Hello to everyone - and wishing you a slightly belated Happy New Year...well it is still January!
I haven't been active on my blog page yet this year for the simple reasons that I have been busy, with my technical experts, putting together the final touches for my website. It was tentatively launched in late 2009 - with the real intention of it being totally live by January 2010.
So at least that's one goal achieved on time already this year!
2009 proved to be a great year for finding bargains - as the media seemed to do its best to help property collectors by painting the blackest picture ever - whilst actual economic indicators painted a constantly improving picture.
Highlights for us on the acquisition front in were probably the 2 one-bedroomed apartments that we secured for half the price that they sold for in mid-2008, also a high-quality Victorian terraced house bought from a very motivated seller for 40% of what adjoining properties sold for in 2007, and a top-quality 1930s classic semi-detached property bought for £100,000 - which was appraised by 3 local agents to sell-on for an average of £160,000 (we have kept it to rent out!)
On to 2010 then.....
As ever, I am constantly being asked what my views are on the climate for property investing in the UK for the next 12 months, and, as ever ,I reply along the lines that the climate is always right - on one condition.
Those who know me well will instantly know what that specific condition is.....
It's the condition that you only ever buy properties that are way, way below their TRUE MARKET VALUE. Nothing for me will ever change in that respect.
Why pay full price for a property when you can pay much less if you know what you have to do to find bargains?
My view has always been that if we buy and hold properties for a number of years and cash in on the dynamics that are working in the UK in favour of property 'collectors' - then we can't go wrong.
However...if we buy those houses at ridiculous prices on day one - then we have an instant reward immediately. This 'cushion' protects us from any short term market downward blips (downward movement is always short term - looking back at historical price movements confirms this fact).
Buying at low, low prices gives investors (especially novices who often are quite fearful of 'getting into property') a lot of confidence in the form of being protected against nasty price falls!
Once again its all common sense - but, in my experience the majority of property investors - the amateur investors - quite often pay full-market-value prices - or very near to market value for their properties. This way you are making it harder for yourself to create maximum wealth - plus the obvious fact that you are parting with more money than is necessary in order to build your portfolio!
The last 12 months will have given existing property investors a lot of confidence and valuable experience, whilst it should also have given those considering property investment as a route for wealth building a lot of encouragement.
Why do i say this?
Simply because no one can deny that we have just gone through the most devastating set of global economic circumstances in generations - I don't have to elaborate here!
Yet...house prices actually rose about 5% on the year!
This time last year, there weren't many people who would have been confident enough to predict anything but massive falls in property. I have to say though that I am not surprised by this positive growth figure at all though.....
To me, its quite obvious when you analyse the dynamics working in favour of the UK property market, why the the prices didn't plummet.
I am not going to extensively list those dynamics here - they are listed in great detail in a few pearlier posts in this blog site. However, you probably realise that a growing population (growing by well over 400,000 every year!), reduced housebuilding - when there is already a housing shortage, and almost obsessive demand from UK inhabitants to own their own property are fundamental drivers in slow and steady house price growth.
Recent economic indicators also point to the fact that the UK is now coming out of recession - next week's Government report should make this official - meaning that things are simply getting better than they were. Let's not complicate things ....things are improving.
Now, I might be wrong here, I'm not a so-called economics expert, but if property prices rose around 5% in the worst year on record for general economic activity - then I'm pretty confident that when things get better with the global and UK economy - as they are doing now - it will have a positive long-term affect on property values.
Other recent economic indicators that we have seen...
· A quarterly growth in economic output of 0.7%
· Property prices rising for 6 consecutive months
- Rate of unemployment slowing down sharply
· Car sales surging ahead
· Extremely low interest rates
· Manufacturing results at their highest for two years
So there we have it - nothing really changes for me. Buying very low - and being patient are the two components of my strategy to increase my wealth. the good news is that anyone can buy property - and anyone can be patient too
Unfortunately not everyone has the ability to consistently secure properties at ridiculously low prices.
If you are interested in finding out more about this precious skill - then please visit my website
http://www.propertyinvestmentcoach.co.uk/
Until next time.....
Sunday, 24 January 2010
Wednesday, 2 December 2009
When everything 'clicks' into place
I heard a typical story last week of a situation when everything clicks into place regarding a enquiry from am,ember of the public who needs a fast sale.
You see, the trouble with this business of trying to buy properties for way below what they are really worth is that there aren't queues of people waiting to sell to you on those terms.
The majority of people who enquire, in response to your advertising, are usually put off by the fact that they either cannot afford your low offer - meaning their mortgage balance is greater than the price you offer them, or they simply aren't keen to accept a low offer - in other words they just don't want the benefit enough - that a fast sale will bring them.
That's fair enough and can only be expected. People who do accept the low offers are actually making a statement. They are effectively saying that the pain of accepting a low offer in order to leave their house and 'move on' (for whatever problem reason - there are hundreds) is less of a pain than what they are currently experiencing.
In other words - 'moving on' is more important to them at this point in their life - than is trying, in a slow market, to sell their house at a retail price on the open market for more money.
I was talking of this last week to a friend who explained a classic situation where he had just agreed a deal with someone who simply was set on moving on - AND could afford the low offer that was made to them.
Essentially the seller in question had a strong desire to go and live elsewhere in the country - quickly. He definitely had to be away fromhis home by Christmas Eve. there was no alternative for him
He said his property was worth 125k (becasue an identical house across the road had just been listed atthat price), but the research and logic applied by the potential buyer showed it clearly to be worth 110k (meaning it couldnt be expected to sell for more than 110k in current market conditions).
The investor who was hoping to buy the house was fortunate because the seller agreed with the logic when it was shared with him (many don't - and that can be a problem to overcome - its not impossible - just a bit awkward!).
He understood that had he been selling in 2007 it would have been worth more - and also that if he could wait another 2 years til 2011 - it would probably be worth more.
But he HAD to leave by Christmas Eve.
He knew he couldn't leave by 24 December if he took the far, far riskier Estate Agent route. He therefore had 2 options left open to him.
The other obstacle was if he had a mortgage greater than the investors offer or not.
The good news was - he didn't have a mortgage at all. He wasn't hindered by a loan.
So he accepted an offer of 79k.
So this is a price that is around 71% of what the property should sell for at a 'retail' price in today's market.
The investor was lucky in as much as he found (via his extensive local marketing) a motivated seller who could afford to take his offer - these are 2 vital ingredients that form any bmv deal.
My friend reckons for every oneof those he has to make around 20 offers. He looks at things this way
For me that sums up this business. Lots of mundane drudgery - punctuated by the occasional lucrative deal that makes it all worth while
The sale is 2 weeks down the line now and is set to conclude on Friday 18 December.
Incidentally the rental on the property is around £525 per month. Finance costs are around £380 per month - so a healthy gross margin there.
The property is only 15 years old - in good condition and needs maybe £500 spending to make it tip top.
You see, the trouble with this business of trying to buy properties for way below what they are really worth is that there aren't queues of people waiting to sell to you on those terms.
The majority of people who enquire, in response to your advertising, are usually put off by the fact that they either cannot afford your low offer - meaning their mortgage balance is greater than the price you offer them, or they simply aren't keen to accept a low offer - in other words they just don't want the benefit enough - that a fast sale will bring them.
That's fair enough and can only be expected. People who do accept the low offers are actually making a statement. They are effectively saying that the pain of accepting a low offer in order to leave their house and 'move on' (for whatever problem reason - there are hundreds) is less of a pain than what they are currently experiencing.
In other words - 'moving on' is more important to them at this point in their life - than is trying, in a slow market, to sell their house at a retail price on the open market for more money.
I was talking of this last week to a friend who explained a classic situation where he had just agreed a deal with someone who simply was set on moving on - AND could afford the low offer that was made to them.
Essentially the seller in question had a strong desire to go and live elsewhere in the country - quickly. He definitely had to be away fromhis home by Christmas Eve. there was no alternative for him
He said his property was worth 125k (becasue an identical house across the road had just been listed atthat price), but the research and logic applied by the potential buyer showed it clearly to be worth 110k (meaning it couldnt be expected to sell for more than 110k in current market conditions).
The investor who was hoping to buy the house was fortunate because the seller agreed with the logic when it was shared with him (many don't - and that can be a problem to overcome - its not impossible - just a bit awkward!).
He understood that had he been selling in 2007 it would have been worth more - and also that if he could wait another 2 years til 2011 - it would probably be worth more.
But he HAD to leave by Christmas Eve.
He knew he couldn't leave by 24 December if he took the far, far riskier Estate Agent route. He therefore had 2 options left open to him.
- Stay put and forget moving elsewhere
- Sell it quickly and cheaply to an investor
The other obstacle was if he had a mortgage greater than the investors offer or not.
The good news was - he didn't have a mortgage at all. He wasn't hindered by a loan.
So he accepted an offer of 79k.
So this is a price that is around 71% of what the property should sell for at a 'retail' price in today's market.
The investor was lucky in as much as he found (via his extensive local marketing) a motivated seller who could afford to take his offer - these are 2 vital ingredients that form any bmv deal.
My friend reckons for every oneof those he has to make around 20 offers. He looks at things this way
'If I increase my wealth by an average of 30k on each deal I eventually agree - this means that every time I see someone (regardless of if a deal is agreed or not) I make £1,500'
For me that sums up this business. Lots of mundane drudgery - punctuated by the occasional lucrative deal that makes it all worth while
The sale is 2 weeks down the line now and is set to conclude on Friday 18 December.
Incidentally the rental on the property is around £525 per month. Finance costs are around £380 per month - so a healthy gross margin there.
The property is only 15 years old - in good condition and needs maybe £500 spending to make it tip top.
Thursday, 12 November 2009
Interesting story of procrastination by a seller
I had a call yesterday from someone I mentored 2 years ago. the call illustrated a common phenomenon of what quite often happens in this business if you allow patience, and 'nature' to take care of matters for you.
Just over 12 months ago he offered 55k for a 3 bedroom terraced house with a very realistic current market value (then) of 80k. This point in time turned out to be, what now appears, to be the bottom of the market value-wise. The seller wanted to sell and leave the property as he had another property that he was actually living in. He therefore had 2 sets of costs - hence his eagerness to sell it.
This offer of 55k represented an offer of 68% of a very realistic market value. The seller refused to accept the offer feeling that he could sell it for more - either by the retail route - or with another investor. He had every right to do this, but the investor in question pointed out a few obvious facts (reality check) about the state of the market at the time.
I recall that he contacted me about the situation, and, as ever, I told him not to 'push' the prospect at all. In my experience, when people say no - its a sure sign that they aren't motivated enough (at that time) to take your low offer. to push is only going to probably upset them and alienate you from any chance of a future deal with them.
Sometimes you simply have to let time, and circumstance, take care of things for you.....
Fast forward to last week.....
The investor receives a phone call form the same gentleman.....
Not much has happened in a year regarding htis property, He did get a slightly better offer from another investor - but the proposed deal fell through owing to the investor not having the ability to complete. He fell out with his Estate Agent and took the property off the market (not the cleverest thing to do if you want a high offer!)
The owner has therefore had 12 months of uncertainty, stress and worry. ths has been compounded by the expense of maintaining the property for 12months (£250 mortgage per month - 3k p.a./council tax/insurance etc). He's about 4k down onthe year - expense wise.
During this time, the first investor has been consistently leaflet dropping locally - and therefore hitting the potential seller's two properties (and also carrying out other forms of local advertising). This has ensured that he has never been far from the prospect's mind - hence the phone call last week.
Oh, I almost forget - rapport played a part too.You see, the first investor (my student) realised that the seller was a building tradesman - and instead of bearing a grudge at having his offer rejected, he actually used the seller to do a few property repair jobs for him locally in the 12 month period! Apparently by this time they are quite friendly now.
After all - the seller needed the money -he was financing 2 properties!
I liked it whenI heard that one! Very clever!
The result?
The house is now being sold at 55k (the same price as the original offer). the seller has endured around £4000 of unecessary expense (and the mental anguish involved) because he thought, wrongly, that he could do better elsewhere.
The property is easily worth 80k today - based on typical research available.
The investor has a situation where he is now getting the keys to a property at a far better time than he would have if he had bought it last year (even though it would still have been a most welcome deal)
Apparently it needs around £1500 to spend to cosmetically prepare it for rent. Market rent is arounf £450 per month - this will provide £150 per month positive cash flow after mortgage payment s have been made. Rental demand is strong.
This to me is a perfect example that illustrates when to walk away and exercise patience.
You will only ever have your very low offers accepted by people when they are absolutely and totally motivated to move - and not before!
Thats why this busines is simple....
You never sell and 'push'...you just simply tell...and wait.... and hope.
Until next time.....
Just over 12 months ago he offered 55k for a 3 bedroom terraced house with a very realistic current market value (then) of 80k. This point in time turned out to be, what now appears, to be the bottom of the market value-wise. The seller wanted to sell and leave the property as he had another property that he was actually living in. He therefore had 2 sets of costs - hence his eagerness to sell it.
This offer of 55k represented an offer of 68% of a very realistic market value. The seller refused to accept the offer feeling that he could sell it for more - either by the retail route - or with another investor. He had every right to do this, but the investor in question pointed out a few obvious facts (reality check) about the state of the market at the time.
I recall that he contacted me about the situation, and, as ever, I told him not to 'push' the prospect at all. In my experience, when people say no - its a sure sign that they aren't motivated enough (at that time) to take your low offer. to push is only going to probably upset them and alienate you from any chance of a future deal with them.
Sometimes you simply have to let time, and circumstance, take care of things for you.....
Fast forward to last week.....
The investor receives a phone call form the same gentleman.....
Not much has happened in a year regarding htis property, He did get a slightly better offer from another investor - but the proposed deal fell through owing to the investor not having the ability to complete. He fell out with his Estate Agent and took the property off the market (not the cleverest thing to do if you want a high offer!)
The owner has therefore had 12 months of uncertainty, stress and worry. ths has been compounded by the expense of maintaining the property for 12months (£250 mortgage per month - 3k p.a./council tax/insurance etc). He's about 4k down onthe year - expense wise.
During this time, the first investor has been consistently leaflet dropping locally - and therefore hitting the potential seller's two properties (and also carrying out other forms of local advertising). This has ensured that he has never been far from the prospect's mind - hence the phone call last week.
Oh, I almost forget - rapport played a part too.You see, the first investor (my student) realised that the seller was a building tradesman - and instead of bearing a grudge at having his offer rejected, he actually used the seller to do a few property repair jobs for him locally in the 12 month period! Apparently by this time they are quite friendly now.
After all - the seller needed the money -he was financing 2 properties!
I liked it whenI heard that one! Very clever!
The result?
The house is now being sold at 55k (the same price as the original offer). the seller has endured around £4000 of unecessary expense (and the mental anguish involved) because he thought, wrongly, that he could do better elsewhere.
The property is easily worth 80k today - based on typical research available.
The investor has a situation where he is now getting the keys to a property at a far better time than he would have if he had bought it last year (even though it would still have been a most welcome deal)
Apparently it needs around £1500 to spend to cosmetically prepare it for rent. Market rent is arounf £450 per month - this will provide £150 per month positive cash flow after mortgage payment s have been made. Rental demand is strong.
This to me is a perfect example that illustrates when to walk away and exercise patience.
You will only ever have your very low offers accepted by people when they are absolutely and totally motivated to move - and not before!
Thats why this busines is simple....
You never sell and 'push'...you just simply tell...and wait.... and hope.
Until next time.....
Monday, 2 November 2009
Property prices surpass last years values.
Apparently, average property prices in the UK are now higher than they were 12 months ago to the day!
Amazingly, the fall suffered since October 2008 has more than been wiped out with the rises in the last 6 months or so. There are a few commentators who are fearing that this trend may reverse again soon as more properties come on to the market - as potential sellers take comfort from the recent surge. the commentators logic is that this will lead to the market being flooded and prices falling again
Only time will tell, but, for me. we can only judge things on reality - and at the time of writing these words - the market is rising.
Only yesterday I was speaking to a lady whom I mentored around 3 years go. She has now stopped buying properties. She hasn't stopped because she has lost confidence - or for any other fearful reason. Simply , she has enough houses 'collected' and is now at the 'patience' stage of her plan.
She explained that her portfolio is worth £2 million pounds. this doesn't mean she is worth £2 million - she has £1.4 million in loans - meaning that her portfolio currently stands her at around 600k gross wealth (not a bad figure of created wealthin 3 years!).
Her waiting plan makes total sense. As she explained to me.........
'Lets assume property prices increase just 4% per year (around just 0.3% per MONTH) on average each year for the next 5 years. This would mean the portfolio would be worth almost £2.5 million then - just by doing nothing more than maintaining matters. This would mean an equity gain of almost half a million pounds in 5 years.'
This would be on top of the current equity of the portfolio of £600,000!
The portfolio would be worth £2.5 million - loans would still be £1.4 million - giving the total £1.1 million equity figure!
This is based on annual rises of 4% only. Typically in the last 50 years, average annual house price inflation (HPI) is 7%.
This lady is being cautious about matters and only working on a 4% increase.
For the record, if there was 7% average HPI over the next 5 years - then the portfolio would be worth £2.8 million - an extra £300,000 compared to the 4% example - just for being a bit more lucky with house price inflation.
The beauty of this example is that it is a case-study of someone who has not acted particularly remarkable. The lady in question has 15 properties - acquired over 3 years. this is averaging 5 properties annually - or one every 10 weeks or so. This is achiebvable, in my experience, by anyone who is committed to doing the same.
She has achieved, through 'phase one' of her plan, her initial goal - which was to acquire (below market value obviously - rule number one!) £2 million worth of residential property.
She is now in 'phase two'- which is the waiting phase.
I imagine phase three is going to be the fun part for her!
Once more, to reiterate, if you consistently buy your properties significantly below true market value every time - then display patience and wait - you are virtually guarantee your desired success.
Amazingly, the fall suffered since October 2008 has more than been wiped out with the rises in the last 6 months or so. There are a few commentators who are fearing that this trend may reverse again soon as more properties come on to the market - as potential sellers take comfort from the recent surge. the commentators logic is that this will lead to the market being flooded and prices falling again
Only time will tell, but, for me. we can only judge things on reality - and at the time of writing these words - the market is rising.
Only yesterday I was speaking to a lady whom I mentored around 3 years go. She has now stopped buying properties. She hasn't stopped because she has lost confidence - or for any other fearful reason. Simply , she has enough houses 'collected' and is now at the 'patience' stage of her plan.
She explained that her portfolio is worth £2 million pounds. this doesn't mean she is worth £2 million - she has £1.4 million in loans - meaning that her portfolio currently stands her at around 600k gross wealth (not a bad figure of created wealthin 3 years!).
Her waiting plan makes total sense. As she explained to me.........
'Lets assume property prices increase just 4% per year (around just 0.3% per MONTH) on average each year for the next 5 years. This would mean the portfolio would be worth almost £2.5 million then - just by doing nothing more than maintaining matters. This would mean an equity gain of almost half a million pounds in 5 years.'
This would be on top of the current equity of the portfolio of £600,000!
The portfolio would be worth £2.5 million - loans would still be £1.4 million - giving the total £1.1 million equity figure!
This is based on annual rises of 4% only. Typically in the last 50 years, average annual house price inflation (HPI) is 7%.
This lady is being cautious about matters and only working on a 4% increase.
For the record, if there was 7% average HPI over the next 5 years - then the portfolio would be worth £2.8 million - an extra £300,000 compared to the 4% example - just for being a bit more lucky with house price inflation.
The beauty of this example is that it is a case-study of someone who has not acted particularly remarkable. The lady in question has 15 properties - acquired over 3 years. this is averaging 5 properties annually - or one every 10 weeks or so. This is achiebvable, in my experience, by anyone who is committed to doing the same.
She has achieved, through 'phase one' of her plan, her initial goal - which was to acquire (below market value obviously - rule number one!) £2 million worth of residential property.
She is now in 'phase two'- which is the waiting phase.
I imagine phase three is going to be the fun part for her!
Once more, to reiterate, if you consistently buy your properties significantly below true market value every time - then display patience and wait - you are virtually guarantee your desired success.
Wednesday, 21 October 2009
How can we satisfy ourselves that tenants will be good ones?
I was asked today, by someone who read my blog post recently about the ease at which I found 2 new tenants, how you can be sure that you are going to get good tenants?
The person was asking me from a point of view of assuming that even if conventional references and checks appear fine - what other factors help you to determine if you feel a potential tenant will be a good one - or not.
My answer was that you can never be 100% sure that any tenant will be a good one.
Credit checks, employer references etc all help, but in my experience there are other indicators that often give you clues about the type of people you are dealing with.
In one of the 2 houses we recently let, there was a classic situation of many 'give-away' indicators to me that the potential tenants were probably going to be ok. Their credit checks etc came back fine - but it was the other 'clues' that were just as important to me in deciding to give them the tenancy.
Firstly, they had no quibble about finding all the first months rent and the bond immediately. They both had solid employment histories with very established local companies too.
Explaining that they wanted to stay in the property a long time, they discussed with me their plans for redecoration and landscaping of the garden - all improvements to the house - at their expense.
They also had no problems withthe notion of supplying a family member (mother)as a guarantor for the rent. I took this opportunity to use it as an excuse to visit the mother and it gave me a good insight into the way the house was kept - which was immaculate. I also couldn't help but notice that the potential tenants car was clean and immaculate inside, and their young duaghter was dressed immaculately.
They absolutely loved the house, and I could see that they were psychologically 'moving in' already as we did the viewing. They asked if they could do a second viewing and bring some family members along. This was no problem to me - in fact it indicated that they had strong local family ties. When I met the family, who all loved the house, it turned out that I was acquainted with one of them already - this certainly made the relationship seem even firmer.
Overall, after years of experience vetting potential tenats, I simply used my instinct, experience and common sense to conclude that these people would be as good a tenant as any.
Now, time may prove my instincts to be wrong - but I somehow doubt it.
Experience has taught me that even if formal checks and references are fine, it pays to use instinct and common sense in finalising your decuisions.
The person was asking me from a point of view of assuming that even if conventional references and checks appear fine - what other factors help you to determine if you feel a potential tenant will be a good one - or not.
My answer was that you can never be 100% sure that any tenant will be a good one.
Credit checks, employer references etc all help, but in my experience there are other indicators that often give you clues about the type of people you are dealing with.
In one of the 2 houses we recently let, there was a classic situation of many 'give-away' indicators to me that the potential tenants were probably going to be ok. Their credit checks etc came back fine - but it was the other 'clues' that were just as important to me in deciding to give them the tenancy.
Firstly, they had no quibble about finding all the first months rent and the bond immediately. They both had solid employment histories with very established local companies too.
Explaining that they wanted to stay in the property a long time, they discussed with me their plans for redecoration and landscaping of the garden - all improvements to the house - at their expense.
They also had no problems withthe notion of supplying a family member (mother)as a guarantor for the rent. I took this opportunity to use it as an excuse to visit the mother and it gave me a good insight into the way the house was kept - which was immaculate. I also couldn't help but notice that the potential tenants car was clean and immaculate inside, and their young duaghter was dressed immaculately.
They absolutely loved the house, and I could see that they were psychologically 'moving in' already as we did the viewing. They asked if they could do a second viewing and bring some family members along. This was no problem to me - in fact it indicated that they had strong local family ties. When I met the family, who all loved the house, it turned out that I was acquainted with one of them already - this certainly made the relationship seem even firmer.
Overall, after years of experience vetting potential tenats, I simply used my instinct, experience and common sense to conclude that these people would be as good a tenant as any.
Now, time may prove my instincts to be wrong - but I somehow doubt it.
Experience has taught me that even if formal checks and references are fine, it pays to use instinct and common sense in finalising your decuisions.
Monday, 19 October 2009
Rental market appears to surge
Finding myself with 2 void properties to fill recently, I researched my local area to gauge the level of demand for rental houses. Nine months ago it was a tough market - with only the most presentable properties moving relatively quickly. I have always found that by presenting properties well, and not being greedy on the rents asked it is pretty easy to fill empty houses even in 'bad' times.
However, as I say, a few months ago it was harder than normal.
How times appear to have changed - certainly where I live - and I suspect in a lot more places too. Both properties rented out in one week. I could have let them go after just one day. However, when I realsied the extend of the demand currently i realised that I could build up a frenzy amongst potetnial tenants - and cherry pick the best tenants. One property had 19 enquiries (and apparently dozens of 'drive by' viewers - according to next door neighbours), the other property had 14 enquiries.
I managed to get 2 decent families in them - with great references and guarantors for the rent.
Speaking to one established letting agent in particular - she informed me that out of 132 properties on her books - only 6 remained! She explained that if she was given 100 extra properties now - then she could move them all in 3 - 4 weeks time!
Why is this? I asked her this question and she explained its simply because many reluctant landlords who were forced to rent their properties because they couldn't sell 12 months ago have now left the market. Also, many people are choosing to rent because of the fiasco in the loan markets and this has apparently put many people off home owning for the foreseeable future.
There are also apparently, less tenants moving around from house to house as they seek stability in troubled times.
All this is good news for landlords who need to fill a void. However, it shouldn't be a charter for landlords to let their standards slip because its easier to to rent houses out currently. One day this will surely change again - and that's when your marketing and presentation and people skills will allow you to outperform the many landlords who just don't care.
However, as I say, a few months ago it was harder than normal.
How times appear to have changed - certainly where I live - and I suspect in a lot more places too. Both properties rented out in one week. I could have let them go after just one day. However, when I realsied the extend of the demand currently i realised that I could build up a frenzy amongst potetnial tenants - and cherry pick the best tenants. One property had 19 enquiries (and apparently dozens of 'drive by' viewers - according to next door neighbours), the other property had 14 enquiries.
I managed to get 2 decent families in them - with great references and guarantors for the rent.
Speaking to one established letting agent in particular - she informed me that out of 132 properties on her books - only 6 remained! She explained that if she was given 100 extra properties now - then she could move them all in 3 - 4 weeks time!
Why is this? I asked her this question and she explained its simply because many reluctant landlords who were forced to rent their properties because they couldn't sell 12 months ago have now left the market. Also, many people are choosing to rent because of the fiasco in the loan markets and this has apparently put many people off home owning for the foreseeable future.
There are also apparently, less tenants moving around from house to house as they seek stability in troubled times.
All this is good news for landlords who need to fill a void. However, it shouldn't be a charter for landlords to let their standards slip because its easier to to rent houses out currently. One day this will surely change again - and that's when your marketing and presentation and people skills will allow you to outperform the many landlords who just don't care.
Thursday, 1 October 2009
House prices 'bouncing back'?
Ive just read a report today saying that the Bank of England are astounded at the property market rebound. The Banks Chief Economist, Spencer Dale, admits to 'being surprised in the strength of property values'.
There are most certainly lots of signs of confidence returning to the market. For example, The Halifax report that the average house price now stands at £161,000 - this is the same level as ten months ago in December 2008 - and its rising now month-on-month - this certainly isn't a 'blip'.
Home loans are increasing month-on-month currently. HSBC today announced that they consider the housing crash to be over - and promptly made half a BILLION pounds available for a new 90% loan product. It's enough finance for about 3,500 typical, average priced, property purchases.
This means that those people who sign up for this product only then have to find a 10% deposit. This for me, is a, massive, sure sign of confidence returning. OK - the bank gets some headlines by making this move - however they wouldn't earmark for lending £500m just so they could get some free headlines - especially after what has happened in the last 12 months!
It's a public announcement that they're 'back in business; and are ready to lend at very generous loan to value ratios.
This is the type of move that will give HSBC a 'slug' of easy market share - market share that has been going begging for over 12 months. The banks have had to stand back and watch the game from the sidelines whilst they got their confidence and funds back in place.
People will be flocking to sign up to this product. The product will steal business from their banking rivals. This type of activity puts pressure on other banks - who also will feed off the confidence that HSBC are openly displaying - to copy them in retaliation. This is nothing more than basic economic theory coming into play, in practice, as we come out of the recession - and the banks (who are very greedy - remember?) want (have) to make money.
Other recent economic indicators show that economic output fell less than had been predicted - meaning that, quite simply, things have not got as bad as was previously feared. This is also a strong indicator that the nation's economy is improving.
Unemployment is still rising - but on the other hand, for every person out of work - there are around another 9 who aren't! Many of these people are paying their lowest mortgages ever as tracker rates and low standard variable rates work very much in their favour.
This means that they have more disposable income. Incidentally, at the end of any recession, historically, unemployment continues to rise for about 18 months from the point of the slump ending - its obvioulsy simply a natural economic phenomenon that just 'happens'.
However, it appears that this windfall money that individuals are gaining each month isn't being spent - yet!
Another report by the Office of National Statistics, (ONS) says that personal savings are increasing rapidly as fearful individuals 'feather their nest' following the recent gloom and doom. The 'savings rate' - the % rate of what people save as a proportion of their disposable income is at its highest rate for nearly 7 years.
Historically, Britain doesn't appear to be a nation of savers - certainly not in the last few years. I think that much of this hoarded cash will soon be spent- when confidence returns totally. People will have the confidence to spend this hoarded money - as they feel a little more confident and finally decide to treat themselves with some luxury purchase or other.
Whats the point of all of this from a property angle?
Well, to me, in my humble opinion, it simply appears as if a combination of more lending (at better LTVs and rates), increased consumer confidence, along with people realising (because the media is now telling them!) that the property market has fallen as low as it will - make those who have been sitting on their hands, waiting for matters generally to improve - to take the plunge into the market.
In some parts of the country, housebuilders are saying they are being caught out and running short of completed stock to sell as a result of winding up their operations on many sites in the last 18 months. It will take them a while to 'gear up' again. These shortfalls in supply help to fuel property price increases too.
The fact that the population constantly increase by at least 400,000 people each YEAR means that housing stock is going to be under constant pressure - literally for ever. Remember, as a nation, we don't have enough properties now - so imagine the impact of a growing population - compounding over time!
To conclude, from an investment point of view, I am confident, based on external factors, that prices are rising again - and therefore property will be more expensive for collectors (investors)to 'collect' - the longer an individual leaves it to buy now.
OK - if you buy a property in 12 months time - as opposed to buying it at today's price, you're going to more than likely pay considerably more - but - wait ten years and you will still be a winner anyway. However, buy it now at today's price and you'll win even more!
There are very few times in the property price cycle that one can call a peak or trough - but I feel that we are probably in a point in time now where that is possible.
There are most certainly lots of signs of confidence returning to the market. For example, The Halifax report that the average house price now stands at £161,000 - this is the same level as ten months ago in December 2008 - and its rising now month-on-month - this certainly isn't a 'blip'.
Home loans are increasing month-on-month currently. HSBC today announced that they consider the housing crash to be over - and promptly made half a BILLION pounds available for a new 90% loan product. It's enough finance for about 3,500 typical, average priced, property purchases.
This means that those people who sign up for this product only then have to find a 10% deposit. This for me, is a, massive, sure sign of confidence returning. OK - the bank gets some headlines by making this move - however they wouldn't earmark for lending £500m just so they could get some free headlines - especially after what has happened in the last 12 months!
It's a public announcement that they're 'back in business; and are ready to lend at very generous loan to value ratios.
This is the type of move that will give HSBC a 'slug' of easy market share - market share that has been going begging for over 12 months. The banks have had to stand back and watch the game from the sidelines whilst they got their confidence and funds back in place.
People will be flocking to sign up to this product. The product will steal business from their banking rivals. This type of activity puts pressure on other banks - who also will feed off the confidence that HSBC are openly displaying - to copy them in retaliation. This is nothing more than basic economic theory coming into play, in practice, as we come out of the recession - and the banks (who are very greedy - remember?) want (have) to make money.
Other recent economic indicators show that economic output fell less than had been predicted - meaning that, quite simply, things have not got as bad as was previously feared. This is also a strong indicator that the nation's economy is improving.
Unemployment is still rising - but on the other hand, for every person out of work - there are around another 9 who aren't! Many of these people are paying their lowest mortgages ever as tracker rates and low standard variable rates work very much in their favour.
This means that they have more disposable income. Incidentally, at the end of any recession, historically, unemployment continues to rise for about 18 months from the point of the slump ending - its obvioulsy simply a natural economic phenomenon that just 'happens'.
However, it appears that this windfall money that individuals are gaining each month isn't being spent - yet!
Another report by the Office of National Statistics, (ONS) says that personal savings are increasing rapidly as fearful individuals 'feather their nest' following the recent gloom and doom. The 'savings rate' - the % rate of what people save as a proportion of their disposable income is at its highest rate for nearly 7 years.
Historically, Britain doesn't appear to be a nation of savers - certainly not in the last few years. I think that much of this hoarded cash will soon be spent- when confidence returns totally. People will have the confidence to spend this hoarded money - as they feel a little more confident and finally decide to treat themselves with some luxury purchase or other.
Whats the point of all of this from a property angle?
Well, to me, in my humble opinion, it simply appears as if a combination of more lending (at better LTVs and rates), increased consumer confidence, along with people realising (because the media is now telling them!) that the property market has fallen as low as it will - make those who have been sitting on their hands, waiting for matters generally to improve - to take the plunge into the market.
In some parts of the country, housebuilders are saying they are being caught out and running short of completed stock to sell as a result of winding up their operations on many sites in the last 18 months. It will take them a while to 'gear up' again. These shortfalls in supply help to fuel property price increases too.
The fact that the population constantly increase by at least 400,000 people each YEAR means that housing stock is going to be under constant pressure - literally for ever. Remember, as a nation, we don't have enough properties now - so imagine the impact of a growing population - compounding over time!
To conclude, from an investment point of view, I am confident, based on external factors, that prices are rising again - and therefore property will be more expensive for collectors (investors)to 'collect' - the longer an individual leaves it to buy now.
OK - if you buy a property in 12 months time - as opposed to buying it at today's price, you're going to more than likely pay considerably more - but - wait ten years and you will still be a winner anyway. However, buy it now at today's price and you'll win even more!
There are very few times in the property price cycle that one can call a peak or trough - but I feel that we are probably in a point in time now where that is possible.
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