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Adam

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My brother recently bought a tiny 1 bed flat in kent for £89,000 completed just before xmas. Sigh.

I argued with him to the point of tears, and put together all the information i could find for him to read in October/November after pulling out of my own house purchase at the last minute in early October.

Still he was convinced that his flat is "different". It is near a new International railway station and he is convinced that despite the outlook his flat will be different. The estate agent that sold him the house said it would generate £450 per month in rent, which is £20 less per month than his interest only mortgage. He intends to rent the place out in 2 years (when the station opens - quick journey to london) and is convinced that the rent will rise to about £600 per month. When I asked him where he got this figure from, he had to admit that it was just his opinion (or hope i guess). When I asked him how he expects to profit from this venture, he said the flat will rise in price and he'll make a capital gain and he'll switch to repayment once all that extra rent starts rolling in.

He didn't own his own property (FTB) before, does not want to live in the flat, but is sure that BTL is the way to go BEFORE owning the property he actually wants to live in. He's seen all the programs about it on tv.

Having given him all the information I could, argued, cried and shouted, he has said "Thanks for the information, I appreciate your concern, but I know that my situation is different."

His partner has just lost her job in post production at the BBC as she was on a rolling 11 month contract that has been renewed for the past 5 years. I believe they make you redundant every 11 months, then renew your contract in a different part of the BBC to avoid the costs of permanent employment. This time they haven't renewed the contract. My brother's comms company is being bought by NTL who have promised major redundancies. He knew this in November, but insists his job is safe, again with no evidence.

My parents agree with me, but now tell me "You've done all you can, you're not responsible for him". They don't necessarily agree with my predictions on house prices, but they do agree that to enter into a mortgage whilst both incomes were under threat was "something we would never imagine doing". Then again, the only debt my dad has ever taken on has been a mortgage, which nearly made us homeless in the 15% interest days. My brother's answer? "If I get made unemployed, a mortgage lender will be far more lenient than a landlord"....

It has made me desperately sad and worried about him. I want a crash, except I know it will ruin my 28yo brother's life.

This situation is tearing apart Britain.

My brother is a good person, intelligent, friendly and worried that he will never be able to get on that ladder.

Unfortunately I now have to add blind and stupid to the list, if only where property and finance is concerned.

I just hope the bankruptcy proceedings will be kind to him.

And now I'm back to hoping for a crash. After all, what's good for him is bad for me, but he doesn't seem worried about that aspect in return for my concern for him. IF this is not an unusual example of property investors in Britain, then HPI may be more (insert your own expletive here) than I ever imagined.

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My brother recently bought a tiny 1 bed flat in kent for £89,000 completed just before xmas. Sigh.

At least you went down fighting. :(:(:(:(

By the way whats that pdf in your sig?

Edited by shakerbaby

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I would say most of us have family in this predicament. The social fallout will be just as casatrophic as the economic fallout. Its a cost that can't be measured and all I can say is be there for him when it happens. It's no good saying "I told you so" as that won't help much.

The people that will be in the biggest trouble are those with a high LTV.

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By the way whats that pdf in your sig?

That's all the information I wrote and stole from websites (mainly found through here) that I put together for him in October, after I decided to pull out of my house sale. After putting all that effort in, I decided to post it on a website in case someone else managed to stumble upon it. If it saves just one person, it will be worth the weekend's work it took.

I've supplied him with more as I found it, particularly on how EA's have been inflating rental prospect for buyers, and deflating expectations for renters.

All wasted effort in the end.

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That's all the information I wrote and stole from websites (mainly found through here) that I put together for him in October, after I decided to pull out of my house sale. After putting all that effort in, I decided to post it on a website in case someone else managed to stumble upon it. If it saves just one person, it will be worth the weekend's work it took.

I've supplied him with more as I found it, particularly on how EA's have been inflating rental prospect for buyers, and deflating expectations for renters.

All wasted effort in the end.

Why not get it proof read and post here and firsttimebuyer? Wont be a waste then?

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Why not get it proof read and post here and firsttimebuyer? Wont be a waste then?

Well it's all out there anyway. I just "collected" (ahem stole) it from firsttimebuyer, firstrung, theeconomist, and all the other excellent websites i found through this one. I was just trying to save my lazy brother from having to find it himself. I first supplied him with a list of links, and he refused to even look. So I collected it for him.

It's not well written or original and it doesn't really add anything new to the debate. If anyone wants to resteal it, feel free. My own situation and original post on this site was published on firstrung.com anyway.

I only wish I could have found this site BEFORE deciding not to buy. Ironically (if it is ironic - I'm never sure)I found this site two or three days later when people were questioning my decision (and sanity) and I decided to find something to back it up.

I just thank god that this site exists. I've never posted on forums before, and have learnt SO much from my time here. Having access to the thoughts of some of the posters here FOR FREE is criminal.

I only hope Dr.Bubb starts a portfolio management service....!

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Hi Adam,

Sorry to hear about your bro, I'm sure you will empathize if things don't quite turn out as expected (certainly don't do a "I told you so", I'm not implying you would).

I like your PDF, but you're somewhat generous, you certainly have more qualifications than the average Estate Agent, as you know they don't need any certification or qualifications to operate so is it fair to say they're "qualified" when it comes to the market? Aside from telling you what they want to believe they are probably more detached from the fundermentals of the market than people here.

They may fall back on their own double-think to disconnect factors like silly prices and the parlous state of the market, how many are honest with themselves and link high prices to transaction levels being the lowest in 30 years? More than likely they will say "people aren't coming in because it's cold [or insert inane event]"

The property market is unregulated so you don't have the same accountability as the financial markets, I'm sure it wont be long until we start seeing the sort of mis-selling claims by investors that got their fingers burnt, just like split caps or endowments. When the $hit hits the fan somebody has to pay, people will be gunning for dodgy EA's that have been giving out financial advice on the back of projected or falsified rental data, especially when they're not qualified to give out any sort of investment advice.

"Every time they [banks] lend money, they use their customer’s savings accounts to lend money to those who need to borrow. They pay the savings accounts slightly less interest than they charge the borrower, and they keep the difference."

It's worse than that, they can lend out money that doesn't exist because of Fractional Reserve Banking, so if there is a deposit of £10,000 in an account they can lend out £100,000 (or more) on the back of that, so they collect interest on £100k and also pay a lower rate to the saver. They also parcel the mortgages up and sell them on the bond market to pension funds and alike so they're not left with any direct liabilities, these bonds are meant to be rated by risk grades but often the yield doesn't reflect the risk.

Edited by BuyingBear

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That's all the information I wrote and stole from websites (mainly found through here) that I put together for him in October, after I decided to pull out of my house sale. After putting all that effort in, I decided to post it on a website in case someone else managed to stumble upon it. If it saves just one person, it will be worth the weekend's work it took.

I've supplied him with more as I found it, particularly on how EA's have been inflating rental prospect for buyers, and deflating expectations for renters.

All wasted effort in the end.

That was a very informative read. Thanks.

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Well it's all out there anyway. I just "collected" (ahem stole) it from firsttimebuyer, firstrung, theeconomist, and all the other excellent websites i found through this one. I was just trying to save my lazy brother from having to find it himself. I first supplied him with a list of links, and he refused to even look. So I collected it for him.

It's not well written or original and it doesn't really add anything new to the debate. If anyone wants to resteal it, feel free. My own situation and original post on this site was published on firstrung.com anyway.

I only wish I could have found this site BEFORE deciding not to buy. Ironically (if it is ironic - I'm never sure)I found this site two or three days later when people were questioning my decision (and sanity) and I decided to find something to back it up.

I just thank god that this site exists. I've never posted on forums before, and have learnt SO much from my time here. Having access to the thoughts of some of the posters here FOR FREE is criminal.

I only hope Dr.Bubb starts a portfolio management service....!

Well I would say you more than tried your best - remember you were battling David v Goliath stylee against the VIs monolithic spin machine, so now all you can do is just get on with your own life. Unfortunately your brother may only learn the hard way.

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It's worse than that, they can lend out money that doesn't exist because of Fractional Reserve Banking

Thanks bear. I'm never an "I told you so". The xmas dinner table conversation was pretty stilted as I didn't feel I could even ask my brother and partner about their new house for fear of rolling eyes and "here we go".

I refuse to be drawn into any conversation about HPI with anyone usually, unless they are open and intelligent. But as one of my friends (a doctor in biology working on sacadian rythms and conciousness) nearly bit my head off when I asked his opinion on HPI, I don't consider very many homeowners open and intelligent at all these days.

I learnt about fractional reserve banking from reading "The Grip of Death" (an excellent book) after I put together the PDF. I believe it and am truly shocked by it, but don't add that to the PDF as I don't think those sorts of "crazy" facts really help FTB's.

I lent it to my doctor friend mentioned above, and he loved it. Funny how he closes his mind on property though. He bought a house Jun 2004 and really stretched himself. Braniacs wages are very low in university emloyment.

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Try this re-framing....

Think of the assets and investments of all your family (parents, children and siblings) as one big portfolio.

Seems balanced whilst you keep out of property and your brother gets in.

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That's all the information I wrote and stole from websites (mainly found through here) that I put together for him in October, after I decided to pull out of my house sale. After putting all that effort in, I decided to post it on a website in case someone else managed to stumble upon it. If it saves just one person, it will be worth the weekend's work it took.

I've supplied him with more as I found it, particularly on how EA's have been inflating rental prospect for buyers, and deflating expectations for renters.

All wasted effort in the end.

Not wasted for me. Very interesting, thanks. I need regular reconfirmation that buying now is not the thing to do: I sold my flat in N15 about 10 years ago as I starting working abroad, and having returned to the UK find myself in a quandry of what to do. Having lost about USD 60k in the US stock market crash I don't want to make the same mistake. But neither do I want to be totally priced out if we're wrong. I've managed to salvage about GBP 80k from my investments so I probably could buy a small place with a minimal mortgage instead of paying rent. Only this just feels like the dot.com boom all over again...

Ian

...

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Helllo Ian,

Your situation is almost the same as mine. I was away and came back to a different world.

You are not alone mate.

Good luck in 2006

Adam, the PDF looks great, but is in Chinese when I download it. Is anyone else experiencing this?

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Miss-selling and estate agents...??

I concur..

I posted a while ago about an amusing conversation I had on a wind up mission to the sales office of a new build estate..

They had dropped the price £20,000 on the year before and offered cash back's and incentives worth up to £10,000..

I then spent five minutes which dropped another £10,000 of it..

I was asked if I was interested..

I said no as I was concerned about negative equity..

I got a smirk and a "Prices will not fall, they will rise with Sipps on the way.." (pre announcement)

I replied that they had dropped £10,000 in the last ten minutes..

Funny? I thought so, they didn't.. That made me find it funnier.. ha ha..

But they had told me that prices could not drop.. That is naughty..

at peak these were £170,000

and this is exeter.. no rail link to high paid jobs in London..

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Adam

I have three older borthers. They have many qualities and I love them very much but sometimes I do believe they were put on this earth to make me understand how 'stupid' some apparently intelligent and sane people can be.

That is one of the role of brothers.

If he is determined to go ahead just remember the following-

1) He is a grown man and he will make is own decisions and will have to take the consequences - we all have to.

2) Whatever he does and what ever happens he will survive even if he is a little poorer in the long run because he clearly has a very loving and supportive family.

3) Some people can only learn from experience. He will have a very real life lesson.

4) Thank god it is £80K and not £250K

DO NOT let this tear your family apart - it is only a flat - in the grand scheme of things he is still your brother. You are both still young and you will expereince many more adventures and ups and downs in your lives. You will both go through far worse than this.

You need to be there for him.

Tell him firmly what you feel - then tell him it is his decision and then leave it at that.

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Miss-selling and estate agents...??

I concur..

I posted a while ago about an amusing conversation I had on a wind up mission to the sales office of a new build estate..

They had dropped the price £20,000 on the year before and offered cash back's and incentives worth up to £10,000..

I then spent five minutes which dropped another £10,000 of it..

I was asked if I was interested..

I said no as I was concerned about negative equity..

I got a smirk and a "Prices will not fall, they will rise with Sipps on the way.." (pre announcement)

I replied that they had dropped £10,000 in the last ten minutes..

Funny? I thought so, they didn't.. That made me find it funnier.. ha ha..

But they had told me that prices could not drop.. That is naughty..

at peak these were £170,000

and this is exeter.. no rail link to high paid jobs in London..

I think you may be looking at it the wrong way. Do you realise you just missed a chance to buy at £10000 "BMV" :)

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I think you may be looking at it the wrong way. Do you realise you just missed a chance to buy at £10000 "BMV" :)

If it was the market value then they wouldn't have discounted it..

and that was pre sipps.

also it is £130,000 and I am earning only just £22,500 no mean achievement in devon.. the average here is below £15,000..

and now they may struggle selling to BTL's.

BTL investor

"I can't borrow from the big lenders as they say the property is over-valued and there is an oversupply of rentals and that I can't cover my costs even if I did fill it.. but thats okay.. its still a great idea.. I will find someone else to lend me.."

Quality.

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Guest Fiddlesticks

Hi Adam, what a sad story. I'm sorry to hear that it's causing so much tension in your family. But as other posters have said you seem to have a close and loving family and that's worth a lot more than £80k.

The pdf on your website is good stuff. Is the website right when it says you pulled out 2 days before completion? Had you exchanged contracts? That must have taken some guts, I know how hard the machine is to stop once it starts rolling, and I take my hat off to you.

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This is one of the worst aspects of HPI, the way it's ripping the fabric of society apart. I see this at a micro-level in my own family; I've had to stop discussing a lot of these issues with my mother, and by wishing for a crash it could end up with my sister losing her house if she doesn't find a new job (laid off last month, has huge mortgage in London). A total failure of political leadership.

I'm beginning to wonder if Blair's legacy will be not just the Iraq fiasco, but also for grossly exacerbating social tensions. That comment about being relaxed about some people making vast/obscene amounts of money may come back to haunt him. The legacy for the next guy, whoever they are, is appalling.

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Is the website right when it says you pulled out 2 days before completion? Had you exchanged contracts? That must have taken some guts, I know how hard the machine is to stop once it starts rolling, and I take my hat off to you.

I actually went into the solicitor's office to sign on a Tuesday. Exchange was to be friday. I got the fear and said I needed a day to think about it. The next day I phoned to tell the solicitor i would not be signing.

I lost over a stone (yippee) in 3 weeks through worrying up to that point. I could not sleep at night with stress. I knew I was doing something wrong, so I pulled out. The machine is easy to stop. You just say "Stop". Making that decision was extremely hard. Lost solicitor fees (which they kindly reduced to £250) and survey fee £600. Bargain if you ask me.

Next January I plan to release the "Enormous Interest Only Mortgage Diet". Watch your weight plummet as I raise interest rates! The "Lose Weight and feel great through running from your creditors workout" will come free. Look for it on price-drop tv.

I'm just lucky. My offer on that place was accepted in May 2005. I would have bought it there and then. The vendor's "just couldn't find anywhere" till September. I now suspect they were trying to take advantage of a falling market, at my expense. I pulled out late October.

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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% +
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      • Even
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      • up 5%



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