Consider this situation.
A property investor identifies ten suitable properties each worth 100K (lets say) and submits a bid of 75K on each one. The details of each of these properties is irrelevent but flats within walking distance of a town centre or a railway station are a good idea. One bid is accepted (there probably will be more) and the developer goes ahead and purchases the property. He pays 12K deposit using short term finance obtained using credit cards and will pay 0% interest on the loan which will be needed for six months at the most.
As soon as possible he applies for and gets an 85% mortgage on the property. He spends 4K on a basic refurbishment and his legal costs are 1K. He has spent approximately 17K acquiring a property which is worth 100K.
He then gets the property revalued and he obtains the original 100K (or close to it) valuation. He then gets a new 85% mortgage on the property which would give him 85K and use it to repay the original 64K mortgage. He has his original 17K back and has a surplus of 4K. He owns a property worth 100K and has paid nothing for it.
He can easily find a tenant and the rent will cover his mortgage. He can sit back and watch the property increase in value. There obviously are blips, but property values increase the vast majority of the time and property is the best investment you can make.
This system would work even better if property values were increasing rapidly. He might get a valuation of 110K and a subsequent 10K increase in profit. If the investor is good at identifying undervalued properties then the profit margin becomes even bigger.
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