Golden Egg

No matter where you are from, it is highly likely that you will have heard the story of the goose that laid the golden eggs.

This fable has been recounted innumerable times and touched countless childhoods.

Its history is based in folklore and is associated with Aesop’s Fables, although there have been many other versions. Sometimes the tales tell of a hen laying the golden eggs, rather than a goose.

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However, in all versions, the fable serves as a warning against greed and encourages us to be grateful for what we have.

A Summary of the Fable

In most versions, we hear tell of a farmer (sometimes with his wife) having a goose that laid a golden egg every day.

Our farmer was able to sell the eggs and as time progressed he started to become wealthy.

Unfortunately, he soon became dissatisfied with the pace at which his riches were accumulating (human nature being what it is) and he assumed that the goose must hold a huge lump of gold within it.

His greed led him to slaughter the goose in order to gain access to the perceived riches.

Of course, upon opening up the dead goose, he discovered that it was indeed no different from any other goose.

Our pitiful farmer did not only fail to realise his dream of immeasurable wealth, but he lost what was a very profitable income stream and was left all but empty-handed.

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It clearly did not end well for the goose either!

Property is our Path to a Steady Stream of Golden Eggs

So….. What can we learn from this fable and how can we apply it to our journey in property?

Investing in property is like being the farmer that owns the goose that lays the golden eggs.

Furthermore, we have an extraordinary advantage with property whereby not only is each property that we own (or control) like a golden egg-laying goose, we are not restricted to owning just one!

Each property is like the goose and we can own as many ‘geese’ as our resources (or resourcefulness) will allow.

Our rental income (cashflow) is the golden egg. Produced regularly and increasing our wealth over time.

We must note at this point that investing in property is not a get rich quick scheme. But providing that you look after your ‘geese’ you can become very wealthy over time.

Capital Growth

Property investing in the UK also provides another distinct advantage. Not only do we profit from cashflow each month, we get capital growth from each property that we own.

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In the United Kingdom, property values have consistently increased over the years.

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In fact, over the last eight-&-a-half decades, UK house prices have increased on average 7.9% annually. (Source: Land Registry).

This is a rate of interest that people with money in the bank can only dream about at the moment as it has now been 10 years since the Bank of England interest rate was over 1%.

Of course, we are all aware that from time-to-time there have periods when average house prices have fallen. We can see from ‘dips’ in the chart above. However:

  • We live on a relatively small island, where space is finite.
  • The population in the UK has risen steadily over time and continues to do so.
  • Housing stock in the UK is way below what is needed and supply of new stock consistently falls below demand each year by a long way.

This all means that it is inevitable that house prices will continue to increase.

As property investors, we will not only receive ‘golden eggs’ each month, but our ‘geese’ are also increasing in value along the way.

Leverage

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One other huge advantage with property, over most other forms of investing is leverage.

Leverage allows us to use other peoples money to help us to realise our investing ambitions.

Leverage within property is most often associated with a mortgage. i.e. When we buy our home, we will put in some of our own money (our deposit) and the bank, or building society will lend us the remainder needed to buy the house.

Borrowings do not necessarily need to come from a bank. Many other sources of funding are available.

Example of the Benefits of Leverage:

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Market Value = £100,000
Rental Income = £500 pcm

Here we have an example of just one property (our ‘goose’), which is currently worth £100,000 and we have paid for it using all our own cash.

Each month, we receive £500 in rental income (our ‘golden eggs’).

Good News! As we haven’t borrowed any money to buy this property, there is no mortgage to pay, so our rental income is pure profit (assuming no other miscellaneous expenses for ease of illustration).

Over a period of time, our property will increase in value. Let us assume that the market has risen by 10% over a two year period.

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Market Value = £110,000
Rental Income = £500 pcm

During this period of time we will have received 24 x £500 rental income = £12,000 plus have an additional £10,000 of capital growth, providing us with a healthy profit of £22,000.

Now let’s use the same figures and timescale, but purchase our property using leverage.

Instead of using our £100,000 investment to buy just one property outright, we divide it up into Four 25% deposits for Four properties and borrow the remaining 75% from the bank.

This means that we have still only invested £100,000 of our own money, but we now control £400,000 worth of property. (Thanks to the £300,000 of mortgage borrowing).

For the purpose of this example, we will assume that our monthly mortgage payments will be £250 (interest only, fixed term) per property and that we do not increase the rent on the properties at any point within the two-year period.

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Property Value = £400,000 (4 x £100,000)
Annual Rental Income = £24,000 (4 x £6,000)
Annual Mortgage Payments = £12,000 (4 x £3,000)
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10% capital growth over a two year period.

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Golden Egg Property Ltd, investment, investing, money, wealth, financial freedom, property, property investment, blog, post, leverage
Property Portfolio Value = £440,000 (4 x £110,000)
Two-year Rental Income = £48,000 (4 x £6,000 x 2 years)
Two-year Mortgage Payments = £24,000 (4 x £3,000 x 2 years)
Two-year Profit from Rent = £24,000 (Rental Income – Mortgage Payments)

From this, we can see that by leveraging our initial investment, during the same two-year period, the value that our investment has now provided is £64,000 (£40,000 capital growth + £24,000 rental profits).

This is more than 190% uplift on the returns that we would have seen had we bought just one property outright, for cash.

Additionally, when we start to consider that it is possible to buy property below market value, or build value in by refurbishment and/or repurposing the property, we can magnify these profits hugely.

Re-finance! Don’t Sell!

Furthermore, we have now built up £140,000 of equity in our portfolio (Portfolio Value of £440,000 – Mortgage Dept of £300,00).

This mean that we could refinance the portfolio to release further investment capital.

If we were to leverage the new portfolio value to 75% we could release £330,000.

£300,000 of this would be used to pay off the original mortgage debt, but we would still be left with £30,000 which could now be used as a deposit for another property.

We can see that by doing this, we can start to build our property portfolio. As we acquire a ‘gaggle of properties’, the amount of equity release that we can take advantage of increases exponentially.

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With the example above, we are essentially looking a single, family buy-to-let investments. This is just one property strategy.

There is a whole host of other property strategies available to us, many of which provide even better returns than we have detailed here.

Protect Your Investment

As the astute farmer would protect his geese by providing food and shelter, we must also look after and protect our property investments.

It could be tempting to sell a property when it becomes worth more than we paid for it to realise a quick profit, but this would be similar folly to the farmer who slaughtered his golden egg-laying goose.

Once we lose control of a property (e.g by selling), we lose the rights to any further income from it (rental profits + future capital gains).

Why Golden Egg Property?

From the information and examples provided above, it starts to become obvious why we love to invest in property.

We have benefited enormously from our own property investments and our experience and knowledge can be used to help you to invest through property to achieve improved financial returns.

3 Ways to Invest

Here at Golden Egg Property, we offer investors three ways to make money through property.

  1. Simple Hands-Free Investing:
    • Make your savings go further.
    • Invest £25,000 +
    • 12 – 24 month term.
    • Enjoy 5% – 8% annual return.
    • Monthly payments, or ‘rolled-up’ into one final payment.
  2. Joint Venture:
    • Invest in property with us where we do all the work!
    • £50,000 + investment.
    • 8% – 20% annual returns.
    • Term dependant upon the project undertaken.
  3. Sourcing Service:
    • Want to invest in property yourself, but don’t have the time and/or knowledge to find the right project for you?
    • Allow us to source the right property for you for a fixed fee.
    • We can also oversee and project manage the refurbishment process.
    • We can also manage the property on an ongoing basis.

If you would like to know more, please click on the link below:

Visit our website here.

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