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London-loser

Property V Non-property Investment Competition

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Sorry,

I'm sure there have been threads about this before on HPC but I couldn't dig them up... I'm fascinated by G&A's investment strategy over on The Pig:

Singing Piggies' competition

In a matter of weeks it seems he has turned a £20k initial investment into a three property empire with nearly £460k of debt!

Thankfully he buys all of his properties at well below "market value" - if you buy ten pound notes for £8 each then I guess you can't go wrong (unless of course you are only pretending they are ten pound notes).

He has pyramided this £20k by buying three properties for £390k with debts of nearly £460k ... but that is OK because they are "worth" £540k (instant £150k "profit").

Now, based on his info - he can get rental yields of 7.5-9% (quite attractive) on the purchase prices... which quickly fall to 5.4-6.3% on their "market value".

Assuming he is not a total bulls-hitter then he has got someone to give him mortgages on these valuations but it seems to me the yields tell you the properties are not worth the "market value".

It only takes some fairly small changes in what the actual "market value" is for this investment to quickly go underwater.

I wonder how many BTL "professionals" follow this kind of strategy?

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"You can borrow more at 2% per month if you want as long as you secure it "

In his challenge, you can only borrow money at 2% per month, so 24% a year! His yields would not cover the interest on the extra borrowings!

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I've looked at this competition and it is all a farce. Whose to say he bought at 15-25% BMV? Surely, by definition, what he bought at was the market value.

Also, as I mentioned before his competition rules say they can borrow at 2% per month - so why are they talking about mortgages? Surely he can only borrow from the 'kitty' at that rate!

Is this chap going to sell his houses before the deadline? I can see the outcome now... Dr Bubb made a 100% gain (easily converted back into cash on the last day), G&A "Well, i have 20 houses worth £1squillion! So i win!"

Dr Bubb, i think you maybe wasting your time on this one!

Anyway, i've been looking into the G&A chap and his website. Does anyone know how he supposedly buys that much Below Market Value? Is it as simple as to find some desperate fool and offer a very low figure?

Edit: Spelling.

Edited by Jason

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I've looked at this competition and it is all a farce.  Whose to say he bought at 15-25% BMV? Surely, by definition, what he bought at was the market value.

Also, as I mentioned before his competition rules say they can borrow at 2% per month - so where are they talking about mortgages? Surely he can only borrow from the 'kitty' at that rate!

Is this chap going to sell his houses before the deadline? I can see the outcome now... Dr Bubb made a 100% gain (easily converted back into cash on the last day), G&A "Well, i have 20 houses worth £1squillion! So i win!"

Dr Bubb, i think you maybe wasting your time on this one!

Anyway, i've been looking into the G&A chap and his website. Does anyone know how he supposedly buys that much Below Market Value? Is it as simple as to find some desperate fool and offer a very low figure?

Perhaps he looks for the one property in a street that is asking 30% more than all the neighbours and bargains them down?

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That is really scary from what i have read. It really highlights the major floors in peoples perspective of the housing market. That guy is insane and i cant believe most of the forum seem to think what he is doing is acceptable and anyone could do it...

edit: it also does seem that he has cheated by securing the loans against himself, if i am understanding correclty. If you ask me his risks are far far greater than DrBubbs.

Edited by sllabres

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G&A speaks very little about the fees and costs that he is bearing to build

his little Empire-of-Debt.

The Words "house" and "cards" come to mind.

Of course, he is personally responsible for this debt, so if the House collapses,

he may lose everything he owns.  And if he cannot repay, it is not only him,

but his lenders who will suffer

Wish i had 20k spare so i could follow what you do :D

edit: heh like the link with cards, its all stacked on a joker no doubt.

Edited by sllabres

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Why?

G&A claims about 200% each week on his way of measuring return.

But my method is real- and being real, will generate some bif down weeks too

Yes but , even most the non-brainers can see that he's full of sh*t, your mail box will get hammerd for advice you know... piggies will be without their shirts if they try and do what you do :lol: piggy see piggy do.

Ill take a quarter of your real profits over his misguided, poorly concieved paper profits anyday :lol:

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I think he has a real chance of going bust.

It will be amusing to watch how he tries to cover up his problems,

or how he stays out of trouble.

Who knows, we all may learn something

== == ==

Here's the sort of message these debt-pyramiding experts are pumping out:

http://www.property-habits.com/

What a disgusting little site, looks to me like a wall of shame.

"Mike and two of his associates £167,642.00 and £97,241.00 just by using a simple formula, without capital or risk!"

a simple formula that on he knows but im sure he will share it will you for a price.

All thats happend is that they have jumped into a rising market highly geared and made money, pretty simple and takes no brain power or fianncial sense what so ever, although you do need the intial gumption to actually get into it.

If the same people can make money in a falling market then i take my hat off to them, but the people who i know that have joined the brigade recently will lose all they have in a falling market.

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If you look at his first property:

Bought for 105k

"Claimed" worth 145k

Remortgaged to 85% (£123,250) to release £18,250 "profit"

But - that profit is due capital gains tax if it was released in the near term. If he tried to sell that £145k house and found he could only get (say) 92% of that price (£133,400)

Net profit: £133,400 - £105,000 = £28,400

CGT at 40% = 28,400*0.4 = £11,360

Cost of clearing mortgage = £123,250

Assumed selling cost (say 1% + £500 solicitor fee) = £1,834

TOTAL COST = sum of the above = £136,444 meaning it would cost him £3000 to sell the house! But the rest of the money has already been blown on the next property.

As you can see, a tiny fall locks him in to the market, preventing any kind of an exit; then he is at the mercy of the market, rental, IRs etc. way beyond the foreseeable future. And what if one of the properties suffers subsidence, or needs a new roof?

Will the property dream become the property nightmare? This level of gearing is certainly playing with fire.

Edited by Rapid Descent

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Is that guy for real or do you think he is making it all up? he seems to have put a lot on the line over a game? or does he do this for a living in that fassion? perhaps he is very rich.

DrBubb, 28%?????? ******!!! i need some of that, im sooo poor :'(

Anyone want to buy my degree? Ill throw in some A levels..waste of ******ing time.

edit: oh i have been playing www.virtualtrader.co.uk, even being the spaz i am i had made about 18% (lies it was more like 8%) in about 2 months..ill just check..hmm -6% :P weird one of the companies i bought shares in says closed (Corus Group) i lost £8k on them...weird why did it do that..urh i guess this is why ill never use real money :blink:

whats even more annoying was they were my best performer...annoyed now! :angry:

Edited by sllabres

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Is that guy for real or do you think he is making it all up? he seems to have put a lot on the line over a game? or does he do this for a living in that fassion? perhaps he is very rich.

DrBubb, 28%?????? ******!!! i need some of that, im sooo poor :'(

Anyone want to buy my degree? Ill throw in some A levels..waste of ******ing time.

edit: oh i have been playing www.virtualtrader.co.uk, even being the spaz i am i had made about 18% (lies it was more like 8%) in about 2 months..ill just check..hmm -6% :P weird one of the companies i bought shares in says closed (Corus Group) i lost £8k on them...weird why did it do that..urh i guess this is why ill never use real money  :blink:

whats even more annoying was they were my best performer...annoyed now!  :angry:

What DrBubb freely admits is that he can make a loss, a substantial loss in some cases, but he dosnt delude himself, he knows the reality of what he is doing so, like he has said in the past, he manages his risks.

'That guy' in my opinion does not see the downside risks to what he is trying to do.

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All this talk of yields etc, maybe I should post one of my horse racing systems up on SP

Worst year 150% profit 22% ROI (Return On Investment)

Best year 532% profit 47.5% ROI

If I stoozed some 0% credit cards the gearing could make those figures astronomical :P

Who needs property gambling :lol:

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What DrBubb freely admits is that he can make a loss, a substantial loss in some cases, but he dosnt delude himself, he knows the reality of what he is doing so, like he has said in the past, he manages his risks.

'That guy' in my opinion does not see the downside risks to what he is trying to do.

It seems its easier to calculate risk in the stock market. You could loose what you put in (obviously), the same should translate to the housing market but people seem to look at houses in completely different light.

I probably dont know what i am talking about..

Edited by sllabres

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It seems its easier to calculate risk in the stock market.  You could loose what you put in (obviously), the same should translate to the housing market but people seem to look at houses in completely different light. 

I probably dont know what i am talking about..

You can lose more than you put in on the stock market aswell :) People see housing differently now, in the same way they saw shares back in the tech bubble.

It amazes me sometimes how people completly deny the possibility of losing money with housing... i can ask them questions like "so, how do people end up repossessed and bankrupt" but it dosn't ring a logical bell.

Oh well, each to thier own, its up to the individual how they decide to lose thier own money.

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I'm absolutely gobsmacked!

:o

This is BBB (Yieldman) telling the piggies a few home truths:

Posted 26/8/2005 8:44 PM (GMT 0)   

Pal said...

Personally whilst I have the greatest respect for Yieldman I don't understand his warnings about the high gearing here. With 5 year fixed rate mortgages of 4.69% available there are no worries of interest rate increases and with the positive cashflow plus cash reserves held it seems a very viable strategy to me.

Paul

Hi Pal and Glen (G&A)

Well firstly, in all likelyhood you won't make much money for the next 5 years in capital gains. Of course no one knows for sure, but I think we're all, bulls and bears alike, pretty much agreed, that a reasonable capital gain in real terms, is unlikely in the majority of the UK . If that's not risk number one then I don't know what is!  £200-£300 pcm simply isn't worth the hassle on a 250k property, maintenance will eat most if not all of it anyway.....what are you left with then? I mean you can just about make 6% in a bank account, without the hassle and  risk. Personally I want to be paid for sure, for both of those reasons, I want to be paid for providing a service, and want to be paid simply for holding, to make my risk worthwhile. Not just a speculation you understand.

What if the bears are right? What if GDP growth slips into negative over the next couple of years? I'm not a "what if" sort of guy, but when it comes to lending millions (remember Glen is talking portfolio building here) I'm afraid I am! So what would happen if the bears are right? If Inflation gets more of a grip (as it is now) the Bank of England will have no choice but to ultimately chase it with rates, consumer retracts, recession the result. These are all feasible, I personally don't think they will happen, but to ignore them and simply "be positive" won't cut the mustard, you could well lose your shirt with such a tactic!

So where would that leave us with our 6% yielding £250k property in the Autumn of 2010 even with just a small rise in base rate up to circa the long term average? One, you will have made no money on your investment for half a decade as I'm sure we all agree a rise to 6% in all likely hood would precipitate a crash so you could well lose money on your investment. Secondly, even with a small rise in base rates at the end of your fix, you'd end up without it in your possesion (remember there's others in tow bought by the same 'gameplan')......... Repocessed -that's where you'd end up! ......especially when you consider you've built up an entire portfolio of this weak stuff.

Glen you seem under the illusion that the equity you pull back out is cashflow, well IMO it's not, it's simply a loan, nothing more nothing less. Yes it might help the 'cash to flow' in the short term but it isn't real profit, and over the longer term you're creating a very 'incestuous beast', believe me! (gearing to simply keep afloat by all accounts) In a nut shell you're simply robbing peter to pay paul from the very outset! Cashflow in my sense of the word is something you genuinely create out of nothing, not something you simply "put on your slate". I repeat what you are doing is not profit, it's just a loan, you're putting money aside to cater for emergencies that should be put aside organically through the running of your portfolio....... genuine income that is......you know like a business!!

I mean if I go to Alliance and Leicester and get a loan for £10k under your "plan" I've just created cashflow. Sorry but that's utter tripe, you've simply racked up another liability! Now, there's nothing wrong with racking up another liability if you also rack up another asset, but you're not because you're simply using your new liability to pay for the sort of stuff that should come from a properties earned profit. You're borrowing money and then putting it in the bank for less than what you're paying for the priviledge, it's financial suicide, and not only that but the reason you're putting it in the bank (emergency fund) should be a 'service' the property itself is capable of offering. They should 'wash their own faces' and then some.  I personally have no problem dipping into equity via a loan assuming it's worth my while, both risk wise and reward wise. So if I can borrow at say 5.5% and then go on to make 10%+ with it, it's OK, I'm putting myself into the position of creating real income over and above my treading water costs.

Don't get me wrong, there's nothing wrong with gearing per se, it's what backs it up (to pay for it) that gives its strengh or its weaknesses. If any of you guys are faced with a base rate of 6% (which is hardly very high, in fact it's about the longterm average) when your fixed rates end you'll find out exactly what I mean! I think some of you are totally lost at the cost of maintaining over the longer term as well.

Honestly and truthfully coming back to Singingpig has made me re-evaluate my stance towards the market, I'm truly shocked at the level of  business savvy being exhibited on here, and worse still it being passed on to others!! That said, I believe what Glen teaches does have merits for buy to sell,..... in....out.....who cares what the yield is!! Real conclusive cash in the bank, or within a very tiny property portfolio , you know just one or two properties, but to insinuate to others that you can build an entire portfolio on this basis (safely) is pure folly in my opinion. I also think Glens tactics are not without merit, I myself have used the same method time an time again. The difference is however the yield we end up with at the end. A simple difference, but a huge one. My latest project when finished will give me my money back, and still net me 10% gross yield. There's a lot of work involved in it, and I'm sure Glen will do many deals whilst I (well my project mgr) is tied up on it, however there'll be only one of us playing on the right side of the tracks.

That said, I would have thought that to acquire a property "BMV" was really common sense more than anything else, and down to you as an individual (as indeed Glen says himself ie "it's a people thing") I always knew there were amateurs who dealt with the odd property or two on these sort of yields,in fact I was aware of huge swathes of amatuers buying the just one or two properties for their pensions and so forth, but to see professionals (as in people with quite a few properties) teaching others, and the likes of Loz who admits to having a huge portfolio making naff all truly shocks me to the bone, and makes me think the market is far more delicate than I previously thought, the shock to tip it over wouldn't have to be too big at all.

Pal said...The only real risk I see is if there is a collapse in the rental market, but that would be highly unlikely since rents are 'sticky' to the downside, in fact over a 5 year period rents would be likely to increase inline with inflation adding to the +cashflow.

  Not neccessarily so Pal, don't rely on rent inflation to bail you out, all sorts of reasons can take it the other way. For example in 1993 when I let my first property out I used to get £650 PCM on a £60k property. In 2003 when I sold it (equity better used elsewhere) I was getting £475 for the same property!! Besides even excluding influences beyond your control once you've bought, such as the local rental market (which was the case with the property I cite), how are you going to keep a £250k property looking rent worthy once you've spent your meagre monthly rations on bare bones maintenance? How are you going to refurb it a few years down the line? Heck you can't even mortgage it further, as there's no equity or indeed any spare monthly money to pay for the loan even if there was! 

Honestly this subject is huge and I think a lot of you are thinking very short term indeed. Good luck and genuine best wishes, I think if you've a portfolio based on this you are sure going to need it!

Regards Paul.

Looks like Yieldman's a rehabilitated "big bad bull".

:o

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You can lose more than you put in on the stock market aswell  :)  People see housing differently now, in the same way they saw shares back in the tech bubble.

I guess that was my point, you know you could loose what you put in. In housing people do think its a win win situation. In some respects you could loose just as much in a bad housing investment.

edit: Another thing, how prepared would people be to secure a bunch of shares against themselves to an worth which is more than they can afford? For instance if that share reduced to zero over night, could they afford it?

With housing people seem to be happy putting as much money as they can afford into it with the idea that it will never fall in price, yet a small fall in value and a change in circumstances could see them in a very dire situation (much like the guy bubb is against)..i hope i make sense, i suck at explaining.

Edited by sllabres

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In reference to Yieldman.

wah what put the willies up him, he was all bull wasnt he?

that will go down well :lol:

EDITED: to include the reference to yieldman oops

Edited by theChuz

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It's easy to claim absurd returns when you apply dodgy maths as is the wont from the Piggies. Following some of their approach, I could apply an infinite return on any further upwards move on an upbet on a share where I'd moved the guaranteed stop loss above the original entry price, as I've done recently with FWY. If I then reinvested any such profits into equally successful sbets I would generate a return of infinity squared. Preposterous.

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  • 337 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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