is also a promising competitive edge.
“We invest in our clients,” Kay said. “We coach them on how to make sound investments with the expectation that they will make a profit on their property, sell it, and come back to us for more.”
Contact David Kay at Thai Land and Property HERE.