How do property investors do it

wulfhere

I'm curious to know how property investors do it. I mean making money from property is not rocket science is it...buy at a low point in the economic cycle and sell at the high end - bingo!

How does one convince potential investors of lending cash? I mean why would they lend cash if they can just invest it themselves? Or is it all just about hustling?

Given how difficult it is to get a mortgage, it strikes me that borrowing more money would be more difficult.

poppysarah

Over the last ten years in a galazy far far away, the evil madmen in charge allowed lax lending. This meant many businesses were set up on 100% borrowed money without anyone having to write a nasty business plan.
However the gods stopped playing nice and suddenly property prices stopped going up and no one knew what to do anymore as all the lovely assets were worth less.

In future all lenders should really carefully look at who they're lending to and what they can afford to repay. AND businesses should have to write a business plan and go through a rigourous lending approval process.

*sighs* It shouldn't have happened. It was just too easy for the govt to allow a boom because of the brilliant economy it "created". However it's all created on debt and debt is bad.

mustrum_ridcully

Talk about missing the boat...

Just wait, how long I can't say, but the boat will return, prices will go mental again, money will be made again.

Thing is no one actually knows whether that'll be in 2 or 5 or 10 years time. Some bulls may say the green shoots of recovery are here but they should be viewed the same way as bears 3 or 4 years ago saying house prices will crash next month - the basic trend is right but timing could be well off.

getmore4less

wulfhere wrote: »

I'm curious to know how property investors do it. I mean making money from property is not rocket science is it...buy at a low point in the economic cycle and sell at the high end - bingo!

How does one convince potential investors of lending cash? I mean why would they lend cash if they can just invest it themselves? Or is it all just about hustling?

Given how difficult it is to get a mortgage, it strikes me that borrowing more money would be more difficult.

so the way it works is
Some people borrow money and build properties
Some people borrow money buy property and manage rental properties.
Some people lend money and charge interest

They are different business

The professional investors(not your wanabe BTL LL) do not depend on prices going up they make sure the rental yield( 10%+) is more than the cost of borrowing or investing the money elsewhere. A lot of these guys have been offloading their poor performing(rent or costs) properties to the BTL muppets that have been making a loss on the rent because houses always go up.

Those that bought with 10% yields are now raking in the cash and can sit back and ride out the prices drops.

Oh and those landlords that sold of their poor performing stock are now sitting on cash ready to buy up property in the fire sale that can give 10%-20% yield this time round.

In business the value of your assets is a small part, it is the cash flow that really matters.

The proffesional landlords business is renting for a profit not property asset speculation, very different and should not be confused as being the same.

One is a low risk,the other is high risk.

Conrad

Wulfhere, I'll give you a specific example of how a newbie has made it, starting from zero.

She left School.
She earned £14000 pa
She never went out
She bought second hand clothes - why not I say, afterall, she is confident enough not to worry what the sheeple think, and all ultra fashionable people set new trends, they dont follow others.

She saved up a large deposit.
She bought a house. She let one of her rooms.
She paid off the mortgage within 10 years.
She saved again.

She bought another house with 25% deposit and let it out.
She overpaid the mortgage with her income and rent.

She is now in her mid thirties with the second house mortgage almost gone.
She is now looking at developing full time by raising cash on her houses.

Anyone can do it, but only if they have lots of descipline or a rich Daddy.

spuds_2

Some property portfolios have been ammassed in the way that Conrad suggest, others have been built on the relaxed lending of the banks ie. interest only mortgages, high LTV etc, remortgaging of one property to buy another.

For a lot of BTL land-lords it didn't seem to matter as long as the rent covered the mortgage because they were counting on capital growth. Those who did this and then sold when prices rose will have made money, those who bought recently will be finding that their BTL doesn't cover the mortgage and is worth less than they paid.

I think most BTL people raise their own cash through family, banks, remortgaging etc., not from outside investors.

Sadly, a lot of would-be property magnates have been taken for a ride by the likes of Inside Track, persuaded into buying over-priced flats at, in effect, 100% mortgages, which are now unsellable. When the banks were chucking money around and prices were going up year on year, I don't think it was too difficult to make money. Very different now though - the rental yield has to be pretty good and you have to be prepared to look very long term I would say.

wulfhere

Lots of interesting points - thanks.

The proffesional landlords business is renting for a profit not property asset speculation, very different and should not be confused as being the same.

One is a low risk,the other is high risk.

... I guess the trick is to do both. Obviously, paying off the debt is part of the plan. Ultimately, however, real profit is made from the capital valuation of the properties going up and the selling of them.

Given that most of the economic commentators that I've heard have said that we're heading for further falls, and even a depression next year, then now doesn't strike me as being a good time to buy.