Saturday, Jul 26, 2008
Lamb to the slaughter
ThisIsMoney: Buy-to-let: The housewife developer
When Emma Wright's husband handed her £1m and asked her to invest it in property, she vowed to try to double the money within three years.
Emma plans to purchase up to 30 houses near her home in Wadhurst, East Sussex.
Emma has embarked on her buy-to-let portfolio with a two-bedroom mid-terrace house at the end of her road in Wadhurst for £200,000 in cash. She is currently spending £3,000 on redecoration and will be letting it to her housekeeper and gardener for £660 a month. That works out at just 4% yield, but Emma expects that figure to rise in future as prices fall.(?????)
'We haven't really seen a big drop in prices in this area yet,' she says. 'It's a very desirable place in hot demand and easily commutable from London.
Posted by little professor @ 11:24 AM (2090 views) Add Comment
22 Comments
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1. denzil said...
Best of luck to her! Personally, I think she is playing a dangerous game but as a cash buyer she is in a great position to drive a very hard bargain. I know a BTL investor who is still buying but only if he can know the asking price down by at least 20%, otherwise he just walks away.
2. An Bearin Bui said...
A classic case of 'easy come, easy go', I think. When £1m just falls into your lap, you won't be too worried about losing half of it. If she and her husband had had to work hard for that money (e.g. through building up their own business over many years) instead of getting it through first a shares windfall and then a property windfall, then they wouldn't be so blase about re-investing it and would do the math more carefully.
3. Deadman said...
Hmmm. 20% may look good now but will it look as good once 40% is the norm?
4. amjidk said...
the rich seem to be getting richer, whilst the rest of us are in deep S*^t under this crappy government..
5. handle_it said...
"asking prices" are still based upon an unsustainable (and obviously now defunct lending conditions). A person may well feel that they have "had a result" when they purchase a property at say 20-30% discount but as stated the "real" value probably isn't nearly as high.
6. alan said...
"she vowed to try to double the money within three years"
Nice to see some optimism in the country. Can't help but think it's misplaced. What the country needs is a few contrarian investors, these days.
Anyone fancy shares in B&B?
7. Dead Spider said...
I'll never understand why people will spend so much money (£2mil) for a house 200 yards from a railway line .
Oh , a neighbours house in a similar style is on for £1.85Mil (http://www.rightmove.co.uk/viewdetails-19398566.rsp?pa_n=1&tr_t=buy)
8. nooneo said...
Her businesss model appear to be based on the Northern Crock and Bradford & Buy2let business model.
I think she will be luckyto hang on to her original investment if the downturn continues. No-ones going to be moving unless to a cheaper mortgage or property. Ho well when this goes tats up I suppose it will only mean they pay less tax as I suppose almost of of their money is scattered away outside the UK so they avoid paying the GB guvmint anything anyway.
Come the revolution ey chaps......
9. titaniccaptain said...
Am I reading this right????........Emma Wright's husband handed her 1m to invest in property in a crash??????? ha hahahahhahahhahahahhahahahhahahahhahahahahahahhahaahha
10. planning4acrash said...
Only good buy now is a patch of land that could never be built on, close to home, big enough for a small holding.
11. paul said...
When the economics of the strategy don't stack up, it's usually because the strategy doesn't.
It would be good if ThisIsMoney checks up on her in a year's time, or even two years to see how much on target she is.
There are a few stories like this around at the moment, about how companies are investing with renewed gung-ho into property, presumably in the hope that making a public display of it will kick-start the market.
What thye've failed to appreciate though is how much the phenomenon has been driven by cheap credit, and that cheap credit is now long gone. After all, I remember asking my aunt living in Gillingham, Kent why she was planning to sell her house a couple of years ago to trade down. She replied that she would be daft not to at the current price she would get for it.
"Would you be able to buy your own house at it's current estimated price?" I asked.
"Absolutely not" she replied.
"So who will buy it then?" I enquired.
That was answered by the fact that she never did sell it and they are still living in the house today.
Emma Wright got lucky with her timing, by selling high just before the market crashed, but she's now making the age-old mistake of confusing luck for skill.
12. mark wadsworth said...
Paul, I have been asking people that for about five years "Would you be able to buy your own house?" most people have answered "no".
13. Carbonoid said...
Just goes to show the value she places on money, gambling a mil when the economy's goin down the crapper... wouldn't even provide the staff with free lodging, behind the shiny teeth and smiles these people are vicious sharks. hope it goes tits up massively. Yes, I am bitter.
14. Will said...
Any developer who pushes prices down now will surely force the rest of the market down with them.
15. Geoffk said...
oh dear...the soon to be ex husband
16. Notoo Bright said...
£200,000 in the bank at 6% gets you £12,000 a year in interest. £660 a month gets you about £8,000 a year in rent.
To me that looks like a loss of about £4,000 a year. How can this come to a 4% yield?
17. jonb said...
Yes, the yield will rise as house prices fall, but that just means that house prices will fall by a bigger percentage than the fall in rent.
18. taffee said...
think she was lucky...in normal market conditions she built a top of the range property at the point when properties should have been correcting
reckon she will lose 40% of her money.
19. it_is_going_with_a_bang said...
Good luck to her. But she on one hand points to a long term investment, .i.e buying a home occasionally frequently which sounds like a long term sensible approach. But then comes out with I'm going to double my money in 3 years.
Which quite frankly is exactly the opposite of what she just said. Lets be honest about this. She is in no way a professional having only ever done this once.
The one investment and profit she made is not the same as she intends to do now. Which means she has no prior knowledge.
The only thing saving her from going bankrupt is the LTV ratio being setup for her loans.
The only thing that I would say is reasonably guaranteed is that in 3 years time she will have blown most of her profit from 'one' profitable venture.
Rents will not sustain a consistent high growth because the bottom line is it has to be affordable for people - even more so that mortgages.
I hear Barrats and Co. have plenty of houses for sale. Maybe she would like to make an offer on 30 and get it over and done with?
20. paul said...
That's it mark, the key as you know is to remember that most of the time, most of the stuff you buy is marketed towards people just like you - if you see a deal in Marks and Spencer's food section that is sold out, you think it is because other people have been lucky enough to find out about the deal. The truth is that you only found out about it because they did. In fact, if they didn't know about it neither would you in all likelihood.
The same applies to houses - if you can't sell it to yourself, and you're going to be selling it to people just like you then who will buy it? No-one.
I'm always amazed at how few people outside corporate marketing departments really understand what this paradox means.
21. Rimmer said...
Just in case you missed this her Hubby "GAVE" her £1000000 - personally with careful investment you could "Safely" make that £1.3 to £1.4 Million in 3 years, why take the risk?
Besides that read the papers Luv, the time to buy certainly is not now.
22. Stevo said...
What a drop kick, she should have put it in a term deposit and sat on it untill the market is at its lowest, we have sold our house in australia, and have put 370.000 dollars in a 3 mth term deposit at 8%that is about 175.000 quid and were are getting 2,5000 +pm interest dollars = 1,2500 quid pm, so 200.000 quid at uk 7% term deposits,would pull in a good1,300+ quid pm, and her property is falling.