Deception of Case Studies UK – Property Rant 025

Property Rant 025

In this video, we look at real life properties that we have sold and how I can make them look like they have performed so much better than they have just by NOT giving you the true picture or all the metrics. Case Studies are great, but they can also lie, or at least deceive even though the figures are absolutely correct.

Don’t fall for the tracks of outrageous returns, look deeper and work out the real return and judge a property investment company of these real returns.


Video Transcription

Hey, guys. Property search… Think Gladfish. I’m Brett Alegre-Wood, and this is Property Rant.

So, today I wanted to carry on with the theme of the deception of case studies, and It’s not really deception in a lot of cases. It’s more just presenting certain facts without the full facts. It is on you to make sure you get all the facts so you can make a proper decision. Now, case studies are used everywhere, and they’re used on emails. They’re used on websites, you know, a lot of times they’ve got testimonials, all this sort of thing. But what I’m talking about specifically is case studies of how property’s performing. So, let’s take a look at some of the properties where they had performed over the last various number of years.

So, Witham Warf in Lincoln, beautiful waterfront in the Brayford there, development. This was the best development in Lincoln at the time back when we bought it. And we actually got the last 14 on site. The developer just wandered off site, so we got a particularly good price, which is 125. At the time, they’re worth about 160s, 170s. So quite a substantial discount in this case. Now, interestingly, if I just told you £125,000, £130,000 profit. Now, me saying profit is actually a deception as well.

It’s not profit. It’s this is how much equity, or this is how much it’s gone up. Profit is after all the costs and all that sort of stuff. So just be careful of that deception, because people say, “Oh look, 130 grand profit.” No, not profit. If you solve it, and you got that, and then you took away all the fees and taxes, great. So, it has gone up 130%, so it looks like 100% return on your money. In actual fact, it’s a lot more, because you paid a deposit and got a mortgage. And so therefore, that may represent 300 or 400 or 500% profit or, you know, hey, a profit.

But the point is here is that 130,000 is over nine years of ownership, so it works out at 15 grand a year. Still a good investment. And that’s been a fanstastic investment. All these properties, and, in fact, pretty much all of our properties, they rent, and they stay rented, and they very rarely have void periods.

And that’s one of the key things too. A lot of people think they’ve got to be worried about that. They don’t, but that’s a story for another thing. So, even though it looks like 100% profit, actually, consider over nine years, 15 grand. That’s getting much more accurate about what the real return is, and obviously, the property cycle changes, in this case Lincoln. And these are all there through the recession, so they’re all bought pre or post-recession, so where house prices dropped in most cases.

Now, let’s look at Echo Central. So, Echo Central in Leeds. Leeds dropped considerably, prices about 30% drops. So we go in after that happened and got these for about 59 grand. At the time, at the height, they’re worth about somewhere between 99 and probably about 120,000. So, 40,000 profit based on this. That 40,000 over seven years is 6K per year. Perhaps not as good as here but still okay, and you know what? They’re rented. They’re great, really nice flats. And I think now you’ll start to see these prices start to go.

See this is the thing, is you can look over a period where you’ve just had a big capital growth, and you think, “Wow, these guys are wonderful. They can do that every year.” No they can’t, because when you own properties for nine years and seven years and six years, you’re going to see them go up and some years, you’re going to see them sit around and do a lot. In other years, they might even go down a couple of years in that 10 year or property cycle.

Fairways, Milton Keynes. Bought for 120, currently 125, you know, six years, 25,000 or about five grand a year. So, not necessarily as good, but you know what? It’s still a making profits over thing. It’s certainly not dropping in price, and what you’ll find now is is this commutable to London.

You’re going to see the house prices start to take off, because that’s what’s happening. The cycle realistically, anywhere outside of London and the commuter towns skipped a property cycle. And because of that, what’s it’s meant is values haven’t doubled in every 7 or 10 years, and what do we say?

The biggest assumption of property is it doubles every 7 or 10 years, in most cases it didn’t. A lot of London cases, it did. So now you’re starting to see these places and certainly Lincoln’s looking up. Leeds is looking up. Miolton Keynes is looking up. These places are looking up now, so you start to see if we do these in two years’ time, you might see that the average goes from 5 to 8K or to 10K, you know, the six to 12K and from 15K to 30K, who knows.

Depending on the market, depending on the change in fundamentals and a whole range of things. So guys, that just gives you a bit of an idea how to look at these things, because oftentimes if we’re just saying, “Look, 125 grand property made 130 grand profit.” Okay, great, but over what period.

Over nine years, so it’s actually 15 grand per year on average, but that doesn’t mean every year it’s 15 grand. It could have been 0 one year, 0 two years, 0 three years, and it could have been 80 grand in one year. And that’s oftentimes how it goes. Shoots up and then slow and steady growth, and then perhaps falls off the face of the Earth and comes back again. So, guys, hopefully that gives you a bit of an idea about case studies.

Have a great day, live with passion.

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

>