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Time to raise the rents.

My Purchase - Price Agreed

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Finally I seem to have found a decent place & got some money off the asking price. I'm paying 7.1% off the asking price. It's a 5 bed house, but has enough space to make it a 6 bed house.

It also has an unconverted loft and the potential to be split into two 4 bedroom flats when including the space added once a loft conversion is done.

Rented straight away, it should make about £800 per month in rent more than it costs in interest. Once the extension & conversion to 2 flats is done, it should make between £1600 pcm and £1800 pcm depending on the cost of the work.

So with deals like this still out there, why do you lot still think an HPC is in the pipeline?

Edited by Time to raise the rents.

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So with deals like this still out there, why do you lot still think an HPC is in the pipeline?

You have answered your own question

I'm paying 7.1% off the asking price.

People don't lop 7% off the price because they like you. It is a tough market and it is getting worse.

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Hi TTRTR,

As a property investor with (I assume) sufficient achievable equity in your existing portfolio to borrow against (plus whatever cash you probably have sloshing in your account) I'm surprised you weren't able to negotiate a bigger discount (say 10%). Was this one property you had your eye on for a while or one of many irons in the fire? If the former was the case then I can understand you not wishing to push your luck, but if you had put in almost-cheeky offers on a range of properties then you could have waited for the first seller to capitulate.

Just my 2p.

Also, if you’ve managed to negotiate a 7.1% discount on your latest property, aren’t you helping prices come down?

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For anyone who hasn't been following my attempts to find a place to buy, I have spent the last 4 months trying to find a house where a good discount was available & that would obviously rent at a profit.

It hasn't been easy finding this one.

I won't say the price to prevent the actual place becoming full forum knowledge, but its in SW11 which is my area as known to many.

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HAHAHAHAHAHAHAHA

Brilliant business accumen from "Time To Pray For A Rate Cut".

Leverage works FOR you on the way up. It works AGAINST you on the way down.

So what does an astute Ozzie Rachman do when house prices are falling?

That's right. Increases his leverage.

What a tonka. Do us all a favor and buy some more, Mongo. See if you can't get your leverage to above 70%. That's the only way to make money don't you know old bean.

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Finally I seem to have found a decent place & got some money off the asking price. I'm paying 7.1% off the asking price. It's a 5 bed house, but has enough space to make it a 6 bed house.

It also has an unconverted loft and the potential to be split into two 4 bedroom flats when including the space added once a loft conversion is done.

Rented straight away, it should make about ?800 per month in rent more than it costs in interest. Once the extension & conversion to 2 flats is done, it should make between ?1600 pcm and ?1800 pcm depending on the cost of the work.

So with deals like this still out there, why do you lot still think an HPC is in the pipeline?

Good on you. Now is a buyers market. So what should you be doing ?? Exactly.

Once it is common knowledge that there is definitely no HPC nobody will negotiate on price.

I have recently bought a BTL with a 9% yield and currently have 2 offers out there and am looking to expand my BTL portfolio in 2006 further.

Thank god for nervous FTB who want to "wait and See" and keep paying our BTL mortgages off ,thats what I say !!

PG

Edited by property guru

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Strange really. I have always observed in life that when there is a good deal to be had, the world and his dog chase after it.

A house you can buy, simply rent out and make £800 pm profit?

Surprised there aren't dozens of people after it - pushing the price up. This is normally how markets operate.

I rent a house in the home counties 'worth' about 400k. I rent it for £1100 a month.

If you bought it on an 85% BTL mortgage I guess the mortgage would cost about £1700. So a £600 a month loss - not an £800 a month profit.

Wonder what's different 30 miles away in SW11.

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TTRTR has a particular business model of multiple occupancy but not bedsits. It works because rent per a room is greater than rent per house but it only really works in centralish London. As such he can make properties work that don't work elsewhere.

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Here's one I tried to buy a while back. The vendor wouldn't even have my offer of £600k

It'll turn a profit for anyone who's interested.

They had it on for £640k & have just reduced (as the penny may have dropped that they should have taken my offer) it I see. But because this on has no potential for further improvment, I will stick with the one I've found.

http://www.douglasandgordon.com/dng/buy/de...1&thetype_fld=1

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Ah, the former case I see. Makes sense now. Thanks for the reply.

However, to reiterate my final question, would you agree that by driving down the sellers asking price you are helping house prices to fall? And what if other long-standing property investors try to adopt a more aggressive strategy in order to drive hard bargains from sellers, particularly in the areas of the country where prices are currently on the slide? I'd wager there are a few aggressive investors out there trying it now - there at still loads of people out there desperate to sell if work colleagues, family, friends and umpteen posters on numerous forums are anything to go by. Perhaps not in SW11 (I'm unfamiliar with the area) but certainly in other parts of the city/country.

To ignore the possibility of a HPC would be to ignore all sorts of opportunities it presents. If you aren't too highly geared (so as to remain competitive in a bloated rental market) and fully-tenanted then a slump in prices surely presents a great opportunity to extend your existing portfolio later down the line (you're only 35 and so in a favourable position to pick up the pieces should there be a meltdown). Again maybe not in SW11, but elsewhere...?

Just a thought. I'd be interested to read your views, though.

Kind regards,

Cheston

P.S. I'd like to read your views on this too, property guru. This is a buyers market, as you point out. Sellers are now having to face up to offers lower than they would like. As one with a healthy property portfolio are you currently using this as a position of strength and muscling through aggressive deals or are you dealing on more civil terms? Or do you avoid these kind of properties in favour of new-builds?

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well i agree, there are still workable props about. getting more so each day.

theres a crash/downturn on. i just got 10k extra knocked off by a desperate EA this morning.

140k april. 130k by august. october would take 120k. now taking 110k

very tempting. even though i also feel prices will continue to fall for the next 2-3yrs i still feel its just about still workable as an alternative to renting. though certainly not in london area.

if you are in london area your choices are terrible and similar to rats in a box.

i saw a prog this morning 'escape to the country' a woman was living in olyimpia area in what i would describe as a damp bedsit. she was well spoken/educated, but here furniture was like a stundents bedroom. all in one room except for a toilet. £169k she sold it for and moved to dorset.

im not bothered about the price of the flat. stupidity is assumed. what i can get over is how a middle aged woman could live like that. ive seen better drug rehab centres flats. its orwellian.

Edited by right_freds_dead

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For anyone who hasn't been following my attempts to find a place to buy, I have spent the last 4 months trying to find a house where a good discount was available & that would obviously rent at a profit.

It hasn't been easy finding this one.

I won't say the price to prevent the actual place becoming full forum knowledge, but its in SW11 which is my area as known to many.

Isn't the notion of "discount" all a bit arbitrary? It is the difference between some random figure put on the details and what is actually paid. Isn't if fairly irrelevant? What matters is how much you pay for a particular type of property surely?

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Hi TTRTR,

Congrats on your purchase, hope it goes well.

You mention in one of your post that it took some time to find a bargain, are you sure this is not due to BTL supply and demand rather than supply and demand as a whole?

The reason I ask is that where I live (St Albans area), the fast turnover of housing sales slowed to a halt at the end of last year. Since then I have seen an increase in the number of rental properties, so much so Mr Goat and myself were able to move to a bigger house with parking (which we didn't have before) with no increase in rent (we negotiated £250 off the asking price and were supprised to get it).

I personally have never seen this before where a sales and rental market grind to a halt at the same time, have you?

Do you have concerns about the BTL market being flooded?

LG

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Isn't the notion of "discount" all a bit arbitrary? It is the difference between some random figure put on the details and what is actually paid. Isn't if fairly irrelevant? What matters is how much you pay for a particular type of property surely?

You got it in one.

But if you think the asking price is higher than the place is worth (and therefore your highest limit on what you'd pay), a discount is needed unless there is another buyer willing to pay more or the seller decides not to sell.

So a discount is relevant to me as I don't want to overpay.

Hi TTRTR,

Congrats on your purchase, hope it goes well.

You mention in one of your post that it took some time to find a bargain, are you sure this is not due to BTL supply and demand rather than supply and demand as a whole?

The reason I ask is that where I live (St Albans area), the fast turnover of housing sales slowed to a halt at the end of last year. Since then I have seen an increase in the number of rental properties, so much so Mr Goat and myself were able to move to a bigger house with parking (which we didn't have before) with no increase in rent (we negotiated £250 off the asking price and were supprised to get it).

I personally have never seen this before where a sales and rental market grind to a halt at the same time, have you?

Do you have concerns about the BTL market being flooded?

LG

Exactly why I won't buy outside London, because there is a bubble on out there, haven't you heard? :D

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Here's one I tried to buy a while back. The vendor wouldn't even have my offer of £600k

It'll turn a profit for anyone who's interested.

They had it on for £640k & have just reduced (as the penny may have dropped that they should have taken my offer) it I see. But because this on has no potential for further improvment, I will stick with the one I've found.

http://www.douglasandgordon.com/dng/buy/de...1&thetype_fld=1

How much rent would you estimate you could get for that? I'd like to go through the economics.

Edited by karhu

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Exactly why I won't buy outside London, because there is a bubble on out there, haven't you heard? :D

Yes, I might have heard something like that, can't think where though? :D

In all honesty, I'm not trying to be clever, just interested. As confrontational as some of your posts may be, I do believe you are quite successful and have the ability to talk good sense.

I'm not looking to buy for investment just a home, I did STR but not for financial reasons (so Mr Goat and myself could live together :wub: long story!). If I buy now I could end up having to move in the next few years (if I have kids), which, if I'm right about the present market could be financially disasterous. I have had a lot of advise plus done my sums (mortgage/economic wise - as much as my poor little brain will allow for), I just rarely have the chance to ask an experienced property developer or LL for their opinions (I don't consider my BTL friends a having enough knowledge).

LG

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Yes, I might have heard something like that, can't think where though? :D

In all honesty, I'm not trying to be clever, just interested. As confrontational as some of your posts may be, I do believe you are quite successful and have the ability to talk good sense.

I'm not looking to buy for investment just a home, I did STR but not for financial reasons (so Mr Goat and myself could live together :wub: long story!). If I buy now I could end up having to move in the next few years (if I have kids), which, if I'm right about the present market could be financially disasterous. I have had a lot of advise plus done my sums (mortgage/economic wise - as much as my poor little brain will allow for), I just rarely have the chance to ask an experienced property developer or LL for their opinions (I don't consider my BTL friends a having enough knowledge).

LG

Well my instant answer to you is that you should buy a place with extra rooms to get rent to help cover the cost of the larger place, when the time comes that you want to have little ones, kick the tenants out.

Yes its painful, but are you sharing already? I did in my first 2 places (that's excluding the sevral times I shared while renting) and I was married as well. It was the suprise of a baby on the way that caused us to move to our third place where we could hav tenants upstairs while we lived downstairs.

How much rent would you estimate you could get for that? I'd like to go through the economics.

£3,310 pcm and the best long term rate available for an 85% loan is 0.59% over BOE base (5.09%) for the life of the loan.

What you can get as a rate for the 15% (plus 5% more for purchasing costs) is up to your personal circumstances, but I got 0.44% over base also for the life of the loan for my deposit (4.94%).

Calculate away...... :)

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Well my instant answer to you is that you should buy a place with extra rooms to get rent to help cover the cost of the larger place, when the time comes that you want to have little ones, kick the tenants out.

Yes its painful, but are you sharing already? I did in my first 2 places (that's excluding the sevral times I shared while renting) and I was married as well. It was the suprise of a baby on the way that caused us to move to our third place where we could hav tenants upstairs while we lived downstairs.

£3,310 pcm and the best long term rate available for an 85% loan is 0.59% over BOE base (5.09%) for the life of the loan.

Is that really the wisest thing to do?

Cannot really afford a place so get in a lodger, then when you have a baby kick the lodger out?

So youve gone from not being able to really afford it to not really being able to afford it + having a baby , ive heard that babies actually cost a fair bit of money, so you will be losing income by booting the lodger out and have increasing costs with the baby.

I would imagine that you would also give up work for a period of time if not for years so thats...

minus 1 mainstream income

minus 1 lodger income

plus the costs of a newborn baby

I dont see that panning out very well IMHO

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Didn't get much of a bargain did you - seeing that the average residential property is selling at 93.something of asking price at the moment anyway. The property investors I know are getting 20 and 30% off properties at the moment............

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Here's one I tried to buy a while back. The vendor wouldn't even have my offer of £600k

It'll turn a profit for anyone who's interested.

They had it on for £640k & have just reduced (as the penny may have dropped that they should have taken my offer) it I see. But because this on has no potential for further improvment, I will stick with the one I've found.

http://www.douglasandgordon.com/dng/buy/de...1&thetype_fld=1

TTRTR - What would you have to rent each room out at to get a good yield on this property if you say bought it for £600k??

And how so you work it out...

Just interested.

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Well my instant answer to you is that you should buy a place with extra rooms to get rent to help cover the cost of the larger place, when the time comes that you want to have little ones, kick the tenants out.

Yes its painful, but are you sharing already? I did in my first 2 places (that's excluding the sevral times I shared while renting) and I was married as well. It was the suprise of a baby on the way that caused us to move to our third place where we could hav tenants upstairs while we lived downstairs.

£3,310 pcm and the best long term rate available for an 85% loan is 0.59% over BOE base (5.09%) for the life of the loan.

What you can get as a rate for the 15% (plus 5% more for purchasing costs) is up to your personal circumstances, but I got 0.44% over base also for the life of the loan for my deposit (4.94%).

Calculate away...... :)

Okay here's the calulation:

Loan of 510k at 4.94% is £2099.50 per month interest only (85% purchase price).

Loss of interest on 90k is £300 per month (15% purchase price).

Let's say it's rented 11/12 months per year, and reserve say £2,000 per year for maintanence - I'd say that's reasonable on a property of that size.

Income = £36410,

Outgoings/loss of interest: £30794 per annum.

Profit = £5616 = £468 per month.

It looks like you can make profit, but it's not as much as you claimed and if you have a 2 month void this drops to £192 per month. And you're exposed to any drop in price of the asset with an interest only mortgage. Oh and I didn't include any buying and selling costs.

Any comments?

Edited by karhu

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Okay here's the calulation:

Loan of 510k at 4.94% is £2099.50 per month interest only (85% purchase price).

Loss of interest on 90k is £300 per month (15% purchase price).

Let's say it's rented 11/12 months per year, and reserve say £2,000 per year for maintanence - I'd say that's reasonable on a property of that size.

Income = £36410,

Outgoings/loss of interest: £30794 per annum.

Profit = £5616 = £468 per month.

It looks like you can make profit, but it's not as much as you claimed and if you have a 2 month void this drops to £192 per month. And you're exposed to any drop in price of the asset with an interest only mortgage.

Any comments?

In 9 years of renting places in SW11 I have never had a vacancy, not even for a day (excluding planned vacancies for the extensions I've done). So feel free to add the month back in.

Plus maintenance can be very cheap when done yourself rather than paying people, I would say £500 is enough.

But I find it satisfying that you agreed its cashflow positive even though you wanted to exclude those amounts for maintenance and voids.

:D

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In 9 years of renting places in SW11 I have never had a vacancy, not even for a day (excluding planned vacancies for the extensions I've done). So feel free to add the month back in.

Plus maintenance can be very cheap when done yourself rather than paying people, I would say £500 is enough.

But I find it satisfying that you agreed its cashflow positive even though you wanted to exclude those amounts for maintenance and voids.

:D

TTRTT, I'm trying to be as transparent and objective as I can. Even if we factor in not a single day vacant and £500 per year maintenance on a 600k property (I doubt this is realistic, even painting a 6 bedroom house could cost that, never mind any structural work) that still works out at ONLY £873 per month in the MOST OPTIMISTIC OF CIRCUMSTANCES and with interest rates at historically low rates. Let's say base rates went up by a wopping 1% to 5.5% - that would reduce your profits to £373 per month on a similar transaction - I doubt even you would accept that :D

I do conceed though that house prices can perhaps about be supported with a base rate of 4.5% (even that's not certain), but not at 5.5%.

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TTRTR - What would you have to rent each room out at to get a good yield on this property if you say bought it for £600k??

And how so you work it out...

Just interested.

In that particular house there are 6 double bedrooms & at £551.66pcm each as an average (with better rooms paying more, the total is £3,310pcm.

You can look on www.gumtree.com for advertised examples of individual room costs. In SW11 it tends to range from about £500pcm for the smaller rooms anywhere up to £700 for the largest rooms. Naturally there tends to be a variation, so when you get further away from shops & stations it gets cheaper. But further away is also where the vacancies occur as well, hence the lower rents.

TTRTT, I'm trying to be as transparent and objective as I can. Even if we factor in not a single day vacant and £500 per year maintenance on a 600k property (I doubt this is realistic, even painting a 6 bedroom house could cost that, never mind any structural work) that still works out at ONLY £873 per month in the MOST OPTIMISTIC OF CIRCUMSTANCES and with interest rates at historically low rates. Let's say base rates went up by a wopping 1% to 5.5% - that would reduce your profits to £373 per month on a similar transaction - I doubt even you would accept that :D

I do conceed though that house prices can perhaps about be supported with a base rate of 4.5% (even that's not certain), but not at 5.5%.

I'm just telling it how it is. I rent 8 shared places out in SW11 & I have never had an unplanned vancancy. My maintenance costs are very low as I tend to turn up & take care of things myself whenever possible. High maintenance costs are usually associated with the labour content. And what structural work would come under maintenance? Sounds more like improvements to me.

Yes there is always the risk that rates will rise, but it doesn't look likely at the moment & rents rise too!

:D

Lets not forget that as this illustration (and the actual place I am buying) is fully funded by borrowed money, any positive cashflow is like pulling money out of a hat.

And my final cherry on the cake.............the HPC community can see with this particular illustration that it is indeed still possible to make money as a landlord, just stay away from newbuilds and riverside flats etc etc.

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  • 301 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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