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BillyShears

A New Reason Why It's Good To Pay High Prices For Houses

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I've just realised why everyone's prepared to pay really high prices for houses. Think of it this way. Imagine that you are going to buy a house that's on the market for £250K. You could offer £200K, but in a rising market it's better to pay the £250K. Why? Well, if house prices then rise by 10%, if you'd paid £200K, that would be a 20K rise, and your house would be worth £220K. But if you'd paid £250K, and house prices went up by 10%, then your house would have gone up by £25K and now be worth £275K, and you'd have £5K additional equity!

Finally the bubble makes some kind of sense.

Billy Shears

Edited by BillyShears

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You're right, it does make sense when you explain it.

You should also pay as much as possible for the smallest property in the worst area. That way when you make 10% on it, it will be testament to your investment genius that you could make as much profit on a crap flat in a crap area as someone else did on a good house in a good area. :blink:;)

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You're right, it does make sense when you explain it.

You should also pay as much as possible for the smallest property in the worst area. That way when you make 10% on it, it will be testament to your investment genius that you could make as much profit on a crap flat in a crap area as someone else did on a good house in a good area. :blink:;)

That's an excellent point. If I bought a £250K house with the intention of flipping it three months later for £300K, I would be much better off buying in the worst possible area in which I can find a house for sale for £250K. The reason being: a lot of people are priced out of more expensive areas, and have set their sights on cheaper areas. So if I put the house up for sale for £300K in a nasty area I'm sure to get a lot more offers than if I put a house up for sale for £300K in a nicer area.

Billy Shears

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Essentially, property is the only investment in which you acn leverage yourself, so when prices go up, you make more money than your might have otherwise, but when prices go down...oh hang on, prices only ever go up don't they? (Sarcasm)

C

I've just realised why everyone's prepared to pay really high prices for houses. Think of it this way. Imagine that you are going to buy a house that's on the market for £250K. You could offer £200K, but in a rising market it's better to pay the £250K. Why? Well, if house prices then rise by 10%, if you'd paid £200K, that would be a 20K rise, and your house would be worth £220K. But if you'd paid £250K, and house prices went up by 10%, then your house would have gone up by £25K and now be worth £275K, and you'd have £5K additional equity!

Finally the bubble makes some kind of sense.

Billy Shears

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I've just realised why everyone's prepared to pay really high prices for houses. Think of it this way. Imagine that you are going to buy a house that's on the market for £250K. You could offer £200K, but in a rising market it's better to pay the £250K. Why? Well, if house prices then rise by 10%, if you'd paid £200K, that would be a 20K rise, and your house would be worth £220K. But if you'd paid £250K, and house prices went up by 10%, then your house would have gone up by £25K and now be worth £275K, and you'd have £5K additional equity!

Finally the bubble makes some kind of sense.

Billy Shears

God dammit I think you have something there. I fully intend to buy tomorrow and offer the vendor a full 20% over the asking price. :D

Edited by Denzil

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Essentially, property is the only investment in which you acn leverage yourself, so when prices go up, you make more money than your might have otherwise, but when prices go down...oh hang on, prices only ever go up don't they? (Sarcasm)

But surely when you buy a house for £200K with a 95% mortgage, you've put down £10K and owe the bank £190K. But if prices go down by 20%, then your house is now worth £160K, And since the value of the house has gone down the 95% mortgage is now only £152K, and you've paid off £38K of your mortgage without having to hand over any money.

Billy Shears

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But surely when you buy a house for £200K with a 95% mortgage, you've put down £10K and owe the bank £190K. But if prices go down by 20%, then your house is now worth £160K, And since the value of the house has gone down the 95% mortgage is now only £152K, and you've paid off £38K of your mortgage without having to hand over any money.

Billy Shears

BillyShears you really are a property tycoon, are you planning on running any property investment seminars I want to sign up now so that I too can be a successful property investor and secure financial freedom for my future.

:lol:

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Can't afford to buy? I still thing that the perfect solution is to buy a place with a BTL mortgage, then rent it to yourself.

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So does that mean if prices only go up 1% a year, its best to buy it at 5million and then sell at £5,050,000 a year later to make your 50K ?

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BillyShears you really are a property tycoon, are you planning on running any property investment seminars I want to sign up now so that I too can be a successful property investor and secure financial freedom for my future.

:lol:

No. Sadly I just don't have the knack for surrealism necessary to run good property investment seminars.

Billy Shears

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Guest Bart of Darkness
God dammit I think you have something there. I fully intend to buy tomorrow and offer the vendor a full 20% over the asking price.

Ha! I plan to offer 30% over the asking price and make even more money when prices go up.

So long suckers! :P

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I've just realised why everyone's prepared to pay really high prices for houses. Think of it this way. Imagine that you are going to buy a house that's on the market for £250K. You could offer £200K, but in a rising market it's better to pay the £250K. Why? Well, if house prices then rise by 10%, if you'd paid £200K, that would be a 20K rise, and your house would be worth £220K. But if you'd paid £250K, and house prices went up by 10%, then your house would have gone up by £25K and now be worth £275K, and you'd have £5K additional equity!

Finally the bubble makes some kind of sense.

Billy Shears

Inescapable logic BS.

And a point completely missed by foolish buyers who offer under the asking price. Much more sensible to offer twice the asking to take advantage of this opportunity to leverage future gains. After all property will quadruple in price over the next 5 years - the local EA told me so.

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No. Sadly I just don't have the knack for surrealism necessary to run good property investment seminars.

Billy Shears

Arggh, what happened there?

Like I meant to say, Billy, if you're going to be a property tycoon you also need an ill fitting sports jacket, moderatley deviant hair and naff mercades to stand next to in your adverts. (you know the adverts I mean - Be a property Millionaire in 10 years, how money can be made in property in good times and bad, and the rest of the huckstering bullsh*t)

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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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