Case studies are used by many property salespeople, but how misleading are they really! Make no mistake case studies are great but only if you really understand what’s being presented (which is always the best of…) what you need to do it convert it to the… real world results.
Brett looks at three development (The Regency in South Woodford, Emerald Gardens, Wembley and High Point Village, Hayes) and this one factor which changes the results of each to a more measured result. These are live developments sold by Brett and his team.
Video Transcription (Coming soon)
Hey guys, Property Search… Think Gladfish. I’m Brett Alegre-Wood, and this is Property Rant.
So, today what I want to do, I wanted to talk about the deception of case studies, and what I mean by that is, in actual fact, I’m going to talk about the positive side of the deception, because it’s more of an educational thing than a deception in most cases, in some cases it certainly is not.
And it’s this, so if we look at, these are real properties, these are real figures, rounded obviously, but the reality is they’re actual figures of developments that we have done. And I just want to show you how I can make things look a lot better than perhaps they are or perhaps they were or…it’s probably not the right word, because what I’m not trying to do is it’s not deceptive but the figures are absolutely correct, but you’ll see what I mean.
So, let’s look at Emerald Gardens, Wembley in London. Now, this is a Quintain development, massive regeneration, fantastic, it’s where our office is. We bought, or our investors bought, in fact, I’ve got one too, at 320,000 at right now in 2017 in January, it’s worth 454 on their website. So, effectively there’s quite a good profit in that, 134,000 profit. Now, all being in paid and profit, because actually nobody’s flipped the properties and actually realized that cash yet.
So, the reality is most clients have held off which is a good thing because it’s such a long period of growth that we’ve got. So, that’s 44,000 per year, sounds fantastic, who wants one? Absolutely, I’m sure back then everyone wanted one, because at this stage I know that sales are quite slow. Wembley wasn’t really heard of. It was kind of they knew people. Things were happening. The rental was there. It was great, but investors weren’t in there. So, we got in there early and, of course, now everybody wants one, so that’s great. Now, this is over a three year period. Now, that’s important, three years. So, 134 divided by three comes out about 44, give or take.
Highpoint Village, let’s look at another one, Highpoint Village, this is in Hayes in London. This is on crossrail. We got in very early, very, very early. I think this was in 2010 when we sold these, 168, and actually it was 2010, 168,000. They’re currently worth 310,000 and with crossrail coming next year I imagine that will go up even higher. So, in seven years clients have made 20 grand per year, all be it paid and profit if they haven’t sold them.
So, I’ll put that little disclaimer in but look, I’m not trying to deceive with these figures. These are real figures. 20 grand a year, who’d be happy with that? Everyone, of course. Now, the interesting thing is, 44 grand a year, 20 grand a year.
Then let’s have a look at the Regency. The Regency in South Woodford in London, and this was another development. Ten years we’ve had this, ten years, and I’ve got one of these here too. So, it’s 317 k up to 455 k. So, that works out over 10 years 14 grand per year. Now, you may say,
“I’ll take that one, because it’s 44 grand a year rather than that one and that one, and, actually, why would I bother at 14 grand a year?”
Actually, to be fair, I’m sure everyone will be happy with 44 grand a year, because here’s the key with case studies. It’s all very good to pick the growth phase in property. So, for instance, when we look at three years, this was massive growth. Do I think I’m going to get 44 grand a year for the next 7 years to make that 10 years? I doubt it very much.
So, when you’re looking at case studies, have the little warning alarm bells go off because just because they’re saying 44 grand a year, I am pretty sure that that will slowly come down to what will be about 5 to 8% per year of the property value. Because that’s normal capital growth, and it’s not every single year. It shoots up, and then it’s slow and steady growth. And that’s the key here.
When you understand the property cycle, you realize that these can be deceptive. This is over a 10 year period and remember these ones were over the actual period when literally we were living through a recession, this one in particular. This was right on the recession, and it still made 14 grand per year over 10 years and you know what, it’s been rented every single day, never had a problem with it, and that’s with all of these and 100 other developments we’ve done.
So, the key here is, understand that when these things are happening, what really is going on?
Okay, guys, have a great day, live with passion.