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Pablo-silver or lead?

The Tides Turned For Many

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A story from a southern commuter town Surrey/Hants.

I met a guy that worked for me ten years ago he’s now thirty. He said he had the foresight to buy 5 years ago before prices when crazy.

He had received £20k comp from an accident (he’s fully recovered thankfully) and put it down as deposit on a little modern estate 2 bed house. Over two and a half years he had substantial increase in paper value (about a further £60k). Being a big fan of Phil and Krusty, he releases 30k of his 80k equity to buy a one bed in B’stoke off plan. He said he has had it 3 years, it’s not gone up in value and the costs mort/other are not totally covered buy the rent. He has just had a baby and his job £45k pa is insecure. Deciding that off plan flats are not the best for BTL he has just released another £30k of the remaining £50k in his home (which when valued had only gone up £10k in the last 2.5 years) to buy a small 2 bed estate house, again in B’stoke.

So, 30 years of age, £90k (give or take £10k) in paper equity in 3 properties, £340k in mortgages, new baby, job insecurity and no prospect for capital appreciation in the foreseeable future. I really hope it works out for him

His last comment was “I want to be a property millionaire, but it isn’t working at the moment!”

Pablo Silver or Lead?

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A story from a southern commuter town Surrey/Hants.

I met a guy that worked for me ten years ago he’s now thirty. He said he had the foresight to buy 5 years ago before prices when crazy.

He had received £20k comp from an accident (he’s fully recovered thankfully) and put it down as deposit on a little modern estate 2 bed house. Over two and a half years he had substantial increase in paper value (about a further £60k). Being a big fan of Phil and Krusty, he releases 30k of his 80k equity to buy a one bed in B’stoke off plan. He said he has had it 3 years, it’s not gone up in value and the costs mort/other are not totally covered buy the rent. He has just had a baby and his job £45k pa is insecure. Deciding that off plan flats are not the best for BTL he has just released another £30k of the remaining £50k in his home (which when valued had only gone up £10k in the last 2.5 years) to buy a small 2 bed estate house, again in B’stoke.

So, 30 years of age, £90k (give or take £10k) in paper equity in 3 properties, £340k in mortgages, new baby, job insecurity and no prospect for capital appreciation in the foreseeable future. I really hope it works out for him

His last comment was “I want to be a property millionaire, but it isn’t working at the moment!”

Pablo Silver or Lead?

This kind of story makes me both sad and angry.

A new baby on the way is a time of great joy. Financially, it means the need to spend about £5 - 10K on cots, prams etc etc and possibly take a hit on income too in the way of giving up overtime but that is trivial compared to the joy of fatherhood. This is what people of previous generations mean when they say they made sacrifices.

Millionaires are not made by jumping on bandwagons, but by having unique insight into the value of an opportunity, managing the risks and knowing when to bank their profits and run to the hills!. If your mate has those qualities then maybe he will yet become a millionaire. If, however, he has punted his future security (as well as his child's) into a single asset-class on the advice of an overweight aristocrat who's only qualifications appear to be wearing un-flattering A-line skirts and miming a slegdgehammer action as she describes knocking through a wall then I'm afraid he deserves exactly the same outcome as anybody through history who has bought assets at valuations that have lost touch with reality "but just keep on going up" - be they dot com shares in early 2000 or stock tips from the shoe-shine boy in 1929.

All he has to do is to look at his position in a different way. Suppose that back in '96 you had told him that by the age of 30 he'd have £90K in the bank providing enough income to pay most of his rent, no debts and a fantastic new child. What a lucky man! Unfortunatly, I think he is blinded by greed and his position as it stands is at great risk but he could so easily bank it, then everybody would agree he has done well for himself. Maybe not a millionaire in cash terms yet, but richer in other ways and he still has time on his hands for the £million in cash if that is really important to him.

Decision making - that is what makes millionaires - spotting a unique opportunity. That opportunity is to exit property, here and now. It may not be trendy but for him is must be the right thing to do.

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"Greed" is an emotive word that's used far too loosely on this website.

When is "an investment opportunity" greed?

There are lots of things you can do with, say, £100K. If you buy bonds or equities you are investing. If you buy property, you are being 'greedy'.

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Ok.... What about 'Twattish'

Investment opportunities ? All well and good..... But who remortgages to buy bonds FFS ?

The most important thing about 100k (of MEW) is 'you gotta pay it back with interest, it isnt yours' :lol:

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"Greed" is an emotive word that's used far too loosely on this website.

I agree!

Wanting to secure a decent financial future for your family isn't really greed.

The decision to do that solely via property may be naive, misguided or even stupid but is no more greedy than investing in another asset class.

It's the perception that everyone has a "right" to own a house that then feeds the feeling of "greed" by those that can't afford to do so.

At a 4% yeild my LL is basicly subsidising my accomodation....how can that make him greedy? Naive, misguided maybe but not greedy surely?

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Understandable way for this chap to think, cause in his working lifetime there hasnt been a recession with real big time unemployment and all the add's TV programs and general chit chat has pointed out that property is a never ending one way bet. Maybe time to let the idea go before its too late, sell the BTL's now.

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As he was telling me the story I though there is no point in me explaining the the way the cycle works. As it's outside his experiance.

This time arround what amazes me is the amount of people of an older generation (40 to 55) who should know better, encouraging or puting pressure on their

20 something kids to pile into property at the top.

Pablo Silver or lead?

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"Greed" is an emotive word that's used far too loosely on this website.

When is "an investment opportunity" greed?

There are lots of things you can do with, say, £100K. If you buy bonds or equities you are investing. If you buy property, you are being 'greedy'.

I think you are making a category error "greed" is an emotion. "investing" is an action.

Buying anything because you believe it to be an asset is investing. If it turns out not to be an asset, it was a poor investment, but still it was an investment.

Greed may or may not motivate your investment. Sometimes, greed leads you to make a poor investment choice.

If you made a lot of money in some asset class, greed might drive you to plough more money into the asset class without thinking whether this is still prudent. So, a lot of recent property investors may well turn out to have been driven by greed rather than prudence if there is a property crash.

Similarly, people who made money on Cisco shares and who then went out and bought thousands more Cisco shares in spring 2000 may well have been greedy. So, it's not the case that greed is limited to property.

frugalista

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"30 years of age, £90k (give or take £10k) in paper equity in 3 properties, £340k in mortgages, new baby, job insecurity and no prospect for capital appreciation in the foreseeable future. I really hope it works out for him "

SHAME on the banks too, for lending so recklessly

How is this reckless lending? There's a large chunk of equity securing the loan. And two of the properties are presumably producing some sort of yield.

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Mervyn King's famous remark "house prices a matter of opinion, debt is real" was imho aimed at just this sort of illusion, that collateral in housing equity and wealth are the same thing. i.e. they are not !

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The banks and moneylenders obviously gave this particular sheep a good strong spade as he's obviously been digging a big hole for himself for the last few years :lol:

Edited by grey shark

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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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