The Best Return on Investment EVER!
"Best Return on Investment" This is quite a bold statement, and I stand by it.
This is a 21 year case history ; - My story of my first Buy to Let investment property. The results of this investment exceeded all of my expectations for 21 years and counting.
Watch this video where Warren and I talk through my journey of a buy-to-let property investment from purchase through to complete ownership. (Fully paid for by the bank and my tenants over twenty years)
A "Hopeless case"
This story starts back in 2001, when I had a single source of income. I was a commercial property broker with JHI and no pension or retirement plans at all.
I was hoping for my big score, my big break that would launch me into the realm of wealthy property investors. But slowly it dawned on me that I needed to change my strategy from hoping-and-praying-and-wishing to a real workable plan.
Apparently expecting a different outcome while continuing on doing the same thing is called insanity!
It was time to take action. But what should I do? I needed to create and multiply wealth but didn’t have anything to start with. I had no starting capital!
My solution became clear,
- The time was now,
- Buy an asset without money,
- Multiply that wealth.
“When there is Blood in the streets - Buy property”
Wealthy experienced property investors say, “When there is Blood in the streets buy property”.
If this was the basis for timing, then my timing was perfect.
I purchased the property on 5 October 2001 and there literally was blood in the streets. I bought my property 24 days after 911.
The day when the Twin Towers and the Pentagon were hit, killing about 3000 people and throwing the world into a war on terror.
Buying without Money
I went out and found a lovely little 3 bedroomed townhouse in Weltevreden Park (A Johannesburg, North Western suburb).
After doing the monthly cashflow numbers to the best of my ability, I took the plunge.
I bought the property with a “starter-bond”. A starter bond is available to first time home buyers, where they lend you the full purchase price plus the cost of the transfer fees. ( That is a 110% bond)
Since I lived close to the property and had the experience to source tenants myself, I could do it all myself and no agents fees and property management fees were payable.
From day 1 the rental income was greater than the cost of holding the property. (I was making a profit from day 1) and it remained this way for the term of the bond - twenty years.
Over the next 20 years this property consistently earned more in rental income than its expenses. In fact every year my profit margin increased to the point that I borrowed an extra R 250 000 on the bond after 10 years and the rental was still sufficient to cover all costs.
On 5 February 2022 I made my final bond repayment and the property is now 100% mine.
So why do I call this the best investment ever?
The return on investment (ROI) is Infinite! - How do you beat Infinite?
Return on Investment
To work out return on investment one takes the total net income (the return) divided by the initial cost of the investment. ( The cash you invested)
Return on Investment ( ROI ) = Return / Investment.
Let’s look at the approximate returns
R 240 000 Approx Rental profit (an averaged out surplus of R 1000 per month for 20 years )
R 250 000 Second bond taken during the 20 year period
R 650 000 Current value if I sold.
R 1 140 000 Total Return
ZERO of my own cash was Invested . NOTE: (repairs and vacancy costs were covered by the monthly surplus savings)
Now since ROI = Return/Investment
Return on Investment
1 140 000 / 0 = INFINITY
The ROI is Infinite!!
This investment has produced R 1 140 000 over 20 years at ZERO cash Invested.
Now that I find myself in this position with a paid up property, what are my options?
My choices at the moment are:
- Sell the property for R 650 000 (but that would be madness as it will incur capital gains tax, and I would be chopping down a fruit tree that was bearing monthly fruit)
- Do nothing and keep and enjoy the R 5000 extra income every month (and pay tax on the income) .
- Take out a second bond of around R 500 000 ( tax free) and use that as a deposit on buying 2 or three extra properties…
If you would like to do the same, check out Property In a Box or this video below and we will get you on the path of obtaining the best return on investment ever.