Thursday, Jan 14, 2010
We Get a Fee for Managing the Fund Whatever Happens
FT: British Land to run buy-to-let homes fund
To raise up to £300m, which would be bolstered by debt. Most will be invested in homes worth £500,000 to £800,000. The fund could buy up to 500 properties, which would be let to provide a target rental income yield of 3.5 per cent (before costs). Most of the returns, targeted at 14.5 per cent a year, are expected to come from capital growth of the properties. !!! Further explanation from the manager at FT Advisor, "He said in the long-term there could be a shortage of properties thanks to the effect of the credit crisis on building and lack of liquidity for borrowers, fuelling rental demand." Errr? So borrowers won't be able to borrow so they can't buy and must rent, therefore target of 14.5% a year coming from rising prices is because all those would be buyers are renting??
4 Comments
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1. dill said...
Perhaps they should take a look at the German market to see where their logic will get them.
2. d'oh said...
Braking mad, unless we are heading for serious, serious 1970s style inflation.
3. paul said...
I love the logic that leads to these kinds of investment decisions - exactly the same that the BBC uses when it talks about the buy-to-let investment market and the property investment market. Goes like this:
If the number of people renting drops, house prices will rise as people buy instead = PROFIT!
If the number of people buying drops, rental returns will rise as people rent instead = PROFIT!
The flaws in the argument are too numerous to mention, suffice to say no-one should take it seriously whether its coming out of the mouth of a property investment firm or a heavily property invested news editor.
4. hpwatcher said...
I love the logic that leads to these kinds of investment decisions
Mania, I think it's called. Still very clear that the property bubble still has a long way to go before it bursts.