How You Can Get A Foot On The Property Ladder

[scuuzeme]

borrowing £140k at 5.98% with the RBS she pays £8,400 per annum If she rents a room for £400 week the costs of renting and buying are about the same.

What? That really does not add up.

Paying £400 a week for a room would get you a very nice room indeed, even in London. It would even get you quite a nice flat in quite a lot of London.

But over a year that would cost you approx. 400x52= £20800, which is not really all that comparable to £8,400. And if you meant per month then its roughly 12x400 = £ 4,800, which again is not really terribly comparable.

Can you tell me why, with arithmetic like that, I should pay any attention at all to your opinion on the financial wisdom of "investing" in an ex counsel 2 bed flat in zone 3 south london for 200K?

I'm going to need more than a bit of convincing, to be honest with you.

[GordonBrownSpentMyFuture]

Yes.

[GordonBrownSpentMyFuture]

Geez, what is this... this... article?

It's not news. It's not a public information announcement. What exactly is it and what is it doing in a newspaper? (Yes, it's the Mail, so I use that term loosely...)

Is it a press release from the Council of Mortgage Lenders?

Is it a bit of spin and propaganda from a desperate government wanting everyone to pile back into the property market because after two decades of gross negligence and fiscal mismanagement that's all our economy has to offer and can depend on?

"Open Market Homebuy"? "Homebuy Direct"?

Homeowner Mortgage Support Scheme?

Special Liquidity Scheme? Asset Protection Scheme?

My God, how many props, how many incentives, how much tax payer support is actually required to keep this zombie economy on life support??

As a FTB with no debt, no STR fund, a small deposit that is being constantly diminished thanks to a 0.5% interest rate and rising inflation, and the prospect of frozen wages and higher taxation, it would seem that our illustrious leaders are not only intent on butt fu cking me; they expect me to pay for the lube as well.

Well dream on, sweet cheeks: I can stay stubborn for a lot longer than the market can stay irrational.

[pathfinder]

So halfway through the term of the mortgage you feel you can start on the next half of the debt. After 25 years you firmly have both feet on the very first step debt free only to find you need another 60% of the market value at that time to go up another step. Most people I know bought in their 30's even with loose lending. So wow that means 2 whole steps maybe just maybe is possible by 60-65. I would rather not think how much pension provision would have been built up in that time.

Well I am sold. No wonder the powers that be want us to work into our 70's, so much for downsizing, staying put is the new vouge in a world full of rugby style goal post ladders ... one step.

[Bloo Loo]

...the misnomer is misleading ...'Property Ladder'.....surprised the FSA have not insisted it should be renamed 'Property Snake and Ladder' ....and prosecute and persecute anyone calling it 'Property Ladder' ...may save a few sheeple from financial ruin....like all that glitters is not gold ...property does not 'always go up' as some people still seem to think....encouraged by VIs like the current Government and financial commission takers....

its not called a property ladder because it goes up. its because of the levels of house you can buy, the ftb grade, the semi, the big semi, the detached, the country detached, the pile, the Grant Bovey.

these are the rungs of the ladder.

even without HPI, they compare the growth in your career with the growth in your spending power, and hence your climb up the ladder.

[bomberbrown]

its not called a property ladder because it goes up. its because of the levels of house you can buy, the ftb grade, the semi, the big semi, the detached, the country detached, the pile, the Grant Bovey.

these are the rungs of the ladder.

even without HPI, they compare the growth in your career with the growth in your spending power, and hence your climb up the ladder.

Prrrrrrrpppsss.

[headrow]

its not called a property ladder because it goes up. its because of the levels of house you can buy, the ftb grade, the semi, the big semi, the detached, the country detached, the pile, the Grant Bovey.

these are the rungs of the ladder.

even without HPI, they compare the growth in your career with the growth in your spending power, and hence your climb up the ladder.

Where am i on the ladder?

I still live in the very first and only house i bought 18 years ago. Am i still on the bottom rung or has HPI took me up a few steps?

[Si1]

I think you have a short attention span

I think you have a very limited capacity for logic and a lazy incoherent writing style

[South Lorne]

its not called a property ladder because it goes up. its because of the levels of house you can buy, the ftb grade, the semi, the big semi, the detached, the country detached, the pile, the Grant Bovey.

these are the rungs of the ladder.

even without HPI, they compare the growth in your career with the growth in your spending power, and hence your climb up the ladder.

....like all advertising and sales it's about perception ....the ladder gives the sheeple the impression that it's up for them all the way if they get on the first rung...even kids know there are snakes lurking to invert their ascendancy .....

[Bloo Loo]

....like all advertising and sales it's about perception ....the ladder gives the sheeple the impression that it's up for them all the way if they get on the first rung...even kids know there are snakes lurking to invert their ascendancy .....

There are no poisonous snakes in the UK...apart from the common l'adder.

EDIT, im sure the posts are spelt right when I type them in....I blame the new skin.

Edited February 9, 2010 by Bloo Loo

[adrian777uk]

I was wondering where on earth you would find a £200k ex LA flat in SW12, but then checked rightmove and found theres one barely 100 metres away from where i live... Looks pretty awful though..

Your examples all very well, but really, even expecting long term HPI of 5% compounding ongoing is a big ask in the BOEs supposed 'low inflation environment' and real wage growth isn't going to be particulary exciting over the next 10 years.. If there was a certain 5% per annum growth until 2018, i'm certain even us bearish types would be out throwing our money at buying houses.

Yeah I was thinking the same thing, where the heck are you going to find a 2-bed (even ex-LA) flat in Balham for £200k. That's where the argument falls down I think.

[South Lorne]

There are no poisonous snakes in the UK...apart from the common l'adder.

...there are on my board game ...Gordo played Snakes and Ladders with a board where all the snakes were rubbed out....that's how he was trained in Economics....

[economiccycle]

Yeah I was thinking the same thing, where the heck are you going to find a 2-bed (even ex-LA) flat in Balham for £200k. That's where the argument falls down I think.

If you check out rightmove you will find 2 on the market at £200k. These are not in the best aread. There is one on the market for £230k in Nevill Court Weir Road.

I was assuming an offer of about 10% less would be accepted.

It is true that I did not put a great deal of time into the postings above I got a number wrong on rent I meant £400 pcm to be honest I would imagine most people would of guessed.

It is because I thought the basic gist would be fairly obvious.

I imagine if I announced that prices will fall because of a martian invasion using the most appaling grammar even I could come up with the post would f been acceptable

I am not making a statement like I know 100%

The pound will fall

The Euro will fall

House prices will fall by x% like capital economics

House prices will rise like CEBR

This type of knowledge if like knowing 100% that Chelsea will win the Premiership .

I was trying to explain something that some people on HPC seem to ignore.

In May there will be an election all the main parties will announce before then there spending plan . In these plans if a particular amount is not costed the other parties will point it out.

When they parties issue their manifestos te figures they use will normally based on treasury forecast for real growth.

Over the next eight years or so I imagine the growth built into these forecasts will be 2 to 2.5% or so.

The bank of England over this period I imagine will keep inflation within its target of 2 to 2.5%.

So the first statement I am making is that I along with the main political parties and the treasury if is that earnings unadjusted for inflation will increase by 4% to 5%.

This is and that the first assumption I make .

It means that in 8 years time the average person will have 20% more income in real terms. i.e. They could buy 20% more of the basket of items that make up the inflation index.

I do not beIieve that this is what they will do. I do not believe they will buy 20% more marmite or spend 20% more on commuting

It is true that some items in the may go up in price more than inflation, maybe food and fuel will maybe not.

However by definition if real growth as assumed by the treasury is 2 - 2.5% the basket of goods bought by the average person will take 15% ~ less of their disposable income.

I read one post on HPC that pointed out in the 1930 the ratio of house prices to earning was 2:1

If HPC existed in 1970 people could of pointed to the historic data showing ratios of House prices beeing twice earnings in the 1930.

I put part of that down to people of that generation spending a far higher percentage of their disposable income on things like food.

I think this trend still has some way to go and that the house price ratio will increase a bit longer.

My second assumption

Tthat house prices will go up by more than earnings I think more than 0.5% a year but this is HPC so in this post that is all I have assumed. Actually even keeping pace would not chage the gist of the post

So I take

(1) The accepted increase by the treasury and all the major parities on real growth and the Bank of England target on inflation for earnings about 4 to 5%

(2) Add 0.5%

The above two assumptiond are assuming prices will go with earning plus a very small amount extra

What I then did as a test for reasonableness is to see if a primary school teacher near where I live could buy a property now and go up the housing ladder.

A teacher like the one mentioned in the article could. The condition that needs to be satified is that the growth in house prices , plus rent saved have to be greater than mortgage interest paid.

I just took the starter property. At 200k and assumed a 10k deposit,

At the moment the teacher in question would pay rent of about £500 a month to rent a room in a two bedoom flat in Balham. Over 8 years that is £48k

Cost of renting about £44k = £48k less say £4k for the interest earned on the £10k deposit

If they were to borrow £140k on the RBS scheme at 5.98% that would cost about £70k over the next 8 years . The 50k government loan is linked to the sales price of the property and is paid on the sale of the property.

Renting out one room withsome voids would bring in say 44k

Cost of buying £70 interest less rent received £44k = £36k

I was going to take rightmove and point out actual houses that this teacher would be able to buy over the next 25 years if house prices increase with earnings.

It would take quite a lot of time.

I have only made two assumptions

(1) The long term growth forecasts accepted by all the mainstream parties

(2) The link of house prices with earning will stay roughly the same I should of assumed exactly the same this does not change the overall outcome.

If these turn out to be true in 2040 some people on HPC will be complaining of those people like the primary school teacher bask in 2010 when there was a golden time and houses were cheap.

It is not a ladder unless you trade up and in the period 2007 to 2009 it was a snake. To the poster who mentioned that he bought 18 years ago in 1992 and this has not helped.

if you had an increase in Salary between 1992 and 1998 and used this to get the same income multiple and traded up. If you did the same in 2004 imho you would know what I am getting at

.

However if you compare yourself t someone who rented form 1992 to now you are most certainly better off.

Edited February 9, 2010 by economiccycle

[South Lorne]

If you check out rightmove you will find 2 on the market at £200k. These are not in the best aread. There is one on the market for £230k in Nevill Court Weir Road.

I was assuming an offer of about 10% less would be accepted.

It is true that I did not put a great deal of time into the postings above I got a number wrong on rent I meant £400 pcm to be honest I would imagine most people would of guessed.

It is because I thought the basic gist would be fairly obvious.

I imagine if I announced that prices will fall because of a martian invasion using the most appaling grammar even I could come up with the post would f been acceptable

I am not making a statement like I know 100%

The pound will fall

The Euro will fall

House prices will fall by x% like capital economics

House prices will rise like CEBR

This type of knowledge if like knowing 100% that Chelsea will win the Premiership .

I was trying to explain something that some people on HPC seem to ignore.

In May there will be an election all the main parties will announce before then there spending plan . In these plans if a particular amount is not costed the other parties will point it out.

When they parties issue their manifestos te figures they use will normally based on treasury forecast for real growth.

Over the next eight years or so I imagine the growth built into these forecasts will be 2 to 2.5% or so.

The bank of England over this period I imagine will keep inflation within its target of 2 to 2.5%.

So the first statement I am making is that I along with the main political parties and the treasury if is that earnings unadjusted for inflation will increase by 4% to 5%.

This is and that the first assumption I make .

It means that in 8 years time the average person will have 20% more income in real terms. i.e. They could buy 20% more of the basket of items that make up the inflation index.

I do not beIieve that this is what they will do. I do not believe they will buy 20% more marmite or spend 20% more on commuting

It is true that some items in the may go up in price more than inflation, maybe food and fuel will maybe not.

However by definition if real growth as assumed by the treasury is 2 - 2.5% the basket of goods bought by the average person will take 15% ~ less of their disposable income.

I read one post on HPC that pointed out in the 1930 the ratio of house prices to earning was 2:1

If HPC existed in 1970 people could of pointed to the historic data showing ratios of House prices beeing twice earnings in the 1930.

I put part of that down to people of that generation spending a far higher percentage of their disposable income on things like food.

I think this trend still has some way to go and that the house price ratio will increase a bit longer.

My second assumption

Tthat house prices will go up by more than earnings I think more than 0.5% a year but this is HPC so in this post that is all I have assumed. Actually even keeping pace would not chage the gist of the post

So I take

(1) The accepted increase by the treasury and all the major parities on real growth and the Bank of England target on inflation for earnings about 4 to 5%

(2) Add 0.5%

The above two assumptiond are assuming prices will go with earning plus a very small amount extra

What I then did as a test for reasonableness is to see if a primary school teacher near where I live could buy a property now and go up the housing ladder.

A teacher like the one mentioned in the article could. The condition that needs to be satified is that the growth in house prices , plus rent saved have to be greater than mortgage interest paid.

I just took the starter property. At 200k and assumed a 10k deposit,

At the moment the teacher in question would pay rent of about £500 a month to rent a room in a two bedoom flat in Balham. Over 8 years that is £48k

Cost of renting about £44k = £48k less say £4k for the interest earned on the £10k deposit

If they were to borrow £140k on the RBS scheme at 5.98% that would cost about £70k over the next 8 years . The 50k government loan is linked to the sales price of the property and is paid on the sale of the property.

Renting out one room withsome voids would bring in say 44k

Cost of buying £70 interest less rent received £44k = £36k

I was going to take rightmove and point out actual houses that this teacher would be able to buy over the next 25 years if house prices increase with earnings.

It would take quite a lot of time.

I have only made two assumptions

(1) The long term growth forecasts accepted by all the mainstream parties

(2) The link of house prices with earning will stay roughly the same I should of assumed exactly the same this does not change the overall outcome.

If these turn out to be true in 2040 some people on HPC will be complaining of those people like the primary school teacher bask in 2010 when there was a golden time and houses were cheap.

It is not a ladder unless you trade up and in the period 2007 to 2009 it was a snake. To the poster who mentioned that he bought 18 years ago in 1992 and this has not helped.

if you had an increase in Salary between 1992 and 1998 and used this to get the same income multiple and traded up. If you did the same in 2004 imho you would know what I am getting at

.

However if you compare yourself t someone who rented form 1992 to now you are most certainly better off.

...do you have an executive summary....

[Bloo Loo]

...do you have an executive summary....

i think it was that nobody can predict the future but house prices will go up due to inflation and everyone will be earning much more....the last part goes against the trend, but Hey Ho.

[South Lorne]

i think it was that nobody can predict the future but house prices will go up due to inflation and everyone will be earning much more....the last part goes against the trend, but Hey Ho.

...thanks .... when we had inflation in the '70s recessions wages were being settled at 30% increases which in turn led to more inflation and wage increases...he forgets Gordo now blocks wage increases and imports cheap Labour from around Europe and the rest of the world....this will suppress HPI in the long run ...alhough Gordo is trying to counteract to HPI on other fronts which will not work ...the market..the poor state of the economy..lack of money will prevail in driving down prices in the foreseeable future....

[economiccycle]

...do you have an executive summary....

That is funny 

Hmm summary

-----------------------

Back in the 1930 the house price income ratio was 2:1 a factr I got from HPC and then conformed with google.

In 1970 it was more  3ish?

I think was a combination of an increase in lending to the public and people having more disposable income after paying for food and stuff

In 2010 it was greater 4.5 ish

I think this was a combination of the buy to let market releasing more demand for property and people having more disposable income after paying for food and stuff.

It is still possible for a primary school teacher to buy in the area I live

if the assumptions mainstream parties build into theire manifestos turn out to be true and the HP income ratio is static.

In 25 years she could of traded up twice, heck if she married someone in the same situation then ......

‘’------------------------------------------

I will stop I will need to summarise the summary.

I have never been great at report writing for senior folks I wrote one back in 1990 explaining why commercial lending for hotels was very poor business . The maths was ok imho but the grammar was aweful I was disagreeing with senior people and I got into a mess of trouble.

[zilly]

The point I was trying to make it that is rents are similar to mortgage payments and capital gain is money that a buyer will have and a renter will not.

Thats the case for “grotty flats” in Balham now.

The last time I saw figures published by TFS a company that offers institutions the abiltity to bet on house prices the numbers had an assumption of 2.0% per annum for the next five years. The last time I saw long term figures it was 4.5%.

I am told there is no natural buyer for these futures so they tend to be slightly bearish.

I did suggest to a friend of mine abou7 seven years ago she buy a one bedroom ex local in SW12 for £100k and she thought it was grotty and overpriced she was comparing to her native South Africa.

Similar ones go for£180k now.

I was born on a council Estate in Brixton . Though my dad was doing ok when I was 6 and we moved out a bit.

For me my first flat was about 2/3 of the average price for London again grotyish if you describe it that way. The next about 4/3 the average and my current one about 2.5 times the average, not all form “the ladder” my salary had had a couple of bumps up.

If I had waited for a “non grotty” flat I would of waited a long time

About 40% of my deposit on my current house came from the HPI on the first two properties I owned.

Yeah - but at the end of the day, 100K or 180K, you'd still be living in a grotty flat upon which you owe a bank 25 years of repayment...life's too short, it really is to live somewhere you don't want to be just because it's a 'good investment'!

And given that it's all relative, the HPI and the 'profit' you're so enamoured with ,meant that you, like everyone else, ended up paying more for your house.

The only time you would gain is if you downsized.

If you're moving up the 'ladder' all HPI does is cost you money. Only the banks win.

You won't have the 'capital gain' you talk of - because as your example shows, it goes straight back into buying the next place.

That's not a capital gain...

Strange like so many people you don't seem to understand or acknowledge that.

[Georgia O'Keeffe]

That is funny 

Hmm summary

-----------------------

Back in the 1930 the house price income ratio was 2:1 a factr I got from HPC and then conformed with google.

In 1970 it was more  3ish?

I think was a combination of an increase in lending to the public and people having more disposable income after paying for food and stuff

Debt expansion in early stages of the credit cycle

In 2010 it was greater 4.5 ish

I think this was a combination of the buy to let market releasing more demand for property and people having more disposable income after paying for food and stuff.

even more debt expansion in later stages of the credit cycle

It is still possible for a primary school teacher to buy in the area I live

if the assumptions mainstream parties build into theire manifestos turn out to be true and the HP income ratio is static.

In 25 years she could of traded up twice, heck if she married someone in the same situation then ......

‘’------------------------------------------

I will stop I will need to summarise the summary.

I have never been great at report writing for senior folks I wrote one back in 1990 explaining why commercial lending for hotels was very poor business . The maths was ok imho but the grammar was aweful I was disagreeing with senior people and I got into a mess of trouble.

You may have noticed the conduits of credit went bust expanding debt to a peak over the last 70 years because it wasnt being paid back. Just like they went bust doing the same last time, and the time before and the time before.

Your whole assumption is based on further debt expansion, given it has bust the banks reaching this level as it has done numerous times in history it makes more sense to expect private credit contraction which is exactly whats been happening,

Edited February 9, 2010 by Tamara De Lempicka

[economiccycle]

Yeah - but at the end of the day, 100K or 180K, you'd still be living in a grotty flat upon which you owe a bank 25 years of repayment...life's too short, it really is to live somewhere you don't want to be just because it's a 'good investment'!

And given that it's all relative, the HPI and the 'profit' you're so enamoured with ,meant that you, like everyone else, ended up paying more for your house.

The only time you would gain is if you downsized.

If you're moving up the 'ladder' all HPI does is cost you money. Only the banks win.

You won't have the 'capital gain' you talk of - because as your example shows, it goes straight back into buying the next place.

That's not a capital gain...

Strange like so many people you don't seem to understand or acknowledge that.

[economiccycle]

Yeah - but at the end of the day, 100K or 180K, you'd still be living in a grotty flat upon which you owe a bank 25 years of repayment...life's too short, it really is to live somewhere you don't want to be just because it's a 'good investment'!

And given that it's all relative, the HPI and the 'profit' you're so enamoured with ,meant that you, like everyone else, ended up paying more for your house.

The only time you would gain is if you downsized.

If you're moving up the 'ladder' all HPI does is cost you money. Only the banks win.

You won't have the 'capital gain' you talk of - because as your example shows, it goes straight back into buying the next place.

That's not a capital gain...

Strange like so many people you don't seem to understand or acknowledge that.

My overall career has had ups and downs . I worked in the city for a while as a trader and hated it.

I say that as a long time ago I was unemployed and hated it when friend of mine told me how well they were doing. I lhad left my job without another one and was unemployed for five months.

I retrained as an accountant and ended up working for a bank.

If anyone ever met me in real life I hope I come across as an easygoing chap not really bothered about status or money as my family background on my mothers side was working class irish.

I have met people who bang on about how much money they have made on houses and it irritates me as well.

I dont acknowledge that if are "sensible " and do not hit the market in say 2007 its possible to do fairly well

Anyways

My “claim to fame” used to be that I lived in the same Road as Ainslee Hariot . Old Devenshire Road in SW12. I still do but he has gone onto better things. Number 35 in that Road sold for £880k last year in November. Its the House next to the one The chief owned and sold a couple of years ago.

My house is similar except without the kitchen expansion. I own this property outright as well as another 15 properties albeit I woulsd guess with a value of about £250k on average in the SW11/ SW12 they are down maybe 40k from the peek. About 3.75 million

These properties cost me £1.75 million and my net borrowing now are 1.35 million. Having paid off about 400k

So net assets of just over £3million

The reason I am so low geared is that I bought the investment properties I own between 1998 and 2001 ish may2002 can not remember when I got the last one.

About 2003 I was slightly concerned property may of been overvalued so I did not add to my gearing.

I wish I did but on the overhand I am glad I was still not buying in 2007.

You may understand the logic of the numbers.

When I bought my first ex local that I lived in for 4 years a collegue of mine who was renting someone where posh thought I was daft.

If I had not done that I would have nothing like the money I do now,

I have lost contact with him perhaps he is still renting.

Edited February 9, 2010 by economiccycle

[Si1]

...do you have an executive summary....

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properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie properdie

[Si1]

My house is similar except without the kitchen expansion. I own this property outright as well as another 15 properties albeit I woulsd guess with a value of about £250k on average in the SW11/ SW12 they are down maybe 40k from the peek. About 3.75 million

These properties cost me £1.75 million and my net borrowing now are 1.35 million. Having paid off about 400k

So net assets of just over £3million

The reason I am so low geared is that I bought the investment properties I own between 1998 and 2001 ish may2002 can not remember when I got the last one.

About 2003 I was slightly concerned property may of been overvalued so I did not add to my gearing.

£3.75 million minus £1.35 million equals £2.45 million net – how is that over £3 million – you said you're an accountant – what have I overlooked?

assuming that is right (?) then at apparently typical 4% gross yield, giving maybe 3% net yield, against which you pay possibly double (thinking long term interest not current short term rates, take note) wipes out your yield. Totally.

Capital value is another matter. If inflation halves capital value in real terms over next decade then you still have the equivalent of a cool million

well done for riding about the biggest financial bubble ever and keeping the cash – you will be one of the few

[economiccycle]

£3.75 million minus £1.35 million equals £2.45 million net how is that over £3 million you said you're an accountant what have I overlooked?

assuming that is right (?) then at apparently typical 4% gross yield, giving maybe 3% net yield, against which you pay possibly double (thinking long term interest not current short term rates, take note) wipes out your yield. Totally.

Capital value is another matter. If inflation halves capital value in real terms over next decade then you still have the equivalent of a cool million

well done for riding about the biggest financial bubble ever and keeping the cash you will be one of the few

I would guestimate my own house to be 80k less than my neighbour so I would value it at £820+ abit for the recent change in HPI k.

That brings it out over £3mill

If you check out right move you will find 3 bed exlocals in SW11 they sell for about £250k thats were most of my 15 are. If you also chek out right move you can see similar peorpties rent for £300 a week about 15k a year.

The yields there are about 6.6% gross. There is an area that I think I can get a tiny bit more out of but 6.6% In SW11 can be verified heck sounds like trial on right move

I make about £220k gross rental and £160k net rental. If I find tenant I pay 5.0% for full management if the agent does it is 8.5%

I do own some 4 beds and one bedooms so the figures abouve are avergaeish

I have 1.75 million borrowed on which I pay different amount with three companies

I own 10 in my own name and pay rates form Base +0.39% with BM solutions to Base Plus 0.56% with the Derbyshire

I have a company for tax reasons with 5 properties that company pays the Woolwich Base Rate plus 0.5%,

I am paying about 1% on my borrowings at the moment

At the moment my borrowing costs are £17.5 k.

Up to December last year I was getting 6.0% on 6 lots of money at the 50k limit so I was receiving £18 k interest. So for that last half of last year I was actually receiving more interest than I paid out.

Now its about 3.0% on average so receiving 9k interest, Net cost of borrowing under 10k. Ie. Making over £150k per annum.

I do rent out a couple of rooms in my own house but like all good DJ;s give the money to charity. I am not a DY it is a Harry Enfield reference

I am investigating a BaseRate swop to lock into a fixed rate. Not sure what they will charge but with 5 year libor beeing 3.5% I assume the swap would have strike rate slightly over 3%.

As for how I started

I remember coming into theBank where I worked in 1998 in a some what excited state.

I said that I had been driving around SW London for the last few week and reading about shorthold tenancies.

I am aware that I am slightly eccentric and at budget time other accounts would duck for cover as I would get incredibley excited about how say changes in the quartering

back rules would effect the balance of Finance and Operating leasing.

I basically told anyone who would listen that if you do the sums is was a brilliant time to invest in property

The big some was if rental income pluc capital gains is more than the cost of funds you are onto a winner if appropriately geared.

Thats the simple sum I was trying perhaps inaquately to describe earlier.

I explained how actually if anything house prices staying the same would be a good thing for me as it would enable me to grow my investment more quickly.

I was about to buy a 90k property that rented for £13k per annum and on which I could borrow 80% at 6.5% fixed for five years with mortgage express.

I had visited a number of Estate Agents and met one who said if I was willing to do the viewings in the evenings and at weekends he would charge a commission of 5%.

I suspect I bored a lot of my audience all those numbers and assumptions. The resonse was all wordy with not a number in site.

I needed to have someone manage the properties I was made redundent in 2000 but continues to get consultancy work at £450 a day so made no sense to manage myself. It is surprising how few accountants can specify code to work out an APR or calucalate an amortised SWAP rate

I will not try to explain the Interest / house price thing again/ anyone interested could replicate the sum with an excel spreadsheet.

This does not mean house price will rise but imho it does not mean they will certainly fall.

Edited February 9, 2010 by economiccycle