It’s not too late to wish you that I hope. Just four weeks since my last communication, but in case you think this means we are about to return to business as usual, let me correct you…well sort of.

Just days into this month I received more calls to keep the shop open - or at least on reduced hours. That made me reconsider whether the end of 2009 had any relevance to the content of my training programme. The conclusion is that it doesn’t. What is clear is that the residential property market across most of the country is flat. Very buoyant in places but prices are generally where they spent the last couple of months of last year. That means that the turn of the year had no significance for the prospects of making a profit from my investment system.

So after consideration, I have decided to do as you suggested and reduce the hours… and the cost. That means that you will only get regular communications from me if you are a member. No change there for those of you who have bought and completed the training course who I will do my very best to help with one-to-one advice. But the window shoppers amongst you will not get regular weekly blogs.

The good news is that you can now invest in the training course for just £15 per module. A 50% reduction in cost down to just £45 for the full course of almost three hours of training and information. I’m a little embarrassed to value so much for so little. That price is simply because I think that I should reflect the fact that the system has passed its original 2009 sell-by date.

A more important consideration for any prospective trainee is how relevant the content of the seminars is a year on from when the course was created. The answer is that it has hardly dated in any respect. These are the only key differences:

1. - Financing your investment is probably more difficult now, but there is a silver lining because the credit crunch has also impacted dramatically on savings in deposit accounts. You can read my response to this aspect of the funding process in my ‘Important Q & A’ blog at the website.
2. - The market has stabilised across the country so it’s easier to make accurate calculations about remortgage values wherever you are investing in the UK. That’s a great advantage - however…
3. - As a result of the above, professional BTL investors have grown in confidence since the autumn, so there is more competition for the ideal investment properties. Residential property auctions are as busy as at the height of the market, so you have to be more inventive about your methods to locate BMV bargains. But I teach this in Modules Two and Three and can provide one-to-one help on this point.

And that’s about it. Just a handful of differences in the market since the training modules were recorded. My personal guidance for members will overcome such variations.

There’s a more important point that I want to make. It is that most, if not all visitors to the website have arrived after investigating property investment opportunities. Perhaps you typed some words into Google or came through our intro on YouTube. Whatever the route, I assume that you are considering various investment methods rather than simply saving a deposit to buy a house or flat as most people do. And if that is the case, my training modules will provide a wealth of information to help you to help yourself – now and for the foreseeable future. I know from our members that the course helps them to think like investors. How to find finance; how to crunch numbers; what properties to look for - and which to avoid; how to approach agents; which to approach; alternative ways to find your property; and so on. All factors that should open your eyes to a new way to approach buying residential property for maximum return.

So whether or not you use my investment system, the modules will provide you with an understanding of the investment process. I love being able to help others to make their investments and would like to use the information in my training modules to do just that for as long as the content is appropriate.

My very best wishes to all of you.

John

I hope that each of you had the Christmas that suited you.

Well, here it is - the last blog in the last week of 2009. Almost time to put the chairs on the tables for the last time before I turn the sign on the door to ‘closed’ in a few days time. From next week our produce will have passed its end-of-2009 sell-by date.

Well that’s how I have been viewing this email, but I hadn’t reckoned on the sudden interest in our service - the stream of new and existing customers suddenly dropping into the shop to ask advice - even suggesting topics that I should cover in blogs. They are all very much appreciated and I will be only too pleased to help any member for the foreseeable future. I am still passionate that you invest wisely and effectively, so please feel free to knock on the side door even though the blinds are down in the widows onto the High Street.

However, the lease on the premises is paid in advance, so I have decided to freeze the website for the moment. I will be watching the market as usual and, as a consequence of your sudden interest in my offerings, I might be persuaded to update the site…so watch that space. But if not, in April I will open the doors for anyone requesting access to the training seminars. No charge. You can come in and clear the shelves of old stock. So those of you who are non-members can get access at a time when members will have taken any advantage by being early birds. That stated, I’m confident that much of information is appropriate to the market at any time. How to find a bargain; where and how to do yourresearch; how to negotiate; how to communicate with agents and builders - these are lessons that will always work.

Remember that you will have to send an email to request access - it’s not automatic.

Just as last week I reviewed the year (well, sort of) in keeping with tradition, at the end of this little era, it seems appropriate to assess my performance. To assess whether I can claim to walk the walk or did I just talk the talk. You can judge. This is my personal track record which I reduce here to the barest summary of residential properties that I have bought during the last two years.

Not spectacular by many investors’ standards, but the potential growth and rental income will provide a return that £110,000 invested in a pension could not hope to emulate. Those of you who have read my biography on the website will know the significance of that statement. It’s also a lot more than companies such as Passive Investments ever promise to do for their investors.

The longer term growth will tell whether I have bought as well as I hope. Naturally I did my homework (just as I demonstrate in Module One) to do my best to have identified safe target areas in which to invest for the long term. If that proves to be the case, projecting forward, if I let the equity grow for the next decade, the profile should look something like this:

Based on my original investment of £110K, that’s a total ROI of more than 1600%.

Naturally none of that would be possible without the original £110K, but it’s not the most important investment in that summary. My greatest investment was time. Time to study what I wanted to achieve - to define my target. Time spent at seminars trying to assess what I needed to know and who was worth listening to. Time spent meeting and speaking to people who know what they are talking about. And time spent researching the market, my target locations and the business of property investment.

It’s important for you to have the confidence that if I can do it, you can do it. I’m an amateur. This isn’t my profession so I don’t concern myself with the fine detail of processes undertaken by my mortgage advisor, solicitors, surveyors or the agents. I think I understand the bits that I need to know to assess whether or not I am getting a good service from people who I am employing to work in my interest. Each is a professional in just one of the inter-related jig-saw trades. Some are great and professional but some are lacking. I consider it my job to identify the difference; not to do their job, but only to appoint the best people do the work for me. Then I assemble the pieces of the puzzle to create the picture.

If that’s sounding familiar, so it should. At the risk of repeating myself, I will tell you that the most important thing you will bring to investment is not your money, but your brain. The processes that you will follow are not as much financial as intellectual. If you have the latter you will learn the former, but it doesn’t necessarily apply the other way around.

I know very little if anything about you, dear reader. There are some clues in some of your email addresses and from that evidence I think that the majority of you are professionals. Some from property-related companies, banking and the media. So you take your intellect to work every day. To decipher briefs, solve problems, work in teams, communicate well, meet deadlines and budgets. You just have to adapt those talents a little to do this thing called ‘property investment’.

And I can tell you something else without fear of contradiction - you will only really learn how to do it once you do it. So don’t take too long before you do it.

Have a Happy, Peaceful and Prosperous New Year.

John

That sounds all rather worthy and benevolent on my part but when I considered where to start such a fragmented process, I admit that I took the easy option by using the various locations around England where I have invested during the last eighteen months. These are locations that I know well because I keep a close eye on each of the towns and cities and regularly speak to local agents. In effect, I set off expecting Land Registry’s stats for 2009 to confirm what I already know. Well it’s nearly Christmas and I fancied an easy ride.

I started in the East Midlands where I cut my teeth on my investment system when I bought two houses - one terraced and one semi. In Module Two I show you all the numbers for a third house that I was trying to buy on the same estate as the previous two, so I know the postcode well enough to tell you that the house prices were dropping until early summer when they bottomed out and have stayed flat since – just as the Land Registry average prices stats would confirm…wouldn’t they?

Really? That’s not what I expected.

Let’s try Brighton where the market has been buoyant all year. I know that for sure. I bought a flat for £100K last November which I know categorically is now worth at least £125K with no more spent on improvements than the cost of some paint and a carpet. So Land Registry’s average price stats will surely confirm the uplift in values for the BN2 postcode.

Mmmm. Bit of a pattern emerging here.

On to the outskirts of Manchester where I have bought a handful of newly built 2-bed flats at bargain prices during the last three months because that market is saturated with flats so developers needing to release cash have had to slash prices all year. That will have the effect of dragging average prices down. And the stats show….?

Enough, enough.

What does this really indicate? Firstly that stats (especially those showing averages and medians) can make or break any scenario according to how you research them and how you choose to read them. You should know my attitude to making blanket statements about the UK property market by now, but even when you reduce the search areas to a small footprint as I have here, the limited data can lie because the number of sales (especially this year) is very sparse. So the stats can be influenced upwards by just a few high-achieving sales and vice versa.

The most important lesson that this exercise demonstrates is how important it is to do your research in depth. That means talking to the people on the spot. Sales and rental agents will give you the real story. You have to develop the art of interrogation to draw that info from them just as I teach in Module Three. And to know how to interpret that information for your purposes. Yes, I know that I am repeating my training mantra ‘there is no substitute for knowledge’ but I make no apology for that, providing you are using real knowledge to make your calculations and decisions.

Now a change of direction back to the subject of my blog-but-one ago.

Just when you thought it was safe to go back into the bathroom where the corpses of Andy Shaw and Greg Ballard are lying drowned under water, this happened …
(Cue loud, screechy, dramatic music)

Hi John,

Andy Shaw here. This [new Internet product] is very inspirational, and I am certain it will change many lives, bringing much more than powerful hope of prosperity in the face of economic crises, job losses, and diminishing incomes…

…and he should know.

I received this email last week. Andy Shaw is still marketing for affiliates and selling Internet services on the strength of his reputation. You know that I admire self-confidence but perhaps this is verging on insensitive.

All that remains today is for me to wish you a very Merry Christmas and a peaceful break.

John

I would like to ask a question. What’s your reaction to this statement?

Anyone in the UK can achieve any non-physical objective thathe or she desires.

Which of these reactions was closest to yours?

- Yep, sounds about right.
- Of course that can’t be true or we’d all be rich and successful.
- Errrr…let me think about it.
- Too simplistic - needs more qualifying.

Okay, this is hardly a pivotal moment in your life and you just want to read on, but your response says more about your character than you might expect so I’ll come back to it.

I maintain that there is very little to stop any normal, healthy child born anywhere in the UK from developing in which ever direction he or she cares to follow. Or achieving any objective that he or she truly desires and is prepared to work for. The hindrances are likely to be social, parental or environmental, rather than the brain with which we were born. It’s well understood that we only use asmall proportion of our brain’s capacity. So once we have identified our target, we just have to train ours how to achieve what we desire by exercising it like any other muscle. By making it think, question, challenge, and reason.

I’m sharing this with you because I hope that you all carry on making your investments long after I blog-off at the end of this month. So I’m telling those of you who have set your sights on investing in property, that you can do it very successfully (as you can do most things you set your heart on) providing you are prepared to work at it. If you are still unsure, it could be due to the two greatest hindrance that you have already encountered – your up-bringing and your education.

We are all a result of how and where we were raised. For good and ill. Just as we are a result of the education that shaped our formative years. According to yours, you may have to fight against those early influences to break away from the destiny that others set for you.

I’ve never used this blog to vent my feelings about non-property subjects, but I will state nowthat the educational system here in the UK is cheating too many young people. It does not provide the developing mind with what it really needs to succeed in later life. And it’s ignoring some howling long-term problems. The national curriculum is too focussed on the very short term needs of political parties, to ensure that our children get the most appropriate education for their future (or that of the country). If anyone wants to take me to task about that statement, please feel free to email me and I’ll explain or debate the subject so that I can now move on.

(Before you write, consider how many well-known entrepreneurs left school at fifteen with no qualifications).

Since education is failing many of us and our intrusive Government is strangling the Brit’s natural instincts for invention, innovation, creativity and entrepreneurism – we have to fight back and do it ourselves by developing crucial skills. I’d shortlist them as…

Self-awareness; fiscal-awareness; determination; a work ethic; curiosity; attention to detail; self-confidence and our sense of logic.

The last two are probably the most important, of which ‘logic’ is the driver because it’s the key that unlocks most doors. And warns which you should avoid. As long as you keep applying logic to everything that you see, do and experience, you will ultimately reach your goal. Logic tells you what you need to know then where to find it. Logic provides you with direction through the minefield of good and bad advice. And the good and bad people providing it. That train of thought will indicate what you need to research – what talents you need to hone. One of which is how to question everything - mostly, yourself. Logic should tell you always to be self-critical because that’s your first step to correcting your weaknesses. That process should inevitably build your self-confidence.

My investment system provides an appropriate example. It’s an entirelylogical process. It’s built with various well-understood practices assembled into what I term ‘a system’. I didn’t invent the component parts of that system, I just organised them into a logical order after research and the application of logical thought.

Some of you will already be self-developing while others will dismiss this as of no significance and carry on as you always have. And many of you will fall between the two poles. Fine. Each to their own. But for those of you who I am still talking to, your self-awareness is absolutely crucial. Questioning what you are doing and how you are doing it is like laying your foundations before you can build your future. Which brings me back to where I started this blog.

When you read the question at the top of the page, how did you react? Did you give it a moment’s thought or did you read straight on? If you responded, would you answer the same way now that you have had time to consider? Or are you stubborn so wouldn’t reconsider as a matter of principal?

If you didn’t take time to answer, why not? Are you someone who skims over the surface? Too impulsive maybe? Do you rush at everything so never see any subject in depth? Are you simply not a detail person so you don’t tackle anything with enough real consideration? Or perhaps you thought the question was stupid – not worthy of your consideration. You’re not interested, so you don’t care one way or the other.

Only you will know, but it’s why I stated that your answer says more about your character than you might expect. Admittedly this was one small, insignificant question with no long term repercussions either way. Certainly not life-changing or with a multi £,000 price tag if you got your response wrong. So, in effect, it’s of no consequence whatsoever….or is it?

Have a goodweek y’all.

John

There were no relatives or animals involved, but last Tuesday I read a blog that left me staring at my computer screen with my mouth open. Literally. The news was that two of the highest-profile players in residential property investment in this country are to be declared bankrupt before Christmas. Their names are Andy Shaw and Greg Ballard. Their company is Passive Investments. You can even find an old blog directing you from my site to theirs.

I have read varying estimates of Andy Shaw’s personal wealth that fall between £30 million and £70 million. Whatever the truth, it was a lot of money, all made since he and Greg changed direction from running a double glazing company at the start of the decade and moved into residential property investment.

For those of you who have never heard of any of the names in this story, imagine that you have just read news that Richard Branson is about to go bust. And Virgin will be sold off by the end of the year. You would read on, wouldn’t you? Can that be true? Good grief. In BTL investment circles, Andy Shaw’s demise is the equivalent. The higher they fly, the further there is to fall - and the bigger the crowd of onlookers.

I deliberately stated that the two partners were ‘high-profile’ rather than ’successful’. There are probably more successful investors operating below our radar, but Messers Ballard, Shaw and Passive Investments are very public. Any of you who ever searched for property investment services available on the Interweb will have found them very quickly. At the time of writing, you still can. Much of the wealth was generated by book, DVD and seminar sales via sophisticated Internet Marketing.

I once did the same search and, to cut quite a long story short, eventually met both Andy and Greg then attended one of their seminars. I was offering my day-job communications services because while the content of their promotions was excellent, their presentation style was not doing them justice. It needed a serious overhaul which I offered to undertake. They were polite and jovial, bought me lunch, invited me to a seminar, but ultimately didn’t listen to much of what I offered so we parted company. However, that brief experience gave me a closer insight into their way of doing business and I was sceptical.

Please don’t deduce from that comment that I want to be associated withthe tawdry collection of hyenas now clogging forums with ‘told-you-so’ snipings as they rush in to bite a mouthful of flesh off the carcass. Some of them barely literate, using the space to spit bile in the faces of two gentlemen who have helped to make a lot of people very wealthy during the better years. Yes they have flown too close to the sun and are now about to hit the ground - and it was self imposed by somewhat dubious business dealings which I am certainly not defending - but some of the attacks that they are now suffering speak volumes about the forum-cloggers’ jealous bitterness while adding nothing to the debate.

If you have read this far even though the story means nothing to you personally, I thank you. So I should respond by drawing any lessons that could impact on your life and your investment plans.

Remember that I read this last Tuesday, the day after I wrote my last weekly blog in which I was reflecting on the debacle in Dubai. They have an uncanny similarity, don’t they? High-flyers not watching their instruments. So mesmerised by the view from on high that they took their eyes off the indicators signalling danger ahead. The main difference between the two stories is that Messers Ballard and Shaw operated very close to home. Geographically and systematically. Their domestic operations were nearly all on the south coast in and around Worthing, Shoreham and Brighton. The stats that they would have been reading; the numbers that they would have been crunching; and the properties that they would have been targeting could have been the same as yours. The very same, in some cases.

And the original system for investing in residential property in the UK that Andy Shaw developed, was extremely similar to mine - or should that be the other way around? Except mine takes account of the factors prevailing during the credit crunch.

So here is the lesson for today:

They were right. Their system was right. Their investments were right. Everything that they were doing was right.

Have you got that?

They were buying shrewdly, building value into their portfolio and remortgaging within safe margins to draw down tax-free cash. Nothing wrong with that. A good business model……until they lost their way. The problems were accelerated elsewhere in their organisation. From all the bad karma on blogs and web forums at the moment, it seems that they started to abuse their clients’ trust and cash a couple of years ago. They probably moved money where it should not have been to plug some holes as they opened. They broke their own rules about safety margins and most critically, they assumed the good times would always roll. Big mistake.

That’s a lesson to us all. But one important factor that should assure any one of us who has bought property well during the last two years and those of you who are about to buy - you are investing at the bottom of a financial trough - unlike our two anti heroes who bought at what turned out to be close to a peak on the graph.

Prices are not about to drop as they have between summer 2007 and spring 2009. That time frame and that drop in value of the Ballard Shaw portfolio was the main contributory factor in their demise. You, my friends and members, will not know such a correction for years. By that time of course, there is every chance that you will have forgotten this isolated lesson and be on the same flight of fancy with no reference to your instruments, but right now, you can assure yourself that my system, your investment and the UK residential property market are all as safe as houses (so to speak).

Have a good week y’all.

John

Judging from the emails that I received during the week, my last blog about the doldrums in the residential property market seems to have made an impression on at least a few of you. I’m only moderately apologetic for the lecture that a couple of you took a little personally. Please console yourself that if I didn’t care, I wouldn’t bother to get so energised on your behalf. Or bother to spend my time blogging it. Please understand that I want you to succeed. Got that? Good.

During one email exchange with a member who will remain nameless, I wrote the following response that seems to have made sense for said member so I thought that I should share it.

The set up: Member was unsure about the importance that I am claiming for the next few months for residential property investors. We had a short exchange that wasn’t going anywhere until I responded with this:

‘….. Perhaps it will make more sense if I put it like this: Imagine for one minute that you are an investor in the stock market instead of the property market. You will be studying stats and reports to try to work out which shares will increase in value after you have bought them. You may even invest in software designed to do that for you - to get the edge on your competition - to ensure you buy shares that will increase in value, before anyone else spots the trend. You could be spending a lot of money to ensure you get that edge. There are very expensive software programmes designed to read stats and buy shares a matter of seconds or even split seconds before your competition. All to safeguard your investment and guarantee that you only buy shares that will rise in value. Even then there is no guarantee – they could drop in price.

Now relate that to the property market that will exist for the next few months. Yes, MONTHS - get it? In stock market time scales you now have an eternity to make your purchase before the market starts to move again. And you know that it will. You don’t need to spend time studying stats or one penny on software to tell you that. It will rise as surely as night follows day. Eventually at a rate better than 10% a year. And the best bit - you will be doing most of it with someone else’s money.

Come on XXXXX, if the penny hasn’t dropped yet, it never will. I rest my case.’

In fact I think at that point the penny did drop for the member in question and I hope that by sharing this, some of you hoverers with the right funds and credentials will realise that there is no time to waste. You should be taking advantage of the current flat spot in the graph before it continues on its upward trajectory again in the New Year.

‘Nough said on the subject. If this has convinced just one of you to make your move very soon, it will have been good use of my time and this space.

I was going to leave the blog there but cannot ignore the big property news of the moment – Dubai. There will be a lot of closet experts surfacing in the next few days and weeks telling anyone who cares to listen that they prophesied this debacle. It’s already started. And while I never claim to be an expert at anything, I will state that I have declined offers to invest in the state since about 2004 – which I suppose puts me on that list of closeteers.

The reason that I wouldn’t invest was because I couldn’t see how the growth rates could be sustained as the investment companies were claiming. This is precisely the same thinking that makes me buy at the furthest point on the spectrum from the Dubai profile. Even the commercial properties that I have bought are small and cheap with measurable track records. Just as I teach in Module Two, I research as many stats as I can to assure myself that there is a positive track record for properties with a particular profile at a particular price in a particular location. It’s not a foolproof science, but to date, every property that I have bought is in positive equity with tenants paying rents every month.

When I considered Dubai, I could not find stats to provide the security that I want so any investment would have been a gamble. And it’s quite possible that I would not have paying tenants much longer. In fact, had I bought property in 2004 and sold (say) two years later, I would now be claiming that it was a good place to make a fast investment. But I didn’t and I’m very pleased about that even though in retrospect, the gamble would have paid off - but then hindsight always has 20/20 vision.

Does Dubai provide a lesson to all of us? I hope so. There are Eldorados in property markets all over the world and in your next street, but identifying them then getting your timing right to invest, is the real science. Since I have no psychic powers I have to employ simple systems based on provable facts, relating to logical growth patterns etc. Perhaps I have missed some fab opportunities to invest in high-earners in recent years but to date my methodical, cautious investment method suits me fine because the invaluable bi-product is that it enables me to enjoy a good night’s sleep.

Have a goodweek y’all.

John

Well it seems that we are already there. The wind has dropped; our progress has slowed to a standstill; everything is calm.

It’s hardly sixth sense on my part to forecast a few blogs ago that the UK property market will flatten out at the year-end. It always does. But the following extract from a recent article in The Times suggests that the freeze has already started (with my apologies for using research based on average findings):

House Prices Slip As Owners Aim To Sell By The End Of The Year
Rebecca O’Connor, Property Correspondent
Nov 16th 2009

Asking prices fell for the first time in three months in November as home-sellers tried to shift properties before the psychological Christmas deadline.  Rightmove stated that asking prices had fallen by 1.6 per cent between October and November to an average of £226,440 and it predicted further monthly falls, with recovery not expected to resume until February.

Miles Shipside, commercial director of Rightmove, said: “In all but the most buoyant of markets, home moving comes second to Christmas festivities. While the market has recovered from some dreadful lows, this month’s price fall proves that it doesn’t have the strength to buck seasonal trends. We expect three months of asking price falls before a tentative recovery in early spring, likely followed by pre-election jitters.”

(If you want to read the whole article you can find it at Times On Line. You will also find links to other articles that document the consistent monthly price rises across the country over recent months).

What’s the relevance of this to us as prospective purchasers as opposed to vendors? Answer: You have a few months in which the odds are stacked in any astute buyer’s favour. But the clock has started ticking so don’t hang about.

The general overall trend with property values is upwards, countrywide, so it will almost certainly return to that earlyish in the New Year. For the moment, someone has their foot on the ball giving us time to think without the pressure of time. This window presents a great short term opportunity until the ball is back in play again. If you wait until the spring and find that you have missed a particular bargain, you only have yourself to blame.

You should be identifying targets (the more the better) now while time is on your side. Check them regularly but don’t move until you think you dare not leave it any longer. You want the agent or vendor to bite your hand off for the sale. He/she is only likely to do that if you are one of a tiny number of prospects to show an interest in the property that he/she is desperate to sell. Remember your training - when you make your enquiry, be casual – don’t sound too enthusiastic. Get more information from an agent or vendor than you give in return. Find out if there has been much interest. Will the vendor take an offer on the asking price? In the region of what? (You may not get an answer to that one, but remember -  if you don’t ask you don’t get). If an agent or the vendor volunteers that, you know that you can usually push the numbers further south than they are indicating. Check my negotiating advice in Modules Two and Three.

The one fact that you must make clear at an early point is that you have adequate funding in place (don’t you?!) and can move quickly when you make an offer (can’t you ?!). That’s crucial. Crucial that you can do it – crucial that you tell any vendor. It’s the make or break factor.

That’s the positive side of the coin – now here’s the nag. It’s likely that the procrastinators amongst you will interpret the above article as evidence that you don’t have to hurry. To a point, you are right. I think you can be pretty confident that (apart from the circumstance above where you promise to complete by the end of December) you will be factoring the same purchase price numbers into your calculations for at least four months from now. However, if you are now consoling yourself that this means there’s no hurry, be cautious. When the spring comes, will you find another reason not to move?

My point is that there is always a reason not to do most things. Buying property well, demands effort, precision, research, time – in other words, work. It also demands that you have testicles (figuratively). If you have been finding reasons not to move, you may not have what it takes to ever make an investment. If you are just a window-shopper, either admit it or do what it takes to break that cycle, but stop wasting your own time kidding yourself. Volunteer your services to The Samaritans because at least the time that you are currently wasting on so-called research will serve someone else for the better.

Have you been finding reasons all year not to make your move? Saving a bigger investment fund? Waiting for the right opportunity? Not sure where you need to live? Whatever your reason not to make a commitment during the greatest slump in property prices in recent decades, was wrong. Land Registry stats for this year clearly indicate that median prices for all the locations everywhere in the country that I checked, have risen since April. Regardless of the profile of the property – house, flat, terraced or semi detached. So if the property prices that you are now hoping to drop, do no more than remain flat for the next few months, that will prove that you should have bought at the start of this year. Since then you have needed to find more money to purchase any residential property, so the time you spent increasing your savings was probably wasted.

Remember - whenever you make your move will almost certainly be better than waiting. The prices next week, next month, next year, are not likely to be lower than they are today. And they could be appreciably higher this time next year. But if by chance the value of your newly-purchased investment does drop a few percentage points, what do you care? You aren’t about to sell. And you now own a property…. And you now own a property…. purchased with someone else’s money. You’re an investor in the best-performing sector in the UK – PROPERTY….RESULT!!!

Have a good week y’all.

John

Good Monday Morning Folks

I was in a French village with my family a few years ago at New Year, which is celebrated more on the Continent than Christmas here in the UK. So we wrapped up and gathered the fireworks to play our part in what would undoubtedly be pyrotechnic extravaganza as the village clock struck midnight.

The anticipation and mulled wine heightened our sense of expectation …. The bells chimed …. The matches were struck …. a … n … d …. NOTHING!! The village was as quiet asa grave, save only for our modest phut – phut – woosh offering. With the emphasis on ’phut’.

That was then, this is now. And another New Year approaches as did my intrigue when, in my blog-but-one ago, I asked for your reaction to this site’s imminent closure on 31st December when 2009 becomes 2010. Should I shut the doors or adjust my 2009 product offering for the New Year? My expectations may not have been quite as high as for the New Year celebrations in France (no mulled wine for starters) and that was just as well because the people have spoken…or rather, they haven’t. The village was as quiet asa grave. The message is received and understood, folks, so the shutters will come down at the end of December. The shop will shut. Apparently it will not be missed as the village becomes a dormitory once again.

(Incidentally, thank you to my band of regulars who did respond. I particularly appreciated the comments from those of you who kindly praised the consistently high quality of my writing. We’ll all keep in touch).

Meanwhile, I have a weekly blog to write…

The Story of the Flat in Mitcham - Episode Three

I trust you recall the first two instalments. I spotted this two bed repo in an auction in March with a guide price of £90K. But it was pulled the day before the auction. Drat – this one stacked up!

I already had a quote of £6,700 from a builder to upgrade it to a respectable, rentable status. And researched local RICS valuations indicating the upgraded value to be £135K to £140K at that time. So the numbers suggested that it could stack up with a good top-end valuation for a remortgage after six months ownership that would have come up during this autumn. Meanwhile the rental value was over £700 a month so it would yield at least £250 pcm.

That was back in the spring since when it’s been boarded up, unsold. Then I spotted it back on the market three weeks ago with an asking price of £135K with no work or improvements since March. At that price it doesn’t stack up for a BTL investor but could just be interesting to a home-buyer. I had in mind that if it wasn’t sold by early December I might offer £110K with the promise of a fast transaction by Christmas.

That’s no longer an option because of this….

2 bedroom maisonette for sale, Mitcham

£135,000

PUBLIC NOTICE
We are acting for the mortgagees and have received an offer of £126,500 on the above property.
Any interested parties must submit any higher offers in writing to the selling agent before an exchange of contracts takes place.

So it’s virtually gone, but thereare two lessonsto be learned - the first being to keep a very close eye on activities in very small areas. Knowthose target areas and all activities relating to property within your price bracket.

Regarding this specific property, we now have the crucial purchase cost so let’s consider this deal fora purchaserusing my system. The approximate numbers for a BTL investor buying this flat are:

Numbers for a Home-Buyer:

Not a bad investment for your own two bed flat in Greater London – evenproviding the option to rent the second bedroom to help pay the mortgage. Okay, this one is off the market, but there are more when you know how and where to spot them…so get spotting. And if you don’t know where to start, it’s time you revisited my training modules while the shop’s still open.

Have a goodweek y’all.

John

By chance last week, I found myself defending debt on three separate occasions. Twice, the conversations referred to mortgages when friends were discussing their borrowings and how they were trying to pay them off as fast as possible. I firstly had to decide whether we had time for the inevitable debate. So often, anyone with a fixed view that all debt is bad and should be paid off as fast as possible, takes a lot of convincing of the alternative approach.

So what is that debate?

I suggest they think of it as someone else providing them with the funds to invest in the property market – which in the UK is a very good place for your own money, let alone someone else’s being invested so you can get the profit. Sometimes that statement does the trick and the penny drops, but it often needs further explanation.

That debt declines in real term value every year. As your house increases in value – traditionally doubling within ten years – the mortgage that may have accounted for 90% of the house’s value at purchase, halves in proportion over the same period. (90% at purchase becomes 45% of the house’s value within ten years; 22.5% within twenty years and so on). Your equity grows in direct proportion. This is why residential investors only use interest-only mortgages. They don’t want to pay more than necessary for their borrowing so don’t worry about paying off the debt – they just let it decrease naturally as a proportion of the increasing value of their investment. They know that what appears to be a very high borrowing on day one, will quickly reduce as a proportion of the property’s value over time.

A personal example: I raised £300K mortgage to buy my office premises. The cost of the mortgage payments at the time were marginally higher than the rental would have been. I recall a friend pulling my leg at the time about paying more to own the premises than just renting it – ‘some businessman you are..!’ Within four years, the property had doubled in value to £600K. Since I bought it, the rental cost in this building has increased by about 25%. I’ve thought about telling my friend but decided against it.

All this should illustrate the point that when you buy a property you instantly become an investor in the UK property market. Whether you are buying BTL or your home, the market plays by the same rules of economics regardless of your reason to own your property. As a result, you should always be thinking like an investor, which leads to the conclusion that perhaps you should not be paying off your mortgage – ever. Or even selling your home.

Really? Yes, really.

This is how that could work for you:

You bought well at (let’s say) £100K with a £90K interest-only mortgage. That minimised your mortgage payments at a time when you needed the money. But now you have owned the property for long enough that the value of your home has doubled to £200K, so it has £110K of equity. You want to buy a larger house that will cost you £250K so you assume to sell your existing home and top up your mortgage to £140K to buy it.

Alternative:

You raise a 75% BTL mortgage on your existing home. £200K x 75% = £150K - £90K (existing mortgage) = £60K. That becomes your down-payment on your new home valued at £250K. You raise a new mortgage of £190K to cover the difference.
Result:

1. Your original home becomes an investment paid for by tenants with a profit every month contributing to your increased mortgage on your new home.
2. It will increase in value year-on-year to provide a long term investment for ever. As it increases in value over the years, you can increase your BTL mortgage and take some of its equity tax-free. (If you sell it you will incur capital gains tax). You may recall my blog a few weeks ago when I recounted my daughter’s investment in a BTL valued at £100K in her mid twenties that should be worth about £1million by the time she is sixty. And will have provided about £100K of rental income profit over that period.
3. Your new home will increase in value at the same rate, so within ten years it will be worth £500K with £310K of equity.
4. That ten year mark will mark twenty years since you bought your first home for £100K with £10K equity. By then, your two properties will have increased their values to be worth close to £1 million with a total of about £600K equity. Plus an income from your BTL property that increases year-on-year.
5. Your original plan would only have resulted in your home (value £500K) having £360K of equity by the twenty year anniversary - with no rental income from the BTL.

I appreciate that this is not for everyone. I’ve discussed this approach enough times to know that some people will not consider taking on more debt under any circumstances. But if you are now thinking like a property investor you will see the logic in this proposition. More important – you will see the long-term game plan and know that the rules are undoubtedly stacked in your favour.
So who wants a level playing field?

Have a good week y’all.

John

My subject title about says it. I try to keep up to date with trends in the property market by regularly checking various industry analyst websites, but right now it’s a job to know which to believe as indicators of longer term trends.

Just look at these snippets from articles posted within a three day period last week. First the good news (well, comparatively):

House movers are returning to the property market, according to the NAEA

The NAEA (National Association of Estate Agents) representative was commenting after the Council Mortgage Lenders (CML) published research showing that lending for house purchase showed material annual growth in July - the first time since early 2007 that this has occurred.

The CML figures suggest the property market is "inching its way back to recovery" and first-time buyers have been showing interest in the housing industry over the first half of the year, "now the rest of the market is following".

Landlords in the UK have seen rents increase in the last six months, according to editor of Property Hawk website Chris Horne.

He claims that things "are starting to pick up" in this regard, with a 2.2% hike in rents recorded by his site during the half-year period. "Although they have fallen over the last two years they are actually starting to rise again, Mr Horne explained.

According to the research, the average rental price for July 2009 was £564 – but this dropped to £531 in August then grew to £674 this month.

Then came the not-such-good news…..

Mortgage lending in the UK dropped to £12.6 billion in August.

This was 13 per cent down on July’s figure and 37 per cent lower year-on-year.

Assessing the current situation in the council’s monthly market commentary, CML economist Paul Samter said that it remains unlikely that there will be a significant pick-up in lending, although "the prospects for wholesale funding markets are improving".

He added that this could result in "a gradual easing in constraints on the supply of funding over time", but it is likely that the market will remain subdued for a while.

The general election next year could have an effect on house prices.

Whatever the outcome, elections are often followed by a "tightening of the belts", according to Gary Smith of the  National Association of Estate Agents (NAEA) president: "In that sense, there could be a period where house prices are not increasing as much as they should."

Confused? Of course you will be if you are waiting for stability in the market before you invest your hard-earned in your new home or BTL. But what does stability look like? Will you recognise it when you see it? Or will it be too late by then because you have missed the market?

Here are some considerations to bear in mind when reading articles such as those above:

• Regional characteristics. Have you heard that somewhere before? Okay, but I make no apology for reminding you since Module One that your own personal local knowledge is far better and far more accurate than the blanket observations by such commentators who summarise the entire UK housing market in soundbite sentences averaging out numbers drawn from the UK’s entire 30 million residential properties without acknowledging regional variations.
• Stats can be made to suggest (almost) any theory that you want to proffer. Most commentators are employed to commentate in the interest of a particular employer. So few of them are truly independent. Any more than someone with column inches to fill for a regular feature. So articles with the same sized headlines are seen to be of equal importance, which they won’t be. The last one above is pure speculation, so don’t give it equal credibility as those using proven stats.
• What does it matter if the market is unstable. Frankly, the longer it takes to settle down nationwide, the more likely you will be to find MVs and BMV property. And even if property is going to dip in price again at the end of the year (as it does traditionally in some parts of the UK) the likelihood of next spring being as fallow as this year’s is highly unlikely wherever you are investing around this country.

Which means that still the only thing that should stop you buying is the availability of funds. Once you have sorted your finances – and if you can legally find or acquire the money that you need to invest - do it now. Oh yes…and stop reading the procrastinations of industry ‘experts’.

Have a good day y’all

John