Real Life B2l Missery

[dogbox]

I have a freind who bought 7 properties between 1998 - 2003.

Last year when I decided to start off - loading my B2Ls I asked him whether he was considering this. He immediatley shut down the conversation with a simple but firm repost,"No way". I didnt mention it again.

He's always been one of those really ultra - positive people.

He called me today and I noticed something Ive never heard in this guys voice before - desperation. Complete and overwhelming desperation.

I asked him how he was and he replied;

"terrible, everythings gone wrong, I now need to get rid of my properties but nothing has sold, Ive tried everthing and even £30000 (read 15 - 20%) reductions havent worked". Money is leaching away from this guy.

He's suddenly realised he's facing a wall of debt, and rents not covering his expenses, which coupled with the hassle of running a portfolio has conspired to turn him from a Man who walked on water to somone really desperate overnight.

He's borrowed to the hilt and has an expensive taste in cars etc.

THIS GUY HAS ENDED UP LIKE THIS EVEN THOUGH HE STARTED BUYING AT A RELATIVELY EARLY STAGE IN THE CYCLE, IMAGINE HOW OTHER LLs ARE FAIRING.

The UK market has had it.

[Smell the Fear]

I thought you were a bull, dogbox. Am I confusing you with dog?

[theChuz]

I thought you were a bull, dogbox. Am I confusing you with dog?

<{POST_SNAPBACK}>

He was reborn a few months ago , actually i shouldnt laugh, there is a quote somewhere which i don't know , and i dont know who said it but its something along the lines of.

I will make my decission and state my case based on the evidence i have, if the evidence should change over time and prove me to be wrong, i can put my hand up and say i was wrong , which we are all wrong from time to time, or i can stick with my original decission and prove that i am a fool.

Someone find the quote will ya, ive completly butcherd that

EDITED:

Actually its wrong of me to make reference that dogbox was wrong in what he was doing , if he met his objective (making cash) then he was right by his own merit.

Providing you don't have a lump of a property you can't shift then your actions were right, even though maybe at times you were over zealous with bullish wording.

Bah you see what im getting at i hope.. if you do .. let me know.

Edited September 13, 2005 by theChuz

[dogbox]

I thought you were a bull, dogbox. Am I confusing you with dog?

I did proclaim Bullish sentiment early this year, even though I was off - loading my small portfolio as fast as I could. My small brain took a while to catch up with my subconscious.

Im Bullish on shares (including international SMs) and some overseas property.

BTW, I also bumped into another LL who started buying around AD 2000.

He was incredulous that Ive sold - up.

This same guy got burned with the SM in 2000 having invested a large amount in 1999 (late). Today he said 'I couldnt sleep when I was loosing money everyday'.

I was itching to say 'then you'd better buy a trolley load of St Johns Whort because your about to realise your property is going to whip you again'.

[theChuz]

I did proclaim Bullish sentiment early this year, even though I was off - loading my small portfolio as fast as I could. My small brain took a while to catch up with my subconscious.

Im Bullish on shares (including international SMs) and some overseas property.

BTW, I also bumped into another LL who started buying around AD 2000.

He was incredulous that Ive sold - up.

This same guy got burned with the SM in 2000 having invested a large amount in 1999 (late). Today he said 'I couldnt sleep when I was loosing money everyday'.

I was itching to say 'then you'd better buy a trolley load of St Johns Whort because your about to realise your property is going to whip you again'.

<{POST_SNAPBACK}>

How f*ckin refereshing, honesty with humility, if only everyone was that upfront then i wouldn't despise people so much. Well done that man.

[London-loser]

I think the quote is (some version of) economist John Maynard Keynes saying that:

"when the facts change, I change my mind".

When the facts change, I change my mind. What do you do, sir?

Reply to an accusation of inconsistency.

Keynes quotes etc

I suspect there might well be a lot of such thinking going on, dogbox. It sounds like your friend may well have continued to gear into his never-ending money machine... only to find out that things are a bit more complicated.

You might well find that you "panicked early" as the good Dr Bubb suggested you should rather than panicking AFTER everyone in the BTL world agrees it is time to panic.

[FaTB]

I have a freind who bought 7 properties between 1998 - 2003.

I also have a freind that iv'e mentioned in earlier posts, he came up to me in the pub only a few weeks back, and proudly announced that he had just bought his 6th BTL flat.

I asked him if the rent covered the mortgages on all of the properties, he said "Err well not all of it" I just didn't have the heart to tell him what I really thought.

But i'll give him a quid for a cuppa when I see him on the street, or maybe I could rent him a room, when I've bought one of his flats at a knock down price !!

God help him !!

[doogie]

THIS GUY HAS ENDED UP LIKE THIS EVEN THOUGH HE STARTED BUYING AT A RELATIVELY EARLY STAGE IN THE CYCLE, IMAGINE HOW OTHER LLs ARE FAIRING.

<{POST_SNAPBACK}>

Interesting stuff. Which part of the country is he in?

[London-loser]

Unfortunately FaTB, this is problem, people who might well have bought a good investment back in 1997/98 (or whatever) have now been so mesmerised by the property market (and its route to endless riches) they have abandoned basic investment analysis (if they ever used any) such as "does this property pay its own way ot am I subsidising it" etc.

Dogbox's friend who didn't like "losing money every day" is simply opting to lose money in bigger chunks less frequently (I would argue you still lose money consistently, you just don't realise it... until the latest Land Registry report comes out, the place over the road sells for less, your surveyor tells you it is worth less etc).

The illiquidity of the property market just allows you to hide from reality more easily than the stockmarket.

[dogbox]

Interesting stuff.  Which part of the country is he in?

A smallish commuter town in hertfordshire. Has schools always near the top of national tables, low crime, leafy etc, yet absolutely no immunity from the market, which means its happening or about to happen everywhere.

I feel very sorry for the guy but on the other hand he always ignored my suggestions to spread his investing and not place so much unshakeable faith in property.

He not only borrowed to the max on every property he also used many CCs and other loans to make his purchases and re - decorate / re - fit each place.

He never considered selling. I remember even mentioning selling some as early as 2003 (Im a worrying type) but he just didnt 'get me'.

There must be tens of thousands like him.

[Portent]

One day when the market has ploughed the trough and turned back up again I may consider a BTL or two. One of the best pieces of advice in this matter that I have read on this site is that each property should be run as a business in its own right and that its viability should stand or fall in isolation.

[Casual Observer]

I have a freind who bought 7 properties between 1998 - 2003.

Last year when I decided to start off - loading my B2Ls I asked him whether he was considering this. He immediatley shut down the conversation with a simple but firm repost,"No way". I didnt mention it again.

He's always been one of those really ultra - positive people.

He called me today and I noticed something Ive never heard in this guys voice before - desperation. Complete and overwhelming desperation.

I asked him how he was and he replied;

"terrible, everythings gone wrong, I now need to get rid of my properties but nothing has sold, Ive tried everthing and even £30000 (read 15 - 20%) reductions havent worked". Money is leaching away from this guy.

He's suddenly realised he's facing a wall of debt, and rents not covering his expenses, which coupled with the hassle of running a portfolio has conspired to turn him from a Man who walked on water to somone really desperate overnight.

He's borrowed to the hilt and has an expensive taste in cars etc.

THIS GUY HAS ENDED UP LIKE THIS EVEN THOUGH HE STARTED BUYING AT A RELATIVELY EARLY STAGE IN THE CYCLE, IMAGINE HOW OTHER LLs ARE FAIRING.

The UK market has had it.

<{POST_SNAPBACK}>

Dogbox. Well done for being brave enough to admit you were wrong. I won't hold you to the promise you made last December:

"'Real prices' are about 15% lower now compared to Spring 04. This is due to 5 quick interest hikes, lots of 'crash - talk' and Xmas.

This temporary 15% drop will reverse in January as people expect interest rates to remain stable. I reckon you can then expect a further 10% price growth on - top by March.

If Im wrong Ill eat my own Todger, which beleive me will be quite a meal.

'Heavy on the Pepper Sauce' I here you cry!

[underpressuretobuy]

If Im wrong Ill eat my own Todger, which beleive me will be quite a meal.

'Heavy on the Pepper Sauce' I here you cry!

<{POST_SNAPBACK}>

[lowrentyieldmakessense(honest!)]

One day when the market has ploughed the trough and turned back up again I may consider a BTL or two. One of the best pieces of advice in this matter that I have read on this site is that each property should be run as a business in its own right and that its viability should stand or fall in isolation.

<{POST_SNAPBACK}>

IMHO

BTL's should look at this formula:

cost of house 100,000

deposit 15,000

interest rate say 5.5%(interest only?)

repairs, insurance running costs, void periods (1,000 estimated for this example)

rent per annum (proper research needed but lets say 5,200)

net income before tax (-1,300) - oops

lets say this could be rented out for £8,000 pa

net income would then be £1500. This would give a return of 10% on your cash deposit. Any capital appreciation would be a bonus.

[apom]

Its not good though..

A friend of mine sold a property in Bristol a while ago.. before the prices dropped..

He sold it because of problem tennants and the distance as he lives in devon..

and put all his money into three BTL's in devon..

Hes having to subsidise the mortages.. but claims that its his pesnsion andthey are not free either..

I asked his opinion on house prices potentially dropping..

No idea.. when he asked me.. I was tactful.. explained that they were my opinions..

He had always wondered why I hadn't bought it turns out..

[HPCheese]

I have a freind who bought 7 properties between 1998 - 2003.

Last year when I decided to start off - loading my B2Ls I asked him whether he was considering this. He immediatley shut down the conversation with a simple but firm repost,"No way". I didnt mention it again.

He's always been one of those really ultra - positive people.

He called me today and I noticed something Ive never heard in this guys voice before - desperation. Complete and overwhelming desperation.

I asked him how he was and he replied;

"terrible, everythings gone wrong, I now need to get rid of my properties but nothing has sold, Ive tried everthing and even £30000 (read 15 - 20%) reductions havent worked". Money is leaching away from this guy.

He's suddenly realised he's facing a wall of debt, and rents not covering his expenses, which coupled with the hassle of running a portfolio has conspired to turn him from a Man who walked on water to somone really desperate overnight.

He's borrowed to the hilt and has an expensive taste in cars etc.

THIS GUY HAS ENDED UP LIKE THIS EVEN THOUGH HE STARTED BUYING AT A RELATIVELY EARLY STAGE IN THE CYCLE, IMAGINE HOW OTHER LLs ARE FAIRING.

The UK market has had it.

<{POST_SNAPBACK}>

I've no pity for this guy. The people I feel sorry for are the 6 or 7 young couples he helped price out of the market. No-one can convince me speculative BTL at the expense of FTB'ers is a moral way of making money. Hopefully there will be more people like this squeezed out of the market, and hopefully help bring prices down as they leave. This may sound harsh, but I think it's for the best.

[edit]

Just to add, I also feel very sorry for the 7+ tenants/couples he's likely to kick-out of their homes because the Free-Money-Well's dried up. Not only will this bloke likely bankrupt himself, he's also playing selfish games with other people's lives.

Edited September 13, 2005 by HPCheese

[Smell the Fear]

A smallish commuter town in hertfordshire. Has schools always near the top of national tables, low crime, leafy etc, yet absolutely no immunity from the market, which means its happening or about to happen everywhere.

There must be tens of thousands like him.

<{POST_SNAPBACK}>

Not TTRTR though! His streets are immune!

[pauluk]

I worked for a small firm of accountants in Croydon in the mid 1980s. We had quite a few one man business clients making a nice healthy living from property. BTL at this time very small I guess because it was much harder to obtain the finance than in recent times. Anyway property seemed the route to easy money until the crash came in the early 90s. I remember one client who started with one property and built up his mini empire until he had four buy to let properties. We all admired him for building up this business from nothing even though it was built on debt. The crash came, this client lost everything and the last time I saw him he was selling gas lighters outside East Croydon station. That's a moral I have remembered ever since.

[Sledgehead]

I have a freind who bought 7 properties between 1998 - 2003.

....

...

THIS GUY HAS ENDED UP LIKE THIS EVEN THOUGH HE STARTED BUYING AT A RELATIVELY EARLY STAGE IN THE CYCLE, IMAGINE HOW OTHER LLs ARE FAIRING.

<{POST_SNAPBACK}>

I can't claim to have a grasp of all markets or even a few, but I do know one thing. Most humans are pretty much all the same when it comes to markets. So it would not surprise me at all to hear thi sguy is in trouble, even with early success.

Why? Simple. In general:

1 . Humans won't buy when fear i sstalking the markets and prices are low. If they are fortunate they buy at this time through happy chance. Either way, th epurchases they make when the market is low are minimal.

2 . When the initial investment pays off, they increase their exposure, but only modestly as the byeword at thi spoint is 'caution'

3 . When the market explodes they begin buying like crazy and keep buying even when the market has plateaued. Their portfolio is now larely full of more recent purchases, many of which will be showing losses or breaking even at best.

From this point on, the average human will freeze, consoling him/herself that they still have very healthy profits on a (small) part of their portfolio. However, if they "did the math" they would probably find a fall of a mere 10% would be enough to erase ALL the gains they EVER made.

[BandWagon]

Dogbox, I know a very wealthy South African investor.

He told me that he always sells property too early.

Something I will always remember.

Last year he offloaded all his SA property.

He also said that the UK housing market was in severe trouble.

Amazing how a man in South Africa can see what's happening in over here, but TTRTR is saying that this time it's different.

I find that very interesting.

Edited September 13, 2005 by BandWagon

[Sledgehead]

TTRTR is saying that this time it's different.

<{POST_SNAPBACK}>

This time it was different : the Aussies lost!

Ah, TimeToRaiseTheRents, our antipodean friend, or should we be calling him TimeToRueTheRuns

[RRP]

I think the quote is (some version of) economist John Maynard Keynes saying that:

"when the facts change, I change my mind".

From my memory.

Question to Keynes. Sir, what do you do when you get things wrong ?

Keynes : Admit it. Why, what do you do ?

[boom_and_bust]

IMHO

BTL's should look at this formula:

cost of house 100,000

deposit 15,000

interest rate say 5.5%(interest only?)

repairs, insurance running costs, void periods (1,000 estimated for this example)

rent per annum (proper research needed but lets say 5,200)

net income before tax (-1,300) - oops

lets say this could be rented out for £8,000  pa

net income would then be £1500. This would give a return of 10% on your cash deposit. Any capital appreciation would be a bonus.

<{POST_SNAPBACK}>

Hi,

Wow! That would be money made ok but if I can be so bold, it is a pitiful return for a risky investment. At this point of the cycle. Maybe if it is a long term investment, you could justify the risk of asset falls in the short term (that is not now a risk as we know, it is a fact), but then it is still a risky option IMHO as you are gearing yourself very higjhly if you are borrowing to that extent. Different if you had say a 75% deposit or cash in full to pay. Where is your shockabsorbers against economic events or suchlike? Your insurance? It's a bit like investing in risky shares at the moment, for the next year or two, sentiment and business pundets - not VI or EA - seem to be the majority in agreement to this. IMHO, - be prepared to invest money you can lose comfortably. But these sums don't give the big rewards of high-risk shares, if you pull it off in the share markets. It really would not be good advice to an average, amateur investment punter, IMHO.

[lowrentyieldmakessense(honest!)]

Hi,

Wow! That would be money made ok but if I can be so bold, it is a pitiful return for a risky investment. At this point of the cycle. Maybe if it is a long term investment, you could justify the risk of asset falls in the short term (that is not now a risk as we know, it is a fact),  but then it is still a risky option IMHO as you are gearing yourself very higjhly if you are borrowing to that extent. Different if you had say a 75% deposit or cash in full to pay. Where is your shockabsorbers against economic events or suchlike? Your insurance? It's a bit like investing in risky shares at the moment, for the next year or two, sentiment and business pundets - not VI or EA - seem to be the majority in agreement to this. IMHO, - be prepared to invest money you can lose comfortably. But these sums don't give the big rewards of high-risk shares, if you pull it off in the share markets. It really would not be good advice to an average, amateur investment punter, IMHO.

<{POST_SNAPBACK}>

problem is at this moment in time the returns are mostly negative (btl's are subsidising the properties). If they had done something similar to the above calculation then they would have realised the investment didn't make sense and they wouldn't have chased the market up to these levels.

If people are looking at property as a long term investment and it puts money in their pocket each month who cares if the price goes down in the short term. Problem is it doesn't stack up as an investment at all right now and hasn't done for a few years because the yield is too low. It has relied on the greater fool theory and we've nearly run out of fools unless there are a few waiting for the SIPP fool and I don't think there will be many of those.

High Risk Shares - Risk and Reward aren't as correlated as many people seem to think.

Shockabsorber - this would be the fact that you are making a return on the cash you invested - people can use this as the shock absorber. Very rare for uk property right now.

[bears all]

Hats off to Dogbox, first for having the intellectual honesty to change his mind and second for being cunning enough to maintain his uber-bullish position while all the time selling up behind our backs! Surely a name change is in order - Dogfox?

So many people are going to get so thoroughly stuffed in the next couple of years ...