Wednesday, January 9, 2008

BTL gamble

Gamble that didn't pay off

"I bought 20 new flats dotted around the city centre, using the technique where you buy at a 15 per cent discount and that discount would pay for the deposit for the mortgage either in the form of a cashback or a gifted deposit,"This meant he had a property portfolio worth £3m having staked only £60,000 or so of his own money." A perfect plan, BUT... "The rentals went down very quickly as so many new builds came on to the market."He sold some, but many of the properties were repossessed and Peers was made bankrupt in April last year. He now works for a company, advising on how to build up a property portfolio "without overstretching yourself" What-a-punk!

Posted by confused76 @ 10:10 AM (715 views)
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7 thoughts on “BTL gamble

  • “He now works for a company, advising on how to build up a property portfolio “without overstretching yourself” – I just about p’eed my pants when I read this bit (LOL)

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  • Astonishing really. And as has been commented, he now works as an advisor for others contemplating it.
    Thankfully, I think the BTL market may well be quiet for a while so hopefully he can re-skill as something useful!

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  • Sorry got absolutely no sympathy for the btl’s They are reaping what they have sown. They buy cheap ill constructed properties and expect people to pay their interest only mortgages for them. Sorry writings been on the wall for ages. I’ve sold and have bought gold.

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  • ontheotherhand says:

    It was not demand but just the creation of money that made prices go up. The banks enabled this guy with only £60k to throw £3,000,000 at the market. Clever man – if prices kept on rising he would have been rich, if they fall it’s the banks’ problem and he just goes back to his day job.

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  • £3 million for £60k. Leverage is great on the way up, disastrous on the way down. He is a microcosm of the economy.

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  • This sums up the average inexperienced BTLer.
    In a volatile, hyped up market, nobody actually knows what anything is worth. If suckers are told the flats normally sell for eg £200K but they can have some for 15% less, then they believe it. Trouble is, all the other suckers who bought for £200K also got the same cashback, so they were never worth £200k in the first place – the only reason the cashback was the developers difficulty shifting the flats . Add to that the fact these investors were creating and inflating their own market anyway so the true value was probably nearer £125 – £150K if speculation was removed from the equation.

    So how did these speculators get a mortgage if people like me are supposed to provide a valuation for the lender?
    Putting it simply, it’s not my money and I don’t give a stuff if the buyer or lender loses shedloads. I am simply working within my employers remit that I must be able to support my valuation with comparable sales evidence – which in a hyped up market is quite east to obtain. I am also following most lenders policy that a 10% allowance has to be made on new builds, so if I have comparable evidence that only supports £180K, I can submit a valuation at the stated bogus purchase price of £200K without sticking my neck out too far. I have no desire to waste my time arguing the toss with builders, buyers or lenders justifying my figures if I downvalue a property, so there is an incentive to ‘go with it’. (incidentally, the 10% leeway has now been abandoned, and a more cautious approach has been adopted for new builds of houses – and flats in particular)Door, stable, bolted!!

    In a particularly peed off moment, I actually phoned a buyer to check that he was paying the stated price of £200K for a 2 bed flat, offplan. I was gobsmacked when he said he was and that it was a bargain. I did mention that you could get an older 4 bed detached bungalow for less but he wasn’t bothered.

    So, are values falling, or is it that the figures are skewed by speculators paying fairyland prices. Don’t forget that cashbacks and incentives don’t show up on Land Registry data.

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  • Ha ha !

    And, they say that the New Liebour want to get people into remunerative employment. Does that mean employment of utility ??

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