We got this email from one of our newsletter subscribers. It makes for an awesome read. It's a story that I have heard so many times working in the UK. It shows you the exact reason I am so passionate about providing quality education and investment advice based on solid fundamentals.
Your property portfolio lesson
“I hatched a 10 year plan without any help from anyone and the first time I have ever seen anything like it committed to print was about five minutes ago when I decided to have a more detailed look at your website. So we think along the same logical and financial lines.
I bought my original target £1million worth of property during 2006, so the rest of the plan was to let it grow over 10 years till it was worth £2m with £850k in mortgages on it. But opportunities kept coming along and by mid-2008 I had reached £2m worth of investment property (based on RICS valuations at purchase). Then reality set in at the same time as the credit crunch, and it all went pear-shaped. Mortgages came out of fixed rate and went up £200 a month, the reality of grossly over-valued flats on new developments became apparent and at best my £2m worth of property is worth £1.5m with mortgages of £1.5m to match. I got seriously in arrears because of continuing negative cash flow, and my credit rating was screwed.
I still have those 13 properties, but three have suspended possession orders, and two are being handed over to an LPA (Law of Property Act) receiver. I have some trackers, so my current cash flow has been improving, with the full effect of the 0.5% base rate being passed on by June (Birmingham Midshires) at the latest. However, the trackers run out in the autumn, so I have a very small window to make a recovery and it is already too late for some of the properties. I would hope to come out of this still owning that magic 10 properties that you aim for. What I would have really liked is to buy some more in this market to offset those bought on a high in 2006/7. The current climate holds such opportunity for those who are still creditworthy or cash rich. But I am neither of those things.
So that, in essence, is why you haven't heard from me. I have to bide my time, probably for several years.
Thank you for your continuing flow of information, though, as I need to keep my interest up and be assured that others are doing great things.”
It's an unfortunate but all too common story. It should provide food for thought is something to be avoided.
It's this very story echoed from 100s of people over the years that our very principles are designed to help them avoid.
Live with passion,