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isv

Dumber Plumber

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I had to call the landlord over the weekend - had watering gushing out of the ceiling (thank God I'm renting - no maintenance to worry about!). Anyway, they sent around a plumber to fix it and we got talking and he asked me why I was renting...

Turns out he (late 20s) has just bought his first house and tells me his tenants are moving in this week. When I asked him why he didn't live in it himself he replied "I'm staying with my Mum & Dad - would be stupid not to".

He plans to use the rent to "pay most of the mortgage"... when I dug I bit deeper he explained that his mortgage would be about £200 a month MORE than his rental income. When I asked if he was happy to be losing money each month his repsonse was: "its not a problem as £200 each month is nothing compared to the profits I'll make when I sell the house in 5 years time" !

I kept quiet... very quiet. It would have been very tempting to blow him out of the water but I figured he was pretty niave and perhaps beyond salvation. I'm still trying to get my head around what he said and WHAT ON EARTH makes someone think like that.

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I had to call the landlord over the weekend - had watering gushing out of the ceiling (thank God I'm renting - no maintenance to worry about!). Anyway, they sent around a plumber to fix it and we got talking and he asked me why I was renting...

Turns out he (late 20s) has just bought his first house and tells me his tenants are moving in this week. When I asked him why he didn't live in it himself he replied "I'm staying with my Mum & Dad - would be stupid not to".

He plans to use the rent to "pay most of the mortgage"... when I dug I bit deeper he explained that his mortgage would be about £200 a month MORE than his rental income. When I asked if he was happy to be losing money each month his repsonse was: "its not a problem as £200 each month is nothing compared to the profits I'll make when I sell the house in 5 years time" !

I kept quiet... very quiet. It would have been very tempting to blow him out of the water but I figured he was pretty niave and perhaps beyond salvation. I'm still trying to get my head around what he said and WHAT ON EARTH makes someone think like that.

And its probably an interest only loan in which case he will have paid off nothing by way of equity in 3-5 years time and own a property that will be worth less (worthless?) than he paid for it. People are silly to buy at the top of the market.

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If it is a repayment mortgage might be worth it. After all with no voids losing £200 a month over 25 years would be £60,000 the house would surely be worth alot more than that in 25 years.

It's a matter of timing isn't it, at the moment he would be a lot better off dropping £200 a month into a unit trust in a maxi-ISA.

Nothing is stopping him buying a property at a time when the rent actually covers the mortgage.

Edited by BuyingBear

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I kept quiet... very quiet. It would have been very tempting to blow him out of the water but I figured he was pretty niave and perhaps beyond salvation. I'm still trying to get my head around what he said and WHAT ON EARTH makes someone think like that.

Its simple, if this conversation took place in 2000 then he would in a very good position today. Regardless of what we think the crash is not here yet. There is also nu guarantee it will happen. Its pretty clear why this guy is doing what he is, historically over the lat 10 years its a proved a very smart investment. I just love how some people on here can become so smart after so much HPI ;)

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isv,

I heard an almost identical story about a mate of a mate, also a plumber. He's not based near Southampton, is he? I can't believe there are many such people around, surely must be the same bloke.

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The hype of the housing market means that everyones at it, fools rushing in.

People are convinced its a money maker. I know two people who have bought recently and has said it'll make a nice little pension. Yet their research into the market is minimal at most.

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Guest muttley

and your point is ? are you denying that we have 8-10 years of HPI ? At least its a fact....not an estimate as we are predicting :rolleyes:

My point is that if you're only going to look at the last ten years then you are not taking a historic perspective.

Otherwise,yes,house prices only ever go up.

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Its simple, if this conversation took place in 2000 then he would in a very good position today. Regardless of what we think the crash is not here yet. There is also nu guarantee it will happen. Its pretty clear why this guy is doing what he is, historically over the lat 10 years its a proved a very smart investment. I just love how some people on here can become so smart after so much HPI ;)

Hindsight is 20/20 vision and all that... but so many things are different today than back in 2000....

But just think about it - this guy at the age of 29/30 finally saves enough deposit to buy a £145k (ex-council)house - takes on (I assume) a huge mortgage and then lets the property out for a rental figure that doesn't come close to covering his costs. He is totally dependent on significant capital gain to get him out of trouble.

Assuming he has no voids, interest rates don't rise and totally ignoring maintenance, agents fees, insurance and lots of other costs (that make the true figure far higher)... he needs to make £12k in capital gain in 5 years time just to 'break even'. Perhaps he will. But he is gambling big time. I'd say the odds were stacked mightily against him. Why not just take £12k to Vegas and play the tables?

Edited by isv

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I had to call the landlord over the weekend - had watering gushing out of the ceiling (thank God I'm renting - no maintenance to worry about!). Anyway, they sent around a plumber to fix it and we got talking and he asked me why I was renting...

Turns out he (late 20s) has just bought his first house and tells me his tenants are moving in this week. When I asked him why he didn't live in it himself he replied "I'm staying with my Mum & Dad - would be stupid not to".

He plans to use the rent to "pay most of the mortgage"... when I dug I bit deeper he explained that his mortgage would be about £200 a month MORE than his rental income. When I asked if he was happy to be losing money each month his repsonse was: "its not a problem as £200 each month is nothing compared to the profits I'll make when I sell the house in 5 years time" !

I kept quiet... very quiet. It would have been very tempting to blow him out of the water but I figured he was pretty niave and perhaps beyond salvation. I'm still trying to get my head around what he said and WHAT ON EARTH makes someone think like that.

(_*_)

enuff said!!

Edited by teddyboy

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My point is that if you're only going to look at the last ten years then you are not taking a historic perspective.

Otherwise,yes,house prices only ever go up.

If we're looking further than 10 years then we have to look a lot further. Even further than the graphic attached.

ScreenShot053.gif

post-3500-1138656526.gif

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Timing is everything.

5 years ago, interest rates were in the middle of a downward trend, and property was a much better investment on the basis of future cashflow discounted to the present.

Today a house makes a very poor investment. Prices are flat to falling - the weapon of leverage that given people so much paper wealth in the last 5 years will begin to work the other way. All markets go in cycles and have their major turning points, but it will takes years to play out.

Personally, I think we could be in for an even longer bear market in property than the 6-7 years we had last time around. A few years of political turmoil and a rate squeeze could help it along, however.

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Hindsight is 20/20 vision and all that... but so many things are different today than back in 2000....

But just think about it - this guy at the age of 29/30 finally saves enough deposit to buy a £145k (ex-council)house - takes on (I assume) a huge mortgage and then lets the property out for a rental figure that doesn't come close to covering his costs. He is totally dependent on significant capital gain to get him out of trouble.

Assuming he has no voids, interest rates don't rise and totally ignoring maintenance, agents fees, insurance and lots of other costs (that make the true figure far higher)... he needs to make £12k in capital gain in 5 years time just to 'break even'. Perhaps he will. But he is gambling big time. I'd say the odds were stacked mightily against him. Why not just take £12k to Vegas and play the tables?

Hi,

Need not go to vegas. 18 months ago I moved 15k within a unit trust fund into blue chip Japanese & far east stocks (and I mean low risk, big name corporations, very little risk, no tech or commodites, high street type fund, I made no specialist analysis or market angle for that punt) and that part of the holding is over 34K now. To be hoping to make barely a third of that after several years, with a highly geared, risky investment over my head, in a market where, in some parts of the country last year by many "indices" showed some decent falls, with a turbulent economic outlook, and so on ......(unless it was an sole property, that I could reasonably afford on a reypayment mortgage that might the kind of place I could stay in eventually for the long term. Still a very unattractive proposition for such a single guy). The Banks and Ea's are really great at scamming the British public in the property market and I pretty sure that interest only mortgages, 5-10 years down the line, will be viewed in much the same way as endownment mortgages have been recently, a financial scam of the day.

Anyway, back on the principality of Rockall, there may be some short term hope for his asset value with a spring bounce ;

http://www.therockalltimes.co.uk/2002/09/1...use-prices.html

Edited by boom_and_bust

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WIerd, sounds similar to a plumber I know in Andove.

Except in this case he has done up a house.

His situtation is - girlfriend dropped their kid 6 months ago. She' just left her paid maternity leave.

She owns house (which she cannot afford)

He owns another house which he is 'doing up'

They are rying to sell her house, which has now been on the market since Mar05 - no takers.

Andover is wierd at th best of times. Even wierder now - companies cannot seem to leave it fast enough.

Anyhow, I pointed out to this guy that his invertment and job are both exposed to the housing market.

Ipoint out he should have diversified away. Make his investments less linked to hosuing market.

He's made the classic builder's mistake. This is why so many go under during the down cycle.

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My point is that if you're only going to look at the last ten years then you are not taking a historic perspective.

Otherwise,yes,house prices only ever go up.

Well you tell me what man in the street looks back further than 10 years. If we look at the last 2 or 3 generations then effectively house prices do only go up in the long term. Now agreed if you get unlucky and hit a downward cycle then of ocurse you could start or end on a downturn. I've been through a downturn and 15% interest rates and survived and then made money on my next property. So to most people the market trends upwards.

That is WHY people buy property. To live in for free once they retire, OK its got a bit twisted and distorted in the current scenario with BTL's etc but its an anomoly that will be fixed.

Just look at the folks on this site , what they are trying to do now by STR etc is do a scalp on a well deserved market downturn. Just read this forum, I've yet to see anyone say, hey I'm NEVER buying again. No they are all(vast majority) waiting for a dip/downturn to BUY.

So bottom line its absolutely clear why this guy has done it, I understand it given the physcology of the market, historical statistics and the all round peer pressure to BUY BUY BUY. Now I'm not doing it myself but I don't right now feel any safer than him as I know the market isn't always rational. So I'm gambling too as a STRer. If you and the other STR's on here don't realise that then its not just the buyers who are kidding themselves.

I really think this forum is getting far too inscestuous. :ph34r: . We all need to just be a little more open minded and keep flexible. If you think the VI's will roll over and allow their tummy's to be tickled during a 50% crash you are seriously mistaken.

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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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