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spyguy

Psst, An Ea Has Told Me The Secret To Eternal Wealth

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A local EA (boomer woman if it matters) has recently took to posting property ads on my local town's FB page.

Currently they are along the lines of 'reduced by xxk for a quick sale'

Now, I've had a run in with this woman before. In a thread that veered into a 'xx is cannot sell their house' I said well, stuff just is not selling. She than rose up and said

'I've sold loads of property this month. I worked with 3 other people and they've sold loads too. We've had some property complete...'

I pointed out that she ought to know the difference between 'Sold' and 'Stuck in a chain' I then pointed out the LR only shows ~8 sales for the previous month, in a area covering 1 medium size town, a couple of very a large villages and 20 odd villages and hamlets - basically and area of about 40 by 20 miles.

She then responded with 'I'm not arguing with you. Goodbye'

I then pointed out she was arguing with me and that I'd just posted an observation.

But, like they say, no-one likes a smart **** so she stopped responding.

Any how, here's her current posting on the EA's FB page, which I only wondered to as she's posting adverts:

'Are you cheesed off with the paltry return of your cash investment paid out by your bank? Have you considered becoming a Landlord and buying a Buy-to-Let Investment? As a landlord, or more specifically, perhaps a new/upcoming landlord, have you ever been torn between multiple properties?

A landlord’s main concern should be buying the property which will offers the best ROI (Return On Investment).

Example scenario

John wants to be a landlord, so he’s on the hunt to buy a property. John has seen 2 properties he likes. Property 1 costs £150,000 with a potential rental return of £600pcm. Property 2 costs £180,000 with a potential rental return of £775pcm. Which is the better buy?

The formula to work this out is quite simple. It basically boils down to “rental yield”

What is rental yield?

Rental yield is the amount of money a landlord receives in rent over one year, shown as a percentage of the amount of money invested in the property. There are different ways of calculating rental yield, but for the sake ease, I’m going to use one of the most common formulas in my examples.

The higher the yield, the better.

Calculating rental yield

The formula:
mrr = monthly rental return
i = investment

Yield = mrr*12/i*100

Rental yield for Property 1

Monthly rental return = £600
Investment = £150,000

£600 * 12 = £7,200
£7,200 / £150,000 = 0.048
0.048 * 100 = 4.8 % yield

Rental yield for Property 2

Monthly rental return = £775
Investment = £180,000

£775 * 12 = £9,300
£9,300 / £180,000 = 0.0516
0.0516 * 100 = 5.16 % yield

Conclusion

Although property 1 costs less to buy, property 2 offers the better ROI.

I did not bother posting a reply. I just cannot be ar5ed.

Lets start.

You cannot return on cash - the ultimate liquid investment - to property, which at the moment is probably the ultimate illiquid investment.

Lets use the 'best investment' te 180k

Moving on. Both cases show a 0% LTV i.e. not mortgage finance.

What has she missed?

Voids. I would hope for 2 months void but expect 3 months but lets just put 1 month in.

The rents she quotes are well north of the local LHA.

-775/year

Building/LL insurance:

-300/year

Maintenance:

-1000/year (bare minimum)

I would assume someone able to drop 180K on property invesment is very well off and a 40% tax payer.

Lets assume they pay 30% tax.

-3000/income tax.

That 5.16% gross yield is now 5,300/year, giving a yield a sub 3% net yield.

If the 'investor' had any 50% LTV mortgage then we are talking negative cash flows.

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i have seen lots of property on the local buy and sell adds on facebook. More in the last 3 months than for the last two years.

All basically 2007 prices plus about 30% (outside of london where prices have been flat since about 2004)

they are stuffed. they bought at peak must have made no attempt in 7/8 years to actually pay anything back. And now expect to get bailed out. But i guess the punishment for a lot of these people are to be forever stuck in their first homes, no room for all the children they wanted.

I do put up a good fight to these loosers, pointing out next door sold a year ago for 35% less than they are asking, and noting they bought it for less than their asking. Sometimes i feel like a lone voice pointing out the overpriced houses (and backing up with some quick searches to see actual selling prices)
But if i make only a few other people realise the market is fecked i think its worth the abuse.

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A local EA (boomer woman if it matters) has recently took to posting property ads on my local town's FB page.

Currently they are along the lines of 'reduced by xxk for a quick sale'

Now, I've had a run in with this woman before. In a thread that veered into a 'xx is cannot sell their house' I said well, stuff just is not selling. She than rose up and said

'I've sold loads of property this month. I worked with 3 other people and they've sold loads too. We've had some property complete...'

I pointed out that she ought to know the difference between 'Sold' and 'Stuck in a chain' I then pointed out the LR only shows ~8 sales for the previous month, in a area covering 1 medium size town, a couple of very a large villages and 20 odd villages and hamlets - basically and area of about 40 by 20 miles.

She then responded with 'I'm not arguing with you. Goodbye'

I then pointed out she was arguing with me and that I'd just posted an observation.

But, like they say, no-one likes a smart **** so she stopped responding.

Any how, here's her current posting on the EA's FB page, which I only wondered to as she's posting adverts:

'Are you cheesed off with the paltry return of your cash investment paid out by your bank? Have you considered becoming a Landlord and buying a Buy-to-Let Investment? As a landlord, or more specifically, perhaps a new/upcoming landlord, have you ever been torn between multiple properties?

A landlord’s main concern should be buying the property which will offers the best ROI (Return On Investment).

Example scenario

John wants to be a landlord, so he’s on the hunt to buy a property. John has seen 2 properties he likes. Property 1 costs £150,000 with a potential rental return of £600pcm. Property 2 costs £180,000 with a potential rental return of £775pcm. Which is the better buy?

The formula to work this out is quite simple. It basically boils down to “rental yield”

What is rental yield?

Rental yield is the amount of money a landlord receives in rent over one year, shown as a percentage of the amount of money invested in the property. There are different ways of calculating rental yield, but for the sake ease, I’m going to use one of the most common formulas in my examples.

The higher the yield, the better.

Calculating rental yield

The formula:

mrr = monthly rental return

i = investment

Yield = mrr*12/i*100

Rental yield for Property 1

Monthly rental return = £600

Investment = £150,000

£600 * 12 = £7,200

£7,200 / £150,000 = 0.048

0.048 * 100 = 4.8 % yield

Rental yield for Property 2

Monthly rental return = £775

Investment = £180,000

£775 * 12 = £9,300

£9,300 / £180,000 = 0.0516

0.0516 * 100 = 5.16 % yield

Conclusion

Although property 1 costs less to buy, property 2 offers the better ROI.

I did not bother posting a reply. I just cannot be ar5ed.

Lets start.

You cannot return on cash - the ultimate liquid investment - to property, which at the moment is probably the ultimate illiquid investment.

Lets use the 'best investment' te 180k

Moving on. Both cases show a 0% LTV i.e. not mortgage finance.

What has she missed?

Voids. I would hope for 2 months void but expect 3 months but lets just put 1 month in.

The rents she quotes are well north of the local LHA.

-775/year

Building/LL insurance:

-300/year

Maintenance:

-1000/year (bare minimum)

I would assume someone able to drop 180K on property invesment is very well off and a 40% tax payer.

Lets assume they pay 30% tax.

-3000/income tax.

That 5.16% gross yield is now 5,300/year, giving a yield a sub 3% net yield.

If the 'investor' had any 50% LTV mortgage then we are talking negative cash flows.

And when prices collapse ?

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She has tried to make herself look clever, by making a simple calculation look like the theory of relativity.

If a potential buyer cannot work this out for himself, and is still able to get finance there is something wrong.

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She has tried to make herself look clever, by making a simple calculation look like the theory of relativity.

If a potential buyer cannot work this out for himself, and is still able to get finance there is something wrong.

I see you're new to the UK BTL market ...

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She has tried to make herself look clever, by making a simple calculation look like the theory of relativity.

If a potential buyer cannot work this out for himself, and is still able to get finance there is something wrong.

In the BTL mortgage market just now, I would say that the first person to be able to pay a 25% deposit on either house is the one to get the mortgage - whatever the calculations show.

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Not to mention all the hard the work and anxiety about tenants trashing the joint. The sums never add up, unless like in the south at the moment, you have capital gains to off set the losses of running this type for venture.

Unsurprisingly property rentals have been the worst long term investment of any type, occasionally masked by periods of capital gains and the fact short term you don't need to put aside a fund for dilapidations.

Houses sadly are depreciating liabilities, a money pit that needs feeding forever. Great if you can get a landlord to pay this stuff for you.

Edited by crashmonitor

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T give you an instead of the capital at risk.

The 180k would normally sell for 4-5 average wages - 110K top.

There's a 70k risk if prices return to average.

If they undershoot then that becomes 90k+.

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When the new tax rules come in on mortgage relief, leveraged BTL landlords will get burned big time,i would not buy a BTL unless it was for cash,way too risky,her figures are childish,she has missed the biggest problems, voids,non payments,maintenance,that edjaat should go on dragons den.

I had a mate who would make up figures for his stoopid part time job/for fun job,he would buy stock,on a credit card hide it in the loft for a year,then sell it a year later for what he paid for it,then say "I made a £100.00 on that,I forgot I had it. no joke!(although if you overheard him down the pub he was like a del trotter type you would have thought he had a huge company)

Although this is the same moron who in the late 80's would buy a car for £200.00 to break for spares, sell the bits over 2 years for £10.00 to £20.00 a pop then come down the pub and say his beer was free that night as he had just sold an alternator for £20.00, he never ever got back his original £200.00

he is the age group (mid 40's) that he should be mortgage free/sitting on a lot of cash

Most people should read "Rich dad poor Dad" it might if you can read and are not ESN change your whole view on money and how to make it.

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When the new tax rules come in on mortgage relief, leveraged BTL landlords will get burned big time,i would not buy a BTL unless it was for cash,way too risky,her figures are childish,she has missed the biggest problems, voids,non payments,maintenance,that edjaat should go on dragons den.

I had a mate who would make up figures for his stoopid part time job/for fun job,he would buy stock,on a credit card hide it in the loft for a year,then sell it a year later for what he paid for it,then say "I made a £100.00 on that,I forgot I had it. no joke!(although if you overheard him down the pub he was like a del trotter type you would have thought he had a huge company)

Although this is the same moron who in the late 80's would buy a car for £200.00 to break for spares, sell the bits over 2 years for £10.00 to £20.00 a pop then come down the pub and say his beer was free that night as he had just sold an alternator for £20.00, he never ever got back his original £200.00

he is the age group (mid 40's) that he should be mortgage free/sitting on a lot of cash

Most people should read "Rich dad poor Dad" it might if you can read and are not ESN change your whole view on money and how to make it.

the original book is good

but don't get sucked into the courses / videos / seminars etc.

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Have you pointed out the changes in BTL taxes coming on?

Not only that....if only providing unfit for human habitation overcrowded accommodation will make the sums fit......what with tax free rent in a nice large spare bedroom becomes more widely available, comfortable and reasonably priced...no brainer.......did they mention also landlords to be responsible for checking ID etc.....fun and games ahead.

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buying property has made little sense since 2004. when the London collapse happens this will become all to evident.

if you get rich taking on debt ground of pushing debt, why are the bankers lending to us and not buying everything up themselves.

it's the old adage, if a deals too good to be true...

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buying property has made little sense since 2004. when the London collapse happens this will become all to evident.

if you get rich taking on debt ground of pushing debt, why are the bankers lending to us and not buying everything up themselves.

it's the old adage, if a deals too good to be true...

We could argue about 2004 or 2005 but you are about right

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The wealthy and wise that I know have said to me once their kids have their UK education a fairly substantial investment by their parents they will advise them to make a better life for themselves outside the UK......reasons? I can think of a few.

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fill yer boots with this opportunity emailed to me today:

Central Westcliff on Sea Location - Minutes from town centre and sea front

12 Flats in one block - *Generating 6% Yield* * £8155 rental income pcm* * All rented assured shorthold tenancies*

*£1,631,000.00*

OR

23 Flats in total *Generating 6% Yield* * £14,095 rental income pcm*

*All rented assured shorthold tenancies*


*£2,811,000.00*

OR

29 properties in total *Generating 6% Yield*

*£18000 rental income pcm*

*£3,592,000.00*

Investment Information:

The 12 flats consist of an entire block and can be sold lease hold or freehold.

There are nine more flats in an adjacent block making the total of flats available 23.

There is further commercial units available making the entire portfolio available 29 properties.

The vendor is looking to sell the entire portfolio however the deal can be sold in a variety of ways

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Ok this looks like the perfect thread to ask:

People close to me are on the verge of 'making' circa £40k equity on a flat bought 18 months ago. They're looking at keeping it, BTLing it, withdrawing the equity to use on a purchase of their own and continuing as LLs fresh to the game with one property to rent and one to live in.

It concerns me, probably because I've had a couple of years viewing this site. But I'm having trouble getting past the dread feeling and knowledge that I wouldn't touch that option with a barge pole. But that may be just me. Of course, I would like to go into a conversation with more than 'Holy sh!t don't do it'. Not a very viable argument especially if, like that last decade, we're all wrong about an impending price slump.

I've read all the BTL threads but am after the assembled learned folk here to give me a simple run-down of what they should be considering as the essential calculations and considerations before making such a decision, aside from the 'what if prices fall?' question, which is obviously there at any time of such a decision.

Please try to keep the red mist to a minimum as these people are very close to me. I am so far being successful in avoiding palpitations.

Thanks in advance all.

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.....the equity they got they got for free...meaning they didn't work for it, what have they got to lose apart from all they gained from nothing. ;)

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Ok this looks like the perfect thread to ask:

People close to me are on the verge of 'making' circa £40k equity on a flat bought 18 months ago. They're looking at keeping it, BTLing it, withdrawing the equity to use on a purchase of their own and continuing as LLs fresh to the game with one property to rent and one to live in.

It concerns me, probably because I've had a couple of years viewing this site. But I'm having trouble getting past the dread feeling and knowledge that I wouldn't touch that option with a barge pole. But that may be just me. Of course, I would like to go into a conversation with more than 'Holy sh!t don't do it'. Not a very viable argument especially if, like that last decade, we're all wrong about an impending price slump.

I've read all the BTL threads but am after the assembled learned folk here to give me a simple run-down of what they should be considering as the essential calculations and considerations before making such a decision, aside from the 'what if prices fall?' question, which is obviously there at any time of such a decision.

Please try to keep the red mist to a minimum as these people are very close to me. I am so far being successful in avoiding palpitations.

Thanks in advance all.

My advice, FWIW, is this

Leave them to it. Let them do their own research and keep your opinion to yourself. If they can't (or can't be bothered to) make a fully informed decision of their own accord, they are best left to get on with it.

Don't lend them any money

If they make a few bob on the next stage of their adventure too, don't ask to borrow any money from them

Edited by pipllman

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Ok this looks like the perfect thread to ask:

People close to me are on the verge of 'making' circa £40k equity on a flat bought 18 months ago. They're looking at keeping it, BTLing it, withdrawing the equity to use on a purchase of their own and continuing as LLs fresh to the game with one property to rent and one to live in.

It concerns me, probably because I've had a couple of years viewing this site. But I'm having trouble getting past the dread feeling and knowledge that I wouldn't touch that option with a barge pole. But that may be just me. Of course, I would like to go into a conversation with more than 'Holy sh!t don't do it'. Not a very viable argument especially if, like that last decade, we're all wrong about an impending price slump.

I've read all the BTL threads but am after the assembled learned folk here to give me a simple run-down of what they should be considering as the essential calculations and considerations before making such a decision, aside from the 'what if prices fall?' question, which is obviously there at any time of such a decision.

Please try to keep the red mist to a minimum as these people are very close to me. I am so far being successful in avoiding palpitations.

Thanks in advance all.

I would guess we are talking London/SE? Anywhere else and you would not cover the transaction costs for 5+ years.

Are you sure the place will sell for 40k more?

You know, EAs do lie to get business.

How bouyant is the rental market?

What is the LHA rate?

Personally, I would not bother getting involved. Consenting adults and all that.

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