Joining the dots

Last week we met a client who didn’t realise what potential he was sitting on. He is in the Rag trade. The ‘rag trade’ is the garment trade where many Asians have made their wealth including the famous Dhirubhai Ambani.

We have several clients from this industry and they all say it’s a difficult environment; it isn’t as good as it used to be. Margins have been cut right down, previously China was not as open to trade as it is now and the world has become a flat level playing field. Also when there is too much information available it is difficult to find margins.

Consequently his income had dropped from £50k to £15k, yet he is still engaged in the same activity. Rather like a mouse going around a wheel. You often find many business people who have made their wealth doing one thing. However the environment has changed, and therefore business has declined, yet they still clutch on to the original business which initially made their wealth for them. They do this as it is comfortable, they know the business, they have relationships with their clients… And they cannot let go of it… it’s like their baby.

They neither adapt their business to the modern world nor do they venture into other territories. What’s sad is they have worked and saved very hard, often paying off any loans they had on the business and their properties; and yet they still carry on playing an outdated record.


Clearly the model which served them a couple of decades ago will not serve them best now. The world has moved on, you didn’t have internet back then. Individuals as well have changed their priorities, the highest priority is not necessarily to earn money, priorities have changed in order. Money will always rank highly in the priority of a Gujarati but perhaps it is not the highest any more. Lifestyle and health seem to be becoming high on the list.


Consequently to get the most out of their business they need to adapt to the new world and the opportunities it presents. Clearly doing the same thing to earn £15k does not make sense.

On speaking further we discovered he had three BTL properties which were all mortgage free. There were three proprieties which had a combined value of £800k, refinancing these at a sensible level would give a lump sum, based on 50%, of £400k. The cost of this would be roughly 5% per annum, this means this money will cost him £20k per annum.

There is another route to releasing money which is known as equity release. This allows you to take money out of your property and not pay interest on the funds until you and your spouse die. Then the lender will reclaim their loan plus interest cost from the property by resell. This product has restrictions on the Loan to Value, the older you are the higher Loan to Value you will get. As Asians we never look at preserving wealth simply for ourselves, the tendency is too look at several generations down the line. This is a distinctive feature, which also runs heavily in the Jewish community.

Asians that might have done equity release, would have probably done this more as a part of a crude inheritance tax planning angle rather than an investment one.

If the amount of money released, £400k, was invested in a property fund and the fund had an expected minimum return of 15%, and then met this target, then the client would make £60,000 on his money, leaving him a net income of £40,000. So almost making him the same money that his business used to make during the good times.


And what does he have to do to get this? Nothing, just sign some bits of paper. The rest is taken care of. In short he gets his life back and earns even more money.


Of course there are risks associated with any investments; when it comes to track record the past is the past and not the future, this is the first most obvious one. However the past is indicative of the future, furthermore this is property you’re investing in not some fancy new idea. Property has stood the test of time and weathered many turbulent times in the economy.

Doing nothing is not an option. Your money is earning paltry returns in the bank, and services which were free are being stripped from you. If you do nothing your wealth goes backwards.

The principle here is the same as when you purchase a garment at £5 and sell it for £15, and you keep the difference. People can understand this. But when you apply the same principle to money for some reason they get confused. The interest rate percentage is the cost of borrowing money, so if you can use this money to get a higher percentage rate than what it has cost you to borrow then you have a profit. Here the profit will be 10% on the money invested.

Simply by joining the dots more money can be made than actually working (well in this gentleman’s case anyway); the issue is many people think it’s too good to be true. Therefore it is – for them.

But this saying is not cast in stone. For example if I had said you could purchase property with no money and get a cash back, this statement would also fall in to the category of ‘too good to be true’. Therefore it is considered false.

Yet I have previously been able to purchase a property with no cash and I received £40,000 cash back. Straight after completion.

This was in fairness during pre-credit crunch times, however the same principle is true still – but you need to wait six months. You can get all your money out from an investment and still have a cash flow. There is still a way that you can also purchase property with no money down, but it’s not as easy as the good old days. It is possible if you can find a property which has a good discount from the market valuation.

The biggest block for people not investing in property funds is not that of return or security, these concerns can be addressed satisfactorily. A compliant fund would have the necessary checks in place and the evidence would be there to back up the track record. The real issue is psychological; most people cannot conceive they can earn money for not doing anything. It has been ingrained in their psyche you need to work hard to earn your money, this has been passed down generation after generation.

The concept we passed to our client is in short: spend more time enjoying your life, and less in working; just by re-juggling your finances you can earn even more money for doing less – in fact nothing. Of course you need to be satisfied the return will be as expected and your funds will be held securely.

Why not attend one of our seminars or call our office to see what potential you may be sitting on?


The Real Deal


Olympia, London, W14

Purchase Price: £1.25m



  • An end of terrace three storey Victorian building
  • 3,000 sq ft area with part residential and part as a pub
  • Freehold
  • Will come with vacant possession
  • Priced at £417 per sq ft while properties in this area are priced at £1,000 per sq ft


Call us now to reserve!

Suresh Vagjiani

Sow & Reap

A Property Investment Company


!Tips of the Week

More people lose money from not making a decision than making the wrong decision when it comes to property investment. Remember – The early bird gets the worm!

Property prices in good locations tend to be high, but these are the areas where you get the maximum capital appreciation. So it’s better to save or club together to ensure you purchase a diamond.




Suresh Vagjiani
Suresh Vagjiani
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