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#1 Gone baby gone

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Posted 06 May 2012 - 06:46 AM

My father in law has always been keen on DIY. Unfortunately he's more of a starter than a finisher, but all told he does have a pretty high degree of skill and has helped many of his relatives fitting new kitchens, bathrooms, etc.

When his kids had all left home, he and his wife downsized and embarked on a series of semi-successful flips, moving from one flat to another around 4 times until they eventually ended up in 2 bed bungalow that they intended to spend their retirement in.

As early retirement loomed, he decided that a booming property market (2009!) held ripe pickings for a man of his talents, and embarked on purchase of a BTL flat in a bad area of a medium sized Scottish town. Midway through the renovations, one of his relatives offered to be his tenant and since she was in urgent need of accommodation, he stopped the renovations and let her move in. The ease by which he found his first tenant spurred him on and he bought another flat in 2010, this time just around the corner from his house. I and a few others warned him that things were not looking good economically, but I got the kind of look that suggested I was a killjoy and he told me he knew what he was doing. After some expensive renovations, a tenant for the new flat was duly found and flushed with success he bought a run down bungalow in a coastal "holiday" town as a slow flip in 2011.

Yesterday we were visiting and the "portfolio" currently stands at:

Flat number one, owned outright.
Family tenant is going to move out (still owing him some rent), recently valued at price originally paid.

Flat number two, interest only BTL 10-year mortgage
Tenant (not through an agency) only paid his rent on time once, and was a practising alcoholic - has just been evicted. Flat requires extensive repairs to be either rentable or sellable. Valued by agent for sale (as they "don't want the hassle of renting" - old tenant gave them death threats and turned up on his doorstep at 11pm more than once during the eviction process). Valuation around 10% lower than originally paid. "Can't afford to sell" at that price and have therefore decided it will have to be rented out by an agency. This means the profit over the remaining years of the mortgage will likely not be enough to cover the interest + capital required, and his mortgage provider is increasing his rate, worsening this equation.

Holiday home flip
Still undergoing renovations but another near identical house on the same street recently sold for around £3K less than he paid for his, before he poured around £6K into a new bathroom, kitchen, etc.

Summary:
After four years of this as almost a full time job, with all manner of hassle (including a broken ankle sustained as part of the "doing up") he now stands significantly financially worse off and that's before you take account of the time he's spent on his folly. He has lost around a stone in weight with the worry regarding his errant tenant, and is still receiving nasty texts from him. His wife is showing keys signs of depression .

#2 SuperChimp

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Posted 06 May 2012 - 07:41 AM

Interesting story.

It still amazes me when I think about it today how people with no experience buying, renovating or selling properties jumped onto this BTL band waggon.

How could people be so guillible as to plow their retirement funds into investments they have done little or no research in. I can imagine these people during the DotCom Buble and the Wall Street Crash jumping in at the end and losing everything.

#3 mr messy

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Posted 06 May 2012 - 07:43 AM

My father in law has always been keen on DIY. Unfortunately he's more of a starter than a finisher, but all told he does have a pretty high degree of skill and has helped many of his relatives fitting new kitchens, bathrooms, etc.

When his kids had all left home, he and his wife downsized and embarked on a series of semi-successful flips, moving from one flat to another around 4 times until they eventually ended up in 2 bed bungalow that they intended to spend their retirement in.

As early retirement loomed, he decided that a booming property market (2009!) held ripe pickings for a man of his talents, and embarked on purchase of a BTL flat in a bad area of a medium sized Scottish town. Midway through the renovations, one of his relatives offered to be his tenant and since she was in urgent need of accommodation, he stopped the renovations and let her move in. The ease by which he found his first tenant spurred him on and he bought another flat in 2010, this time just around the corner from his house. I and a few others warned him that things were not looking good economically, but I got the kind of look that suggested I was a killjoy and he told me he knew what he was doing. After some expensive renovations, a tenant for the new flat was duly found and flushed with success he bought a run down bungalow in a coastal "holiday" town as a slow flip in 2011.

Yesterday we were visiting and the "portfolio" currently stands at:

Flat number one, owned outright.
Family tenant is going to move out (still owing him some rent), recently valued at price originally paid.

Flat number two, interest only BTL 10-year mortgage
Tenant (not through an agency) only paid his rent on time once, and was a practising alcoholic - has just been evicted. Flat requires extensive repairs to be either rentable or sellable. Valued by agent for sale (as they "don't want the hassle of renting" - old tenant gave them death threats and turned up on his doorstep at 11pm more than once during the eviction process). Valuation around 10% lower than originally paid. "Can't afford to sell" at that price and have therefore decided it will have to be rented out by an agency. This means the profit over the remaining years of the mortgage will likely not be enough to cover the interest + capital required, and his mortgage provider is increasing his rate, worsening this equation.

Holiday home flip
Still undergoing renovations but another near identical house on the same street recently sold for around £3K less than he paid for his, before he poured around £6K into a new bathroom, kitchen, etc.

Summary:
After four years of this as almost a full time job, with all manner of hassle (including a broken ankle sustained as part of the "doing up") he now stands significantly financially worse off and that's before you take account of the time he's spent on his folly. He has lost around a stone in weight with the worry regarding his errant tenant, and is still receiving nasty texts from him. His wife is showing keys signs of depression .



#4 mr messy

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Posted 06 May 2012 - 07:47 AM

a valuable lesson learnt i feel. it just goes to show you can't trust anyone, not even your own family. the way the economy is going i feel he should cut his losses and sell at a loss as this recession has got a long way to go and times will get a lot harder

#5 Si1

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Posted 06 May 2012 - 12:21 PM

His wife is showing keys signs of depression .


offer her a friendly ear, or one day it may be too late, help he to get help etc etc

#6 juvenal

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Posted 06 May 2012 - 03:58 PM

Interesting story.

It still amazes me when I think about it today how people with no experience buying, renovating or selling properties jumped onto this BTL band waggon.

How could people be so guillible as to plow their retirement funds into investments they have done little or no research in. I can imagine these people during the DotCom Buble and the Wall Street Crash jumping in at the end and losing everything.


We can place the blame for that squarely at the door of television programmes. They promoted the idea that anyone can do houses up and make money from it. Remember the would-be young model and her Beenyfied bungalow near Leatherhead?
'And while I live, no fool or noble knave
Shall walk this world, in credit, to his grave..'

'The pension system has been a very nice gravy train for all of those involved except for those paying into it.'

'Let's see if we can get it for the asking price..' Kirstie Allsop

"Be under no illusion. You will not escape the net..." S'rAlan Sugar

Sex, drugs and sausage rolls...

The House of Lords: 'The Ermine Vermin....'

#7 TheBlueCat

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Posted 06 May 2012 - 04:47 PM

He has lost around a stone in weight

BTL, the new weight loss programme.

#8 Gone baby gone

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Posted 06 May 2012 - 06:01 PM

We can place the blame for that squarely at the door of television programmes. They promoted the idea that anyone can do houses up and make money from it. Remember the would-be young model and her Beenyfied bungalow near Leatherhead?


You don't know just how close to the mark you are... the mother in law was outraged when she found out they'd have to pay for a gas boiler inspection and cover the council tax while they looked for a tenant... "they don't tell you that on homes under the hammer" were the exact words!

One of their other sons in law has (bad) experience of letting his house when he left to work in Australia for a couple of years. They didn't listen to a word he said.

Edited by What's'isname, 07 May 2012 - 01:21 PM.


#9 Shrink Proof

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Posted 06 May 2012 - 06:27 PM

Interesting story.

How could people be so guillible as to plow their retirement funds into investments they have done little or no research in.


The same thought crossed my mind on reading the OP. It's not just the idea of the hassle, work, time & risk of all this, the really ghastly bit is getting knee-deep in the excrement of multiple interlocking problems (physical, financial, legal, practical, interpersonal, emotional, etc.) at that stage of your life.
If you can't stand the heat, get out of the kitchen...

#10 tim123

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Posted 07 May 2012 - 12:05 PM

Interesting story.

It still amazes me when I think about it today how people with no experience buying, renovating or selling properties jumped onto this BTL band waggon.

How could people be so guillible as to plow their retirement funds into investments they have done little or no research in.


People do that all the time, with investments that have nothing to do with property

E.g. I can't understand why anyone except the most sophisticated invested invests in "fine" wine and then only with a very small percentage of their wealth. It has to be the easiest way of buying a dud imaginable. Yet first timers can be persuaded to invest their life savings in it. Madness

(and there are lots of other examples)

tim

#11 porca misèria

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Posted 08 May 2012 - 01:40 PM

BTL, the new weight loss programme.

Aha, better buy myself a few!

#12 porca misèria

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Posted 08 May 2012 - 01:45 PM

People do that all the time, with investments that have nothing to do with property

Up to a point. But they don't put all their eggs in the same basket (unless it's cash), nor leverage up ...

E.g. I can't understand why anyone except the most sophisticated invested invests in "fine" wine and then only with a very small percentage of their wealth. It has to be the easiest way of buying a dud imaginable. Yet first timers can be persuaded to invest their life savings in it. Madness

If you think expensive wine is worth the price then why not?

#13 bergkamp N4

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Posted 11 May 2012 - 01:41 PM

OP thanks for the post, would it be possible to name the Scottish town and coastal place.
Also why your in-laws did not downsize directly to the 2 bed bungalow ?

Re: Flat 1 your father in law is neither up or down on the value so if flat had been bought in North London then would have been a gain or somewhere like NI then a loss in value so all in all probably a result.

Flat 2 the wrong particular tenant but in the right circumstances a tenant who has alchol problems can be a lucrative cash cow for landlords if let through the right agency/charity/government dept with rent payments, often 1.5 or 2 times the market rate going direct to the landlords bank.

Flat 3 the holiday home is just that. Rent it out at weekends and holiday times get a little bit of income stream going and gradually renovate the place room by room and then it would be possible to charge a wee bit more for a revamped place.





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#14 Venger

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Posted 16 May 2012 - 08:42 PM

We can place the blame for that squarely at the door of television programmes. They promoted the idea that anyone can do houses up and make money from it. Remember the would-be young model and her Beenyfied bungalow near Leatherhead?


She'd gotten herself some sort of job at Mercedes when I did a background check a while ago. Bungalow still on at £400,000. http://www.housepric...dpost&p=3008720

It's greed and that's fine. It's not just a TV programme responsible. It requires a certain type of person to believe property always goes up and there is little risk. The recently divorced mother in that instance was irresponsible, allowing Natasha free rein to buy a house and do it up. Natasha had already flipped one property iirc, and expected to do it again for big profit.

In the case of What's father in law, buying property after property in 2009, thinking he was getting value.... it sounds like he's put his own financial security at risk at retirement. His eventual slow bleed failure is part of the mechanism to allow younger people entry into the market at lower prices. Not to blame tv shows or the culture or the banks for his failure, or What's inability to dissuade him. Personal responsibility.

#15 Gone baby gone

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Posted 18 May 2012 - 06:58 AM

OP thanks for the post, would it be possible to name the Scottish town and coastal place.
Also why your in-laws did not downsize directly to the 2 bed bungalow ?


The town with the first flat is Falkirk.

The holiday home is in Dunoon.

They originally downsized from a 1930s 4 bed semi - nice place - because all but one of their 5 kids had left home and his wife has problems with the stairs, plus they knew paying the council tax and heating bills on the place would be sapping more and more of their income as they retired (which was a bit of foresight given the way energy bills have gone).

Flat 3 the holiday home is just that. Rent it out at weekends and holiday times get a little bit of income stream going and gradually renovate the place room by room and then it would be possible to charge a wee bit more for a revamped place..


The problem he has is that Dunoon isn't that popular with holiday makers, and the cost of the council tax (which is now charged at 90% on empty properties there) would be a drain during the voids.




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