Singing Pig

Whilst looking for investments 2 years ago, I considered the BMV property route.  I read the writings of the major players.

Seemed like a good investment at the time, but never persued it as my sales techniques may not have been as polished as the main people on here.

At the time, I was looking at 25-30% bmv, and re-mortgaging to release my funds..Easy!!

Don't think that is true any more

Considering house prices have reduced by 10% and I think another 15% coming, my offer would be 50% of value...Is anyone making this deal come true?

Who is gonna accept?!?!?

Ade?

 Hi Tassotti,

First of all, in property, whatever the market is doing, nothing is "easy".  There are no short cuts, no get rich quick, and no magic fairy dust to sprinkle around to get yourself a cash flow positive portfolio. Property is for serious and committed people who provide a genuine service to their clients (tenants).  It takes effort on your part.  Property is, and always will be, a mid to long term investment.

Therefore, if you had got involved two years ago, if you had done things well, you would hopefully be two years down the line towards achieving financial freedom!.

With regards to your question about BMV discounts.  It's all about the numbers and making them stack.  Towards the end of last year I was able to get deals to stack with only a 10% discount.  That was because the mortgage products were a lot more favourable than they are now. 

When people talk about making very low offers, they fail to remember that a vendor can only take such a massive hit on their property if they have a huge amount of equity in it.  In most cases, that would mean that they would have to have lived in that property for a long time or have only had a small mortgage in the first place.  With house prices dropping, that "buffer" zone of equity is getting smaller and therefore I believe that there is going to be less and less room for negotiation.  Clearly the vendor is unlikely to accept an offer for less than what his property is mortgaged for.  You can always have a look on the Land Registry to find out what the person paid for the property originally, and that should give you an idea as to how much they might be willing to negotiate.

If you want to find out how much rent the borrowing will support , you can use this simple calculation:

Monthly rent x 12 divided by the product interest rate, divided by the product rental stress.

With the current mortgage products and high rental stresses, you need to get 25 %+ discounts to get anything close to stacking.

Even if you get something with this discount, you are still going to have to put 10 - 15% of the NET price into the deal as there are currently no legitimate ways of structuring "no money down" deals.

Hope you find this helpful and good luck with your investing career.

Well, thanks Vanessa.

If I had asked you to teach me to suck eggs, your post would have been appreciated a bit more.

I still wouldn't buy without a discount of 50%

I think you are missing a fundamental point Tasstoti, If you want to make money with Capital Releases every time yes - you're gonna need 50% to make anything work - but you are going to see a lot of trouble down the line and the quality of your portfoli o will be poor. And not to mention It will be completely unprotected against the recession coz you are so dependent on the gross value and the Equity in your portfoio.

 That's why cash flow is much more important than equity releases.
 

From your post, it appears that you do not know how to suck eggs.  Sorry I misinterpreted it.  My agenda was only to give you my (humble) opinion, which is what you requested.  You gave the impression that you have not purchased any property, so I could be forgiven for thinking you would appreciate some advice from someone who has.

I look forward to hearing about your 50% BMV deals when you have done them. 

tassoti,

i had to laugh at your resposne to vanessa ... very dry.

in answer to your OP, i have been trundling along buying at around 20% BMV ... never managed to get anywhere near 50% and i would guess my lead conversion would drop dramatically if i held out for that level of discount.  i simply buy at 80% of OMV at that point in time, ensuring that there is a good cashflow.  i've just re-financed some of my earlier purchases and had to put in around 7 grand into two props each to get to 75% LTV .... a combination of a slight drop in prices and my own wish to get reasonable finance (e.g. BMS's 75% LTV 5.89% product) ... the cash came from my trading profits. 

it really depends on your objectives though.  if you only want to buy and hold 2 props per year, then why not cream off only the best possible deals?  for me, i aim to buy no more than 5-6 per year, and don't do any BTS, so around 20-25% is good for me.  i have sold off one or two slightly dodgy buys from my earlier days, but now i only buy props i plan to keep forever.  i pass on a lot props that i don;t want by offering at 40% dicount or so ......... no vendor has ever accepted that (few could, if they wanted to). 

it all boils down to the level of trading / buying you are aiming for .... as you increase your required discount, the number of deals done will fall rapidly. 

just my tuppence ........ !

First of all, apologies to Vanessa. Hope I didn't offend you. I am an experienced property investor, but am not buying at the moment ( Due to my reasons in the first post)

My point is if I buy at 20-25% BMV at the moment, in two years time that equity will have gone. My cash-flow will still be the same, but when I come to remortgage (if I can), that will be wiped out, unless the mortgage situation changes rapidly.

Pod says he has had to put in 7K  to keep this business going. I'd rather not finance my tenants to live.

So, assuming no-one will accept 50% value, I am not buying anymore.

Does that make more sense?

I'm with Vanessa here, her post is sensible and reflects the fact that she is doing and you, Tassotti haven't.

Set the bar high enough - beyond any acceptable "discount" and few CAN say yes.

"I still wouldn't buy without a discount of 50%"  you sound as if you have your excuse to do as you have been doing - nil.