I just bought and read your book. I liked it far better than other property investment books I've read as it's the only one that actually seems to make real sense. Some are just crazy! However I had many questions after reading the book so it is a delight to see you offering to provide answers through an on-line discussion! Thank you! Here's the questions I have, and I look forward to your feedback.
- many of the examples you give are of properties values at around £100,000 putting a 15% deposit. Where are these properties??! I live in London (although like you I'm an Aussie!) and there are no such properties here that know of (I bought my first flat this year in NW6 for £245k). Which makes me anticipate to find such properties I would need to invest in areas unknown to me. Is this correct? - secondly, I believe (especially after the recession) buy-to-let mortgages now require a 40% deposit. So even if you did manage to find a property for £100,000 you now seem to need £40,000 deposit, plus the 24 month cover money you mention. Do you have any comments on this? - I felt a little frustrated that it was only at the very end you discussed making money from these properties, as up till then you were not making any income from rent or capital gain. I was interested in your idea of re-mortgaging being the key. I'm definitely going to follow up with my accountant about that for further details. But seems to me this vital point is given only one paragraph in your book. So I'd appreciate further explanation on this. Also is this universal - i.e. the same in Australia? - another question is you don't mention where the properties are based. Are you suggesting location doesn't matter and that any property, will double in value over 7-10 years no matter where it is? - finally your book is very optimistic - which is great - but as we all know many people have been ruined when property markets crash. Are you suggesting the 24 month rule always sees you through these tough times? In Australia in the '80s I believe interest rates went up to 18% so if you had 7 or more properties at that time with only enough to cover 24 months rent (no doubt budgeted when rates were a lot lower) I could imagine you might have been in real trouble. Again your thoughts here are of interest.
Thanks for your time Brett - look forward to your feedback; I'm sure I have more questions but that's all I can think of right now!
In terms of the £100,000 properties you won't find them in London you'll need to go outside and up North. So yes you would have to go outside London, which I don't have problem and we do it with 1000's of investors. The trick is to apply the same levels (if not more) due diligence or research to these properties and invest using the same fundamentals.
The 15% is an example right now (August 2010) you can safely get 75% on second hand property and 65% on new build. As lending comes back this will change and Loan to Values will go back up. I think we are still a good 12-18 months before this happens in the wider market.
In terms of making money from rent or capital growth you can make this at any stage and it is certainly something that you should be looking at whenever you can. Remortgaging in particular is a great strategy to build your portfolio. The process is actually very simple and your accountant is a good place to start.
It is the same in Australia, my business runs in Australia as well and whilst the tax is a little different the strategies and principles apply in the same way.
Location doesn't matter, fundamentals matter and what I mean by this is that many people think location means the best locations. I stick to the Everyperson house (as mentioned in the book) as long as I can see that the property has things like shops, schools, transport links, major employers and major investment then I can pretty much guarantee a tenant and that means someone to pay the mortgage.
Very optimistic :) - Many people quote the 18% interest rate scenario and whilst this is possible it is highly unlikely, in the UK base rate rose to 5.75% before it came crashing down. Times have changed, many people have much bigger consumer debt loads and are more responsive to interest rate rises. I could go on all night about rates and predictions but I won't here. If interest rates did go to 18% there would be a lot more people in serious trauma than just my investors. I always plan for Realistic Worst Case rather than Worst Case. I'll just say this since 2004 we have not had a single client lose a property, we've helped them through the base rate at 5.75% and then through drops of 17.2% statistically. The best thing is to have a chat with the team and they can talk you through in much more detail. Just jump on the website in the book and also my blog at www.yourpropertyclub.com/educate