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Pieman Pieface

"The Maths Behind My London Property Investment"

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https://www.arbing.co.uk/london-property-investment/

Came across this guys blog a while back, it was this post that probably stopped me buying a flat and calmed my nerves about feeling like the only way to live is to become a BLTer. Seeing just how little he was making as a return was quite eyeopening. 

 

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That’s right. £66 pounds a year! In other words, our tenant is living in the flat almost for free! They’re just covering the costs of running the flat, as landlords we’re making almost nothing! Imagine if interest rates go up? I’ll be paying someone to live in my flat!! Crazy.

 

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The Science Behind Putting My Hand Onto A Hot Stove

I think this is a pretty bad idea, but it's ok I've got two hands so I'm diversified. 

Ok I did it, and I've got third-degree burns, but the good news is I've raised my average body temperature by 0.1 degree. 

You live and learn!

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In other words, our tenant is living in the flat almost for free!

No. I think you'll find they are paying thousands of pounds to live in your flat. That mindset makes him an utterly egocentric ****.

 

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17 minutes ago, Parkwell said:

No. I think you'll find they are paying thousands of pounds to live in your flat. That mindset makes him an utterly egocentric ****.

 

£13,100.00 per year, according to the site. The thing is, this guy probably holds his tenant in utter contempt as a "free loader" who isn't even paying him any profit.

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Welcome to the Forum!

This was very interesting read, but the key point can be summarised in a couple of lines:

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I wanted a massive mortgage. Interest rates are so low, it would be silly to not get as much as possible.

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 perhaps most importantly, there’s that cheap, gorgeous mortgage. That mortgage acts as a multiplier for any increase in the property price.

 

So, buy property with other peoples' money, and pocket all the profit.  Innit.

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Looks like the comparison calculations are missing the return that could have been earned on the deposit, if it has been invested elsewhere.  Even a pathetic 1% on £80k would have earned £800pa . If he sells now, he'd probably get the money back; but another year and he is screwed.

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29 minutes ago, LC1 said:

Cretins like this belong in debtor's prison. Bring on the rate rise.

That is a bit harsh.  If you read between the lines he has been pressured into this by a family member.  He can see himself it is not a good investment and is constantly questioning the decision.  I should imagine he was needed to put in half the deposit so the other guy could afford to go ahead.

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1 hour ago, AndyFTB said:

That is a bit harsh.  If you read between the lines he has been pressured into this by a family member.

The heart bleeds. If you look again at what Dyson Fury posted above:

"I wanted a massive mortgage. Interest rates are so low, it would be silly to not get as much as possible."

"And perhaps most importantly, there’s that cheap, gorgeous mortgage. That mortgage acts as a multiplier for any increase in the property price."

you'll see that, despite his attempts to be impartial, the author hasn't even considered the life cycle of interest rates on his bankruptcy-inducing debt. We'll see how his P2P investments hold up as hedges.

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1 hour ago, darkmarket said:

The heart bleeds. If you look again at what Dyson Fury posted above:

"I wanted a massive mortgage. Interest rates are so low, it would be silly to not get as much as possible."

"And perhaps most importantly, there’s that cheap, gorgeous mortgage. That mortgage acts as a multiplier for any increase in the property price."

you'll see that, despite his attempts to be impartial, the author hasn't even considered the life cycle of interest rates on his bankruptcy-inducing debt. We'll see how his P2P investments hold up as hedges.

Diversified, not hedged. Your point stands......he is aware of the risk he's taken on the horrific leverage. Yet, you cannot argue with his reasoning....given recent history, it's a fair and reasonable risk vs reward.

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7 hours ago, Pieman Pieface said:

https://www.arbing.co.uk/london-property-investment/

Came across this guys blog a while back, it was this post that probably stopped me buying a flat and calmed my nerves about feeling like the only way to live is to become a BLTer. Seeing just how little he was making as a return was quite eyeopening. 

 

 

...yes ..and prices will go down......:rolleyes:

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7 hours ago, 80sBaby said:

Your point stands......he is aware of the risk he's taken on the horrific leverage. Yet, you cannot argue with his reasoning....given recent history, it's a fair and reasonable risk vs reward.

- No, my point is there's no evidence at all he's aware of the risk of interest rates rising.

- Yes, I can argue with his reasoning.

- It's a terrible reward and even other BTL do much better. Are you seriously here pitching this as good investment advice?

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14 hours ago, Pieman Pieface said:

https://www.arbing.co.uk/london-property-investment/

Came across this guys blog a while back, it was this post that probably stopped me buying a flat and calmed my nerves about feeling like the only way to live is to become a BLTer. Seeing just how little he was making as a return was quite eyeopening. 

 

 

Is that the maths ( aka oprimary school arithmetic )....with IRs at 0.25 % and the bankers handing out our children's futures via freshly printed QE cash to any subprime drongo willing to supoport their ponzi ?

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The maths is easy for me.

If im young (under 30), not dependents and a bank is stupid enough to lend me 500K then take the money and make the most leveraged bet I can take.

Heads I win

Tails the bank loses and I go bust.

This is why the banks historic lending practises saw them go bust. his is why th basel rules are strongly against leverage.

Banks shold oly be lending money to people who will pay the money back.

The only way they can do that is if they keep the leverage down and the credit checks high.

 

 

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21 minutes ago, spyguy said:

The maths is easy for me.

If im young (under 30), not dependents and a bank is stupid enough to lend me 500K then take the money and make the most leveraged bet I can take.

Heads I win

Tails the bank loses and I go bust.

This is why the banks historic lending practises saw them go bust. his is why th basel rules are strongly against leverage.

Banks shold oly be lending money to people who will pay the money back.

The only way they can do that is if they keep the leverage down and the credit checks high.

 

 

I find it very depressing that people need to post stuff like

"Banks should only be lending money to people who will pay the money back."  20 years ok that would have been a given, now it is not.

This is not an attack on spyguy, rather pointing out how depressing it is.

 

Edited by iamnumerate

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7 minutes ago, iamnumerate said:

I find it very depressing that people need to post stuff like

"Banks should only be lending money to people who will pay the money back."  20 years ok that would have been a given, now it is not.

This is not an attack on spyguy, rather pointing out how depressing it is.

 

Debase your currency, game your risks controls.

Just shows how far retail banks have fcked up. Not sure if its depressing. Its worrying.

How do you get the banks back in the bottle though?

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12 hours ago, AndyFTB said:

That is a bit harsh.  If you read between the lines he has been pressured into this by a family member.  He can see himself it is not a good investment and is constantly questioning the decision.  I should imagine he was needed to put in half the deposit so the other guy could afford to go ahead.

Pressured? Was someone pointing a gun at his head? "Other people kept telling me to" is no excuse for anyone over five years old.

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17 minutes ago, spyguy said:

Debase your currency, game your risks controls.

Just shows how far retail banks have fcked up. Not sure if its depressing. Its worrying.

How do you get the banks back in the bottle though?

Public hangings

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53 minutes ago, iamnumerate said:

I find it very depressing that people need to post stuff like

"Banks should only be lending money to people who will pay the money back."  20 years ok that would have been a given, now it is not.

This is not an attack on spyguy, rather pointing out how depressing it is.

 

The banks ran out of borrowers who had a healthy chance of paying the money back long ago. If they want to survive they have to keep lending, meaning they have to lend ever more money to ever less creditworthy borrowers. It's inevitable in a system where everybody expects a return on their investments and governments act to make sure nobody loses.

In the end, we all do. Now that's depressing...

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16 hours ago, AndyFTB said:

That is a bit harsh.  If you read between the lines he has been pressured into this by a family member.  He can see himself it is not a good investment and is constantly questioning the decision.  I should imagine he was needed to put in half the deposit so the other guy could afford to go ahead.

Where is there any suggestion of that in his blog?

He is also projecting big capital gains and rent zooming up, in his 'constantly questioning' after he's bought his investment property.  

Implies tenant living for free at the moment.   

You might want to make the BTLers the innocents (in need of future compensation for their own free-will choices if there's ever any HPC) - I won't.  

If he has a bit of buyers-regret now, then he's made his own decisions as a market participant.

He 'won' in an open market. \o/  His bid beat other bids, which may have included other BTLers/property-investors, and would-be OOs (as they've outbid me for years as well).

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We started looking again and on June 16th placed an offer on another place along with ten other keen buyers. We raised our bid, winning a beautiful two bedroom flat for £290,500. We completed on the 10th October and our first tenant moved in on the 31st.

 

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3 hours ago, iamnumerate said:

I find it very depressing that people need to post stuff like

"Banks should only be lending money to people who will pay the money back."  20 years ok that would have been a given, now it is not.

This is not an attack on spyguy, rather pointing out how depressing it is.

How are the banks supposed to know that?  They never have in the past.

Perhaps more chance with lower-value homes, but it's choice of other people when they choose to apply for big mortgages.  How is the bank supposed to know what an individual is going to do in life.  Promotions or slowdowns in sectors.  Or recessions ahead.

It's up to the applicant.   I know I want a healthy deposit and a couple-of-years of mortgage payments set aside if my circumstances change, to see me through any difficult times (if I ever become a homeowner).   Others chose to run it to the edge and want moar and moar.  Fine if they qualify for the mortgage, but on them if it turns down for them.

And others here choose to buy investment property so 'tenants can live for free'.  Market.

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