60 of 62 people found the following review helpful
Risky "Bigger Fool" Investment Strategy,
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This review is from: Hustle Your Way To Property Success: Love It Or Hate It. . .There's No Inbetween (Paperback)
I am a property investor with ten years' experience and property is what I make my living from - i.e. I don't have a "day job". I not only survived the credit crunch, but kept improving my cashflow regardless, while watching other landlords' properties being sold at auction for a fraction of what they had paid for them (and I still thought they were too expensive!) because they had not done their arithmetic when they bought them. So I like to think I know a thing or two.
Now, when a UK-focussed property book comes out I am interested in reading it, to see how other investors shape their strategies. Although I enjoyed the humour in this book and could relate to some of the experiences it describes, I would NOT recommend the investment philosophy it propounds, far from it!
In a nutshell, the Author says he buys distressed (and usually unmortgageable and quite possibly uninsurable) properties FOR CASH, does not refurb them (in fact, he says sometimes he distresses them further, although he does not explain why) and then flips them at auction.
Not only is this a very cash-intensive way to invest but, let's face it, if you take a grotto to auction the only guaranteed thing is the Auctioneer's hefty fees, which you will incur whether the property sells or not, let alone for the price you need to realise to make a profit or even break even.
And while it is possible to pull this off in an overheated, fast-rising market, it is still a risky strategy and one I would not recommend to anyone at any time, let alone in the middle of a recession - which is what we are in at the time of writing.
You also have to consider that if you flip a property you will expose yourself to Capital Gains Tax (currently 40% above about £10k profit) which makes any returns far less attractive.
Oddly enough, the Author also says he can auction off a property when he has only exchanged contracts on it but not yet completed the purchase. I find this rather hard to believe because auctioneers expect to see proof of title before accepting any instruction.
And even if there were auctioneers prepared to accept a property that you have only exchanged on, isn't that a big risk FOR YOU? I say this because even after exchanging you cannot assume the property is in the bag - the transaction CAN STILL FALL THROUGH. It's quite rare, but it does happen, and on one occasion it nearly happened to me. Suppose it happens with a property you have `sold' at auction. If you cannot complete on it yourself, you cannot sell it, so you will not only pay the Auctioneer's fees, but also hefty compensation to your auction buyer. Now, that's a nightmare scenario.
But let us return to the Author's main strategy again. He advises you to PAY ALL CASH to buy a type of property that any sensible person would see more as a liability than an asset - you know, something that needs complete gutting and/or has structural issues, etc.
That's what I call the strategy of a LEMMING jumping off a cliff!!
Excuse me if I have a strong resistance to such `investments'. When I buy a house it's because it's lovely and someone would be very happy to live in it. Then I find a good tenant and ensure I keep the house in good repair and the tenant happy in it. If you follow this strategy and do your homework and maths right, you end up with an ASSET that will bring you a positive monthly cashflow for the rest of your life while at the same time providing a decent, affordable home to someone who could not afford to buy one of their own.
Compare my (perhaps boring and conservative) strategy with the Author's strategy of flogging a ghastly dump to someone who will either end up suffering financially, or will hastily `tart it up' hiding the serious defects and then in turn flog it to an unsuspecting first time buyer - and believe you me, I have seen many such dodgy refurbs in my time! While these tarted up properties cause professional investors to turn on their heels, they invariably attract first time buyers like flies. Lacking the 'clinical eye' they are easily dazzled by the shiny fixtures without noticing that perhaps the roof needs replacing or the foundations underpinning.
My advice is, read this book for fun. You can genuinely profit from some of the 'people skills' it describes, but steer clear of the types of property it encourages you to buy.
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Showing 1-6 of 6 posts in this discussion
Initial post: 19 Mar 2013 11:00:51 GMT
D. A. Harmer says:
I really wish I could meet ''ML'', his business philosophy is excellent. Sell quality and look after your customers.
Posted on 9 Jul 2013 13:20:28 BDT
At Robert says:
Thank you for your review; I very much enjoyed. Could you recommend any books that might be of more interest / use to people who are attracted to your strategy, please?
Posted on 20 Nov 2013 16:24:01 GMT
A very worthwhile comment. I will be avoiding investing in the 'money-pit' sounding properties. To date I have only invested in homes I have actually lived in and loved & renovated for my own use firstly and then to let out. I rent them as 'homes' to good tenants, not a quick fix buy-to-let. I was wondering which way to go next, now that I am settled and wanting to buy solely for investment & your review has been extremely useful. Thank you.
In reply to an earlier post on 21 Nov 2013 17:17:05 GMT
Last edited by the author on 21 Nov 2013 17:19:11 GMT
A UK Customer says:
First of all, thank you for the positive feedback.
It seems to me you are doing the right things, so just keep doing more of the same.
Even though from now on you will be buying for investment, you can still use my very simple test to evaluate a property - after doing the maths to see if it stacks up, that is, because no matter how lovely it may be, if it doesn't stack up it's financial suicide!!
Once I have identified a property that stacks up, I just ask myself: "Would I want to live in here?" And unless the answer is a resounding yes, I give it a miss.
Even from a purely selfish standpoint, that is the best thing to do because bad properties seem to attract bad tenants - as well as a lot of other problems which you simply don't want because life is too short and, as far as properties are concerned, there's plenty of fish in the sea.
In reply to an earlier post on 21 Nov 2013 17:22:14 GMT
Last edited by the author on 21 Nov 2013 17:22:32 GMT
A UK Customer says:
Yes, of course.
A very honest (and often humorous) account of a landlord's life and the problems they have to deal with is provided by Angela Bryant in her book "The Complete Guide to Property Investing Success".
Happy reading. :)
Posted on 8 Feb 2016 12:44:13 GMT
Sadly your thoughts are riddled with inaccuracies.
You do not pay CGT when trading property
You can auction properties without completing
I do agree on one aspect though - "steer clear of the types of property it encourages you to buy" - as that policy will leave more for me!
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