of a Three Part Series
While living I was able
to take advantage of financing International real estate
investing in London because of the falling pound. If you
have not read parts one and two of this study use the arrow
above to read them first. I noticed that Lloyds Bank, one
of the London banks I used, was just beginning to issue a
new executive gold card which included an unsecured 7,500
pound line of credit. This looked like it could be good for
financing international real estate investing.
Real Estate Investing Opportunity
I recommended that clients
apply for these credit cards to finance their international
real estate investing by borrowing the 7,500 pounds and convert
them into a hard currency for investment into London international
real estate which was priced so low.
I helped these investors
buy property in the Queensway area of London.
Map shows Moscow Road area
where we helped investors in Financing International Real
Estate Investing from Londontown.com
Real Estate Investing Profit
Those who took that advice
profited nicely. The pound fell over the next year back to
US$1.40 per pound. When they took the loan, they were able
to convert the pounds into dollars at US$2.20 rate and obtain
US$16,500. When the pound reached $1.40 per pound, it took
only $10,500 to buy the 7,500 pounds required to pay off
the loan. Those investors made a quick 60% before they even
made an investment! Thus they earned a return on their dollar
investment plus made a huge foreign exchange gain, plus gained
huge profits on the real estate they bought.
Real Estate Investing Lessons
There are several lessons
we can learn from this three part case study.
Real Estate Investing Lesson #1: Fortunes can be made just
because of currency moves. In this real example, investors
made 60% on the money they had at risk in just over a year,
from just the currency move!
Real Estate Investing Lesson #2: Timing is of utmost importance.
In this study, investors borrowed their loans at almost exactly
the right time. Had they borrowed a year earlier they would
have waited much longer to make a profit. Had they borrowed
later they would not have made a profit at all.
Real Estate Investing Lesson #3: Great losses can occur because
of currency moves. Any investor who borrowed pounds and converted
them to dollars a year later suffered a loss. After the pound
reached a low in the US$1.40 range, it then strengthened
back to US1.90 and maintained that strength for several years.
An investor who borrowed pounds and converted to dollars
at the 1.40 rate received $10,500. $10,500 converted at the
$1.90 rate would create only 5,526 pounds, a loss of 1,974
pounds or a loss just from currency moves of about 26%.
Real Estate Investing Lessons #4: Borrowing can leverage
profits or losses from currency moves. In the case study,
investors made as much as 60% (or could have made a 26% loss)
only on borrowed money at risk. They did not have to invest
their own cash.
Real Estate Investing Lesson #5: When currency and real estate
prices are distorted together profits potential becomes almost
British banks used to issue
bank notes. Now they issue loans instead. Picture above from Rampantscotland.com
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