Agents' Tactics...

meanmachine_2

ManAtHome wrote:

A reasonable point - if he's doing it as a business, quite likely to worked out all the cashflow stuff. If it's a 'I've seen people doing this on the telly', may well come a cropper.

I heard a radio discussion around a year ago - one guy was still buying, but the criteria he used to value a property was to multiply the monthly rent by 100 (12% ROI). His point was that if you're only just covering normal costs, you're less likely to be able/want to keep the property up to standard for your tenants and less likely to have the cashflow to cover voids or unplanned costs.

Really? So say the rent on a one bed was £600, that would value the property at 60,000. On the market today such a property in London would currently set you back c£150K (minimum).

The 12-20 rule seems better. That would put its buy value at £84K and sell value at £144K. Which means that no landlord wishing to cover their costs and see some kind of return on their investment should be buying right now.

To the grinch I'd say, looking at the short term gain is meaningless, if you're buying well above market value for the property in the first place. A bad investment is a bad investment.

GingeG

So what do the great meanmachine and deemy suggest for everyone then stay with their Mum and Dads? Or perhaps just keep lining someone elses pockets if you buy for a home and not as a business venture then property will always be a sound investment.

I am sure that a house bought now even at the height of a rocky market will be worth more in 10 years time.

ManAtHome

meanmachine wrote:

Really? So say the rent on a one bed was £600, that would value the property at 60,000. On the market today such a property in London would currently set you back c£150K (minimum).

The 12-20 rule seems better. That would put its buy value at £84K and sell value at £144K. Which means that no landlord wishing to cover their costs and see some kind of return on their investment should be buying right now.

Depends on the business model - this guy's argument was that if you buy on a cashflow basis, you don't really care if property values don't go up so you can buy at any time. If you buy on a covering costs basis, you have a relatively limited window when it makes sense to buy. I think at the time (last year) he was mainly looking in Scotland and Wales, but had spotted a few in England (surprised me as well.!). Bit like running a bookies (previous incarnation) - if you run it on the numbers you make a profit, if you run it like a punter you either make a bigger profit or a loss....