The Complete Guide to Property Investment: How to survive & thrive in the new world of buy-to-let

by Rob Dix

Paying off just the interest gives you more income each month. Yes, you need to find the money to repay the mortgage in the distant future when you’re unable to extend the loan term any further – but you’ll get a major helping hand from inflation. Inflation is an extremely powerful force, but it’s easy to miss because, year to year, it’s barely noticeable. Over a 25-year mortgage term though, its effect is huge. Let’s say you borrow £75,000 today (to buy a house worth £100,000) and pay off nothing but the interest. Assuming annual inflation of just 2%, its “real value” by the time you pay it back in 25 years will be only £45,000. At the same time, let’s assume house prices increase by 2% per year too – so the house you bought for £100,000 will be worth £164,000 in 25 years.

Ricardo’s Law of Rent, and it explains why rents account for an ever larger share of the economy over time. There’s a simple explanation at propertygeek.net/ricardo.)

the triangle of capital, timeframe and effort. The less you have of one, the more you’ll need to lean on the others.

It involves having your personal finances in order so you’ve got funds to invest and are creditworthy. It involves being able to set realistic and meaningful goals, and making steady progress towards them despite the inevitable setbacks. It involves knowing yourself, so you can set a strategy that matches your skills and attitudes. It involves the flexibility to change tack when circumstances change. And it probably involves being a bit weird – having an individualistic streak that allows you to ignore what everyone else is doing, and having enough self-control to place your long-term interests ahead of immediate gratification to an unusual degree.