1-1+1 equals 1, but 1+1-1 equals more than 1

I’ld like to share the above formula. It’s a very simple formula for making money out of buying and selling houses. Especially applicable in NZ, where house prices are constantly rising and no capital gains tax is charged for selling a property. Let me explain.

1-1+1 equals 1
1-1+1 stands for Buy house, Sell house, then Buy House. For instance, you buy a 2BR house today say for $300k. Then wait for 3 years. The price of the house would have gone up by then. If you sell the house you'll most likely gain some profit. Let’s say $100k (just to exaggerate). But it is only profit if you don’t buy a new house. Because if you do, $300k won't be enough to buy another 2BR house anymore. Prices of all properties in the area would probably have gone up by $100k too. In short, you won't end up $100k richer at all because you would have used that too towards buying a new house. So 1-1+1 is still 1.

1+1-1 equals more than 1
This second approach is the one that will give you returns. It involves, Buy, Buy, then Sell. Here’s what you do. You buy a 2BR house say for $300k. After 3 years, you would have paid part of your original mortgage. That plus the increase in house prices would have increased the equity on your property. A higher equity puts you in a position to borrow more money for a second mortgage. So with a second mortgage you buy a second property. Rent out the property for a few months, years, whatever. It doesn’t matter. When the timing is right, sell either your house or the rental property. After you settle the mortgage for the sold property and after all expenses are accounted for you should end up with a profit. Let's say $100k (again to exaggerate). Therefore, 1+1-1 is greater than 1 because you end up with one house plus $100k more in your pocket.

Conclusion
Not all buying and selling of real estate properties is profitable. Use the right buy and sell technique. I tell you this is easier than winning Lotto. If you know how to play the property game, the profits alone could pay off your original mortgage...and maybe more.

Pahabol
(Done 1+1-1, once so far. In six months time between the +1-1 cycle, we made a profit of $35k, which we put in to pay off part of our existing mortgage. We are now in the +1 cycle again having bought another property last January. In a few months or years when we come to the -1 cycle, we're hoping to realize another profit. In short, if this formula worked for us, it should also for you.)