Singing Pig

is it just me that has missed the obvious or is my disbelief well founded when staring at the herds of lemming like 'property investors' out there who believe that any property bought for circa 15% - 20% bmv is still good business?

be honest, what do you typically buy at?

personally, ive rarely paid more than 75% and generally, i wont go above 70% yet im truly astonished to find that other buyers in my target areas are regularly offering and completing on purchases for 85% even now.

last year, i increased my portfolio by £1.93m at a cost of £1.31m which is slightly below 69% of omv --- i.e. 31% bmv --- i know how difficult it is for me to continue funding my own marketing programs even on those margins, but i also know full well that when my fixed rates expire in 2008 and 2009, and when im faced with valuations (say) 10% lower, i'll still be able to remortg onto a new low(ish) fixed rate because my loan to value ratios will still work, even at 15% lower.

furthermore, i also know full well that none of my tenants will be at risk of eviction as a result of my lenders repossessing me, but how many of the 15% - 20% bmv'ers  can be as confident in their own future? how many of todays 15% - 20% bmv buy-to-letters will be able to remortg onto a fixed rate this autumn or next year rather than stare down the barrel of an svr as they hear the trigger being cocked?

it seems that many of the people on this board who buy at 15% - 20% bmv are not only writing their own death certificates, theyre also jeopardising the homes of their tenants because unless im very much mistaken, there will be huge numbers of buy-to-let mortgages going into default in 2009 as the result of declining property values over the next 18months and many of them will come from those who are being encouraged to think that 15% - 20% bmv is still a good deal when (in my opinion) that figure will actually be near to the true value of a property towards the end of this year/spring next year.

i realise that life is all about opinions and just like belly buttons, we've all got one and theyre of no use to anyone else but for what its worth, heres mine - im bracing myself for real falls in value to the order of 3% - 5% by spring this year when sellers 'show a bit of willing' and reduce their asking prices, but that will be followed by a further 5% - 10% autumn onwards when its realised that buyers werent willing to be tempted out of their slumbers during whats going to be a very low transaction summer. in summary, im saying minus 8% is the best we can look forward to and im hoping that minus 15% is the worst.

as for 2009, all bets are off. there are far too many imponderables to evaluate hence the reason i simply cant bring myself to even think about buying anything that requires a purchase price thats 70%+ of omv.

RICS valuers have given up trying to fill their appointment diaries, suffering a fall from 20 valuations per week last summer, down to typically 8 a week throughout october, november and worse still in december. the only thing supporting prices right now, are lack of stock and thats going to change quite dramatically over the coming months as more distressed home owners come off low fixed rates.

meanwhile and before then, a substantial proportion of the remaining mortgage business that is being done, is equity release on ppr's and if you havent already done yours, id suggest you do it fast, as 40% more mortgages were declined in the last quarter of 2007 than were declined in the last quarter of 2006. the first quarter of this year will be no better and by all accounts, is likely to be worse.

for the record, i used to frequent this message board quite a lot 2 or 3 years ago and i gave up when the housepricecrash crowd turned this place into an arena of guerilla war.

i note there are still some good people on here from both sides of the camp and although i thought extradrymartini was too pessimistic i always felt he was worth reading and im glad to see that hes made a (somewhat aborted) comeback. dr bubb on the other hand is somebody that i could cheerfully strangle. perhaps it was more to do with the way that he delivered his message rather than the content, but as somebody once said to him "dont make the mistake of going for a career in politics.." then again, ramping up commodities at every opportunity was and still is irritating when this is clearly a property investment board.

too many of the good guys have gone now and much of the fun has left with them, so if youre out there bewarethesharks, pieman et al, heres wishing you a safe 2008. i believe that good fortune will favour those of you who are willing to be patient and cautious with their bids and i wish good luck to anyone left who still believes in the myth of 15% - 20% bmv in what will be a precarious year...

regards

fsfw
 

Flat sto.......   good to see you back f!!!  how i agree with you re the lemmings and BMV campaigns.   i met a friend recently who had had 15 letters from BMV dealers !!!    She will no doubt accept the highest offer, i hope she gets good service from them and does not end  up being evicted.

 I also miss the fun which there used to be from lively debate on here - there is virtually no debate at all these days, just leads, deals and more deals/leads, and newbies asking for help  - not that i mind answering some of their questions, but you do want to say "do a bit of reading first" sometimes !

i largely agree with you old chap,

i have never paid more than 78.5% for a property, i simply cannot see under 20% as being viable (unless rapid BTS with cash and no mortgage)

yes it is a little disappointing to see many folks not here any more, i learned much from many people on SP who no longer post.

the whole BMV thing and repo leads has been overwhipped, i know of more than one buyer who is suffering terrible cash flow problems on nearly 20 properties (it is not supposed to be like that?)

i did buy one in December where i was the 11th person or firm contacted so i am pleased with that... fish a small pond expertly seems to spring to mind.....

Rik

FSFW, I agree that there are ever-increasing herds (or should that be hoards?) of property investors queuing up to join the BMV Enlightened Brigade these days.  Unfortunately, that's where our views part company...

I've always invested in property because I believe in the long-term growth and I still do.  My portfolio works very well thanks.  In 2007, I increased my portfolio by 1.78M with purchase prices to value now of average 85%.  Some of these were "great BMV deals" and others I bought through estate agents cos I decided "this is ridiculous! Prices are rising so fast...!"  Here are the properties - can you tell which is which - great BMV deal or not?

(The clue is that properties in my area rose in value by around 15% over the year!)

By the way, doesn't it make you laugh how things are reported in the press?!  I got this email from This Is Money today with an article entitled:

"Shock Leap in December House Prices!"

Homeowners have been warned of a tough year for property after a shock leap in prices in December produced further evidence of a turbulent market.

The cost of the average home jumped by £2,500, or 1.3%, to £197,000, in December, according to the latest Halifax house price index released today.

--------

What a worry, hey?!

clottie: 15 bmv dealers contacting one vendor? are you sure about that?? thats an amazing number of traders in one area. where abouts was it, as i want to be sure i never make the mistake of trading over there. many people will say that 15 traders competing for business can only be good for the vendor and of course, theyre right as the vendor gets the best price.

question is, at what cost?  no margins literally means no margins and when the rent roll gets tight, any investor who isnt sat on a cashpile for a rainy day is going to be in serious trouble when it comes to subsidising rent shortfalls and their rent back tenants will be screaming from The Sun to the high heavens when theyre turfed out because their landlord has defaulted on a the buy-to-let mortgage of 85% - 90% ltv.

theres nothing wrong with a high loan to value mortgage if youve drawn cash out after having bought cheaply and youre using that cash as a warchest for future acquisitions or as a reserve for shortfalls in rent on your existing portfolio, but if youre buying at 80% - 85% of omv, where is the margin for error?

rik: i havent bought since august as theres no mileage in most of the enquiries that have come through as equity has already been sucked out via remortgs wayyyyy before they came to me and where there has been equity, other traders have paid over the odds. i refuse to get into a competition of buying at or above 80% omv never mind around 85%.

last year, the lead sellers correctly identified that lenders were willing to offer 85% and 90% loans so they ramped up their marketing to generate leads which were 85% omv. seemed like a win win scenario for an armchair investor who hasnt got the time or money to generate their own leads and in fairness, it was win win for some people but not any more.

lenders are tightening up their loan to value requirements either by reduced ltv's or through higher charges including the now ubiquitous 2% or even 2.5% arrangement fee tagged onto the end of a loan. BMS now require 6months ownership before allowing a remortg and MX are out there on there own blowing in the wind but for how long before their own funds dry up and they have to cut back on instant remortgs which all leads me to ask the question, which of the high profile lead sellers are going to have the balls to ask the question "will you accept 75% / 80% for a quick sale?" because when they do, thats when they'll be facing reality and offering a genuinely worthwhile service that suits the needs of investors like your mate with 20 properties that he's paid too much for and protects the needs of his future tenants who are currently living under the undeclared threat of eviction.

angela:

not really too sure how to read the following statement:

*********** 

"In 2007, I increased my portfolio by 1.78M with purchase prices to value now of average 85%.  Some of these were "great BMV deals" and others I bought through estate agents cos I decided "this is ridiculous! Prices are rising so fast...!"

***********

are you saying that

1. portfolio value at time of purchase was £1.78m but actual purchase price was 15% bmv - i.e. £1.52m

or

2.  portfolio was bought at face value of £1.52m and has naturally increased over 12 months to £1.78m?

or

3. am i being completely thick and havent understood what youre saying? 

Hiya,

Sorry it probably was my fault if that wasn't clear.  The point I was trying to make is that in column one is the prices I paid for each and column two is the values now, but since prices rose 15% over the year, it's hard to tell now which were great bmv purchases, and which weren't so great (bought through ea's - although all were what I call 'bargains!' at the time).

Angela