Singing Pig

SpeedyThing:

Ok. 2 scenarios,

 1. You put your money in a rising asset (e.g. oil) and then invest it in property once it is gaining value again

2. You put your money in a declining asset and wait 7 years for it to reach the value you bought it for.

 For someone who has been doing this for 30 years Carl you make some strange suggestions... There I was thinking investors tried to maximise gains. Warren Buffet may have warned against diversification but considering the number of pies he had his fingers in it seems a little hypocritical. When did buy low, sell high become so unfashionable?

Hello,

In response to the above, and for clarity, I was commenting specifically on strategy for the single BMV sector. I did not make the above suggestion because that was not what the person starting the thread asked.

Also the ways different industries work and are traded makes it difficult for inter-trading, for instance property is not what I would call a liquid asset. Now depending on how you would trade or invest in your example of oil my response would be different in terms of using oil as a way of either earning additional income or somehow switching from property into oil.

With oil, and other commodities, you are either a direct buyer or seller, broker or you deal or invest in the stocks or financial markets. Getting out of your property investments in time to catch a rising market in commodities would be difficult due to the time lag created by selling up, switching back would be even harder.

In conclusion I am happy to discuss all types of investment strategies across a number of industries if someone starts a thread on it, I have traded oil in the 90's and I have a number of friends who do it full time.

As for this thread I have confidence that as an investment strategy property purchased at the right prices, which reflect the UK's boom & Bust cycle, will always be a good asset class to be invested in and to trade in. Having said that I certainly agree there are lots of other, more liquid, ways to make (and loose) money.

I would be interested to contribute to a thread which focused on how people work their way though these difficult times, manage their property assets, ideas to save money in their portfolio, ideas on how to make extra money to see them through and even (possibly another tread altogether) how the BMV industry can develop a professional voice to lobby for a special class of mortgage product that is not available to the public.

Any thoughts?

Cheers!

Carl Henry

PS: I decided to start a thread aimed at finding ways to survive, please see:-

http://www.singingpig.co.uk/forums/520458/ShowThread.aspx#520458

Good answer! :)

Maybe I am generally missing something here but would you please explain to me just how someone in the following situation will stand to lose money:

Buyer pays 154k for house worth 220k
Mortgages property @ 165K - 75%LTV (which pays for costs and a little cash back for a contingency fund)
Mortgage interest pm - 880
Rent obtained pm - 1050
5 yr fix on mortgage @ 6.44%
£170 pm surplus for management fees, insurance, gas & electricity cover etc, etc.

Hold for 10 years sell at significant profit, if you want to sell that is, alternatively re-finance rinse & repeat...

Have I missed something here?

Buyer gets house worth £210k not £220k.  Prices fall 10% in a few months making it worth £189k today.
£170 surplus gives small income after costs, but not enough for the £10k refurb required after 5 years.  As a result rent falls to £1000 pcm even though rents generally have risen a little.
At such time house is worth £150k (prices have fallen another 20%), banks are lending at 70% LTV so remortgage is impossible.  SVR 7.5%.
Rent obtained £1000 pcm, mortgage £1031.  Negative equity, negative cashflow, a scruffy house that you can't afford to renovate.  Hopefully a one off and not indicative of a massive portfolio of liabilities.

This is not necessarily the most likely outcome but it is certainly not impossible.