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Guest Cletus VanDamme

Homes Under The Hammer

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Guest Cletus VanDamme

Caught the end of Homes Under The Hammer earlier.

Quite interesting piece on a father and son property business (have been buying property and letting it out for 50 years). They'd bought a commercial property in Haringey at auction from a bank, who'd then offered to lend them the money to finance the deal!

It was a 3 storey building on a corner plot and they paid about 900K for it. It was looking like they would be getting 75K per annum in rent for it. Assuming a 5.5% fixed rate interest only, I guess they would be looking at about 25K per year gross profit. Hardly seems a great deal, when they could get double that in cash.

The guys seemed like real gents. The father was quite bearish, he said 'If property was 1/3 of the price it is now, it would still be crazy', but he still went ahead with the deal. He had a buy-and-hold strategy, their business model did not involve flipping, only renting places out over the very long term.

He'd been in the business 50 years, so he must have known what he was doing.

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The guys seemed like real gents. The father was quite bearish, he said 'If property was 1/3 of the price it is now, it would still be crazy', but he still went ahead with the deal. He had a buy-and-hold strategy, their business model did not involve flipping, only renting places out over the very long term.

The particular transaction you described sounded like a bit of a duff deal, although perhaps it has some strategic importance for them. But I think there's a bit of human nature at work here.

A lot of people run businesses that are not particularly profitable, simply because that's what they know how to do. They sit there for years and they ride out the peaks and troughs, learning what works and what doesn't, and live happy lives. They don't chop and change and try to follow the latest investment fad, apart from deciding when it's a good time to expand their operations and when it's a good time to keep their money in the bank.

There's a lot to be said for doing one thing and doing it well. Particularly in the light of all these part-time wannabe-landlord BTL types who are getting badly burned for meddling in a market they don't really understand.

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Guest Cletus VanDamme
The particular transaction you described sounded like a bit of a duff deal, although perhaps it has some strategic importance for them.

That's a pretty astute reply, benj, as this was exactly what it was. They already owned the properties adjoining the site, plus they had planning permission (due to expire in 5 years) to turn the first and second floors into residential flats.

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Guest X-QUORK

This post highlights the point that many of us so-called bears don't have a problem with the long term landlords of old, professionals who look after their properties and act responsibly when their tenants identify issues with a property.

It's the newbie have-a-go amatuers we hate, the same ones who are in to make a fast buck and wouldn't think twice of ignoring requests for the annual boiler service, just to save a hundred quid. Their business model? MEW - repeat - MEW - repeat, etc.

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