Gearing is a concept used in cases where the buyer uses his or her money to purchase property with a greater value then he or she has at their disposal.
The following illustration is a basic example showing why gearing is so effective in property investment.
Investment via a bank account for a period of 12 months with 5% interest rate.
Investment via property for a period of 12 months
Capital growth of 5% of £120,000 (NOT £12,000)
£12,000)=)10%)Deposit)for)£120,000)house £120,000)X)5%)=)£126,000
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