Friday, Aug 14, 2009
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This Is Money: How to cash in on the property crash
With property prices temptingly low, when Sally Brown inherited a lump sum she invested in a flat in Birmingham, which she will let out to students. "The idea is to achieve a small monthly income of £550 to £575, then to sell in four or five years. By then, the market should have recovered fully and I will enjoy capital appreciation as well," she says.
Sally's investment could prove a good one. She is taking full advantage of the property slump. Her flat, a new-build which remained unsold throughout the downturn, was originally marketed at £100,000; Sally negotiated a price of £72,000.
Stuart Law of Assetz, which helped Sally find her flat, says investors should act quickly. "All signs now point to an increase in house price increase of 5-10% by the end of 2009"
34 Comments
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1. mystie010 said...
How long is it going to take before people realise that we can't base our economy on everyone simply selling or renting out overpriced houses to each other. Go out and get a real job! I am starting to lose all respect for people who do nothing else but buy/sell or rent out houses for a living. Is this because they are incapable of doing anything else (probably)? Anyone who tells me that they have a portfolio of properties or are buying to let I just think oh dear that is sooooooo last year; or should I say: "Oh that was sooooo 2007"!
2. Smiling said...
Stuart Law seems pretty clued on guy, do the regulars here know him? Is he worth following?
3. 51ck-6-51x said...
mystie010
- I agree with the sentiment, however being a landlord can be a "proper job". If you provide a good service you can demand a good margin, and providing a good service is a proper job IMO. The problem is many are not providing a good service - rising asset prices mean that bad business models still achieve profit ( same goes for buy-to-renovate ) - feel good in the realisation that a falling market will weed out the poor service providers :)
4. greenshootsandleaves said...
'Stuart Law of Assetz, which helped Sally find her flat, says investors should act quickly'
Isn't it funny how, when you're offered an opportunity to invest in a pyramid scheme, purchase one of the 100s of 1,000s of empty flats in Spain or buy a sack of sand in the Sahara, you're always advised to hurry?
5. timmy t said...
"All signs now point to an increase in house price increase of 5-10% by the end of 2009"
What, like unemployment going up massively, interest rates so low they can only go up, public and personal debt at record levels, half the world unable to move because of lack of equity, salaries dropping... Those sort of signs? Tw@t
6. Terimitchell said...
Yea, right. Get in quick before any other sucker does...
Law should be sectioned, quick, before he does any more damage...
7. cyril said...
Borrow some money to buy a flat from a bankrupt builder to rent to students. Yep, things are really looking up.
8. drewster said...
"And the student property sector is ripe for growth."
Erm, no it isn't. Firstly the recent boom in Chinese students is tailing off because China now has decent universities of its own. (Same applies elsewhere in developing Asia.) Secondly the population pyramid shows fewer young people in general. Thirdly, many universities have been busy building new halls of residence to cash in on the boom themselves, and many students prefer to live in official university accommodation with other students nearby and added benefits such as a night porter and no rent paid over the summer.
"So she bought a flat near Aston University in Birmingham..."
Would that be the same Aston University mentioned in the article below? Looks like our lucky landlord will have four years of students trashing her lovely new-build flat, before the local rental market dries up entirely.
Aston University: Building work begins on Aston University’s new student residences (December 2008)
"The Aston Student Village project will see the complete regeneration of the University's student accommodation as part of the 'Aston Triangle' masterplan and is scheduled to complete by 2014."
9. Europeanbear said...
A quick look at the internet - plenty of 1 bed rentals around Aston for 300-350 pcm. That makes a gross yield of c 4000 per annum. Looking at the adverts you can get a 3 bed terrace or better for the 550-575 she is quoting. You need a gross yield of about 8% to make it pay (i.e. about 5700). She paid about 20000 too much for this apartment. When she rents it out she will be a) dissapointed by the amount of rent she gets; b) get plenty of hassel as she is pitching in at the low end of the market and c) will be very dissapointed in 5 years time when she does not get the capital appreciation.
The bottom of the market in Aston is around about 65000 for purchasing, It does not say she has brought a 1 bedroom, but it has to be as it is new build.....she has been ripped off!
10. europeanbear said...
A quick look at the internet - plenty of 1 bed rentals around Aston for 300-350 pcm. That makes a gross yield of c 4000 per annum. Looking at the adverts you can get a 3 bed terrace or better for the 550-575 she is quoting. You need a gross yield of about 8% to make it pay (i.e. about 5700). She paid about 20000 too much for this apartment. When she rents it out she will be a) dissapointed by the amount of rent she gets; b) get plenty of hassel as she is pitching in at the low end of the market and c) will be very dissapointed in 5 years time when she does not get the capital appreciation.
The bottom of the market in Aston is around about 65000 for purchasing, It does not say she has brought a 1 bedroom, but it has to be as it is new build.....she has been ripped off!
11. monty032 said...
We have had a 12-year boom during which prices more than tripled, then we saw a slight adjustment over two years of 20%. Advising people to buy any property now should be illegal. As with advising on shares when you are not an FSA authorised person, you should not only risk jail and an unlimited fine, but be liable for any losses the people you advised incur. Stuart Law has got form, but This is Money should know better.
12. britishblue said...
There are also markets within markets for any product or service. Within housing there are different markets for flats, starter homes, family homes, luxury home, etc, etc. It is well documented that the apartment market has been built on flippers, buy to letters, etc and in many parts of the country these cheap, hastly put together shoe boxes, with exhoribitant annual maintenance charges may never recover their original prices.
13. mander said...
I will enjoy capital appreciation as well,' she says.
What tax does apply to the "capital appreciation" since we have bailed out B&B and other banks involved in Buy To Let? Capital gains tax I think applies when property is being sold. What if the property is never sold when does the state see some tax money?
14. Me said...
2.4 million unemployed ang growing. BLT only works if there is someone to pay the mortgage for you.
There are hundreds of people desperately hanging onto their properties in the hope that they will go sometime soon ... it naturally takes time as you only lose out when you sell, in the mean time you are going to hope things turn around.
15. drewster said...
Forgot to mention.... as she is buying a new-build flat, it probably has a hefty annual service charge. If we look at what's happened in America, when half the building is unsold then the other owners have to stump up double the service charge. Either that or let the building fall into disrepair, which isn't an option when there are paying tenants.
europeanbear - the article doesn't say whether it's a one-bed or a two-bed flat; surely it must be a two-bed?
16. David Hurst said...
Stuart Law?
Surely Assetz went bust last year? Please tell me this illiterate prat is not still around......
17. will said...
ha ah ha ha ha ha ha ha ha h ahhhhh ha ah . Staurt Law (the UK will not have a house price crash 2007)
18. Neil B said...
@ Mander - The article (and most BTL rampers) fail to mention that when you rent out property this classed an as income - it will be taxed just like any income and if she fails to declare this will be breaking the law.
19. greenshootsandleaves said...
europeanbear@7
Yes, but apart from all that the advice she received from SL was pretty good, wasn't it?
20. tenyearstogetmymoneyback said...
cyril @ 5 said...Borrow some money to buy a flat from a bankrupt builder to rent to students. Yep, things are really looking up.
The article said she had inherited some money.
Lets assume she had inherited £100000. Just on interest what do people think she should have invested the money in ?
At the moment it is hard work trying to get a decent return on any form of savings
All suggestions including gold and stuffing it in the matress are allowed.
I'm certainly not defending Stuart Law but in the long term she might have made a less bad decision
(couldn't bring myself to say).
21. techieman said...
teyears - the answer is she would have been better off holding it in cash equivalents , and doing some bottom picking when the cost of the properties deflate more. By the time you calc the yield, voids, hassle and maintenance then doing nothing with the money is better that plunging into an illiquid asset.
Yes BTL was a good idea when the yields were right (and probably still are for the people who got in early and who didn't pyramid) but not now.
The mentality that the IRs are low so we dont get a return is all wrong - just cause that how it used to be. The idea now is to preserve capital so you can dip in when the asset prices are low - i.e. the relative value of cash has gone up in terms of those assets - regardless of any piffly interest rates.
22. Greenshootsandleaves said...
In response to 10years@14: 'Yeah, Sally is being ripped off, but not as much as she could have with some other investments' (I'm paraphrasing) is not much of an endorsement, I'm afraid. Anyway, here's some advice SL probably didn't give her: 'It's not a good idea to ignore the warning signs at an unmanned level crossing, especially when the car ahead of you has just been hit by a train'.
23. cyril said...
@10 years - OK so I didn't read the article properly. But since you ask, if I inherited £70,000 I would probably pay off my mortgage.
24. Essexman said...
Regulate financial advisors can advise on property sales with reasonable safety.
Compared with some investments potential losses are low. 50%-60% is ok when some investments lose 100%. And, most important, property sales are not regulated by the FSA. There is no need for a financial Advisor (salesperson) to give a clear warning of risk.
Compared with shares or pensions where warnings must be given - it is easy and reasonably legal to be economical with reality.
25. gone-to-colombia said...
It's oh so simple................laughable.
No other advice is needed than Mr Lawz, clearly, no VI advice here.
My advice, wait a year and buy that flat for 60,000.
Frankly, it was never worth 100,000, more like 80,000. She only got less than 10% discount, crappy deal.
26. Smiling said...
it's seems all the brain surgeon's are HPC regulars, except Timmy T of course who is the little lamb off Cbeebies
27. Johnny5thumbs said...
Stuart Law - isn't it amazing how easy it is to get regular column inches in the dailies as an 'expert'. There's Howard Archer from Global Insight on the one hand, and Stuart Law from Assetz on the other. Now, I personally dismiss everything Mr.Law says as absolute BS since he is about the most obvious fanatical V.I. that regularly appears on these pages. Howard Archer, whether he will ultimately be proved right or wrong, is at least taking an analytical position that is not quite so obviously biased. But those are directly engaged in the business of ramping up property prices, who, by good fortune, also happen to be in the business of selling property too, should be made to issue a direct health warning with every slippery statement that slides out of their gob. Some column inch commentators seem to just constantly talk out of their 'assestz'.
28. hpwatcher said...
Stuart Law seems pretty clued on guy, do the regulars here know him?
Yes.
Is he worth following?
No. Unless, of course you have mistakenly bought a property at the height of the boom, and now fear losing 1000's and need some form of comfort.
29. tenyearstogetmymoneyback said...
Thanks for the replies guys. Just wanted a bit of reassurance here.
If I could get a return of £550 on £72000 then the return on my savings would easily cover my rent.
However, I also remember doing a calculation back in about 1993 when (including depreciation)
my £65000 property was costing me about £1200 a month.
:- Duncan
30. quiet guy said...
@Smiling
"Stuart Law seems pretty clued on guy, do the regulars here know him? Is he worth following?"
@David Hurst
"Surely Assetz went bust last year? Please tell me this illiterate prat is not still around"
Law makes money by charging fees for property transactions. The more property changes hands through his company, the more money he makes. Law isn't going to go bust - far from it. Law has found a way to make money out of the UK's obsession with property. Nomatter how badly the property market fares, Law will be sitting pretty because he charges fees on other people's property transactions. I wish the media would explain this when they use him as a spokesman for the property bulls.
31. shining wit said...
@ quiet guy....
All those fees must buy Stuart Law an awful lot of waccy baccy or whichever hallucinagen he dabbles in to enable hime to repaet the same old BS week in week out.
32. techieman said...
i am starting to think smiling is a bit of a wind up merchant chaps !
33. mystie010 said...
Maybe it is Stuart in disguise, cos I doubt that he would have any real fans on here.
34. jackas said...
Smiling is clearly a troll.
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