One of my sourcers contacted me via text and it went something like this:
"3 bed flat, fully refurbished, £21,000, do you want this?"
My answer was:
"Yes"
I have 2 flats in this area and even though they are difficult to let the LHA rate for this flat is £500 per month.
For those of you who only speak in yield it is 29%!!!!!
I have also found out the person that is selling is an 80 year old landlord who has another 14 of these. I am hoping my sourcer will do the necessaries to get me these also.
It is prices like these that make me realise that this time is very special. I do not know whether it is a window of opportunity (I suspect it is though) or part of a general decline. And to be honest I do not care. The reason being it is irrelevant.
Let me explain. Lets say this flat crashes in price to £5,000 next year. I will be in negative equity and unable to sell. However my motivations are to never sell. So a crash in price has no effect on me.
The flat will make me around £400 per month today. When the price crashes I will still make around £400 per month. So no effect.
If prices crash to £5,000 next year then guess what. I will buy more! I will make even more than £400 per month and I will have less borrowings and less risk.
So as prices fall it is all good.
As prices rise it is all good.
How can it be bad for highly leveraged investors? There is only one thing that can kill a buy to let investor in this world we live in:
Sharp interest rate rises.
Not interest rate rises. It has to be sharp to catch out the landlord. If rates simply rise it is due to inflation. So rent will increase with the rate of inflation so you will be able to cover your mortgage.
The real problem would be a quick increase in rates. You would then not be able to increase rent quickly as you may be locked in a 12 month tenancy and you would have to survive this time period.
So how likely are sharp increases? Sharp falls have been seen. Sharp rises would be very unpopular. I do not think it is a risk but it is a risk. If you can live with this risk then say a big hello to a life of being a landlord.
Being a landlord requires around 4 hours a week of my efforts. The rewards match some of the sacked bank bosses pensions. I mention no names but I think you know who I mean! I have done this in 10 years.
So I ask you. Can you give a 10 year commitment to building a portfolio knowing that you will benefit handsomely guaranteed? Really think about this. I did it and I am glad I did.
I am creating some audio CDs and part of the program is about my life before the age 28. It forced me to think about my life when I did not have a portfolio and made me think what would have happened if I did not hand in my notice at work.
I know what would have happened. I would still be working at my employer Deloittes as a senior manager, working 8.30am to 6.30pm for £55,000. Sounds okay doesn't it? And that is exactly what it is. Okay.
I am not content with being okay. Are you?
I thought about what type of person I would be if I had stayed at work. I think I would be 25% of what I am now. For a start I would have not been writing these emails which you are reading!
I get a lot of thanks for these emails I send out. I write as I think and speak and you can probably tell that I am free. The mere fact the emails come out at random times hints that I am my own boss and what you get from me is what I am thinking at the time.
So if you are at work and only at your 25% of your potential then ask yourself:
can commit yourself to 10 years hard work to get to 100% of yourself?
If so get in contact!
Ajay
Posted on: 17th Mar 2009
del.icio.us
digg
Furl
Facebook
Reddit
Yahoo
Spurl
Smarking
Simpy
Stumbleupon
