Daily Archives: November 7, 2016


I get details of possible dates to view the Manchester portfolio and decide to do this in the same week as the Sunderland viewing to get them out of the way in one go. This will mean a lot of travelling but travelling to view properties is a major part of my life so I am prepared.

I then get a phone call from the Seller of the mixed-use property (see day 7) we were considering. He is very keen to sell and wants a fast deal. He knows who we are and knows we have the cash so his question is what price would allow us to proceed. I go back to my fellow directors and we all agree £120,000 would work. I go back to the Seller who accepts that offer. That is a price that works for us and it seems works for the Seller so we now move quickly to sort out an exchange If you want to see what we got for our £120,000 click this link to see a Video of the property.


I get a call from our London Investor. He wants to discuss where we are with his portfolio and our plans moving forward. We have one large block of flats in Liverpool which we are refurbishing and which we should be able to do a major remortgage on shortly. We also have funds available to consider a further purchase and I tell him about our trip to view properties in Manchester and Sunderland


One of my co- directors is concerned about the mixed-use property (see Day 1) we are in the process of purchasing. The concern is that there may be more problems than we have anticipated and also that the shops will probably be difficult to let (all shops in the North are potentially difficult) and we have not factored that into the price.

We go around to have another look and the concerns begin to multiply. This can happen when you are buying complex properties. My fellow Director thinks we should offer £120,000. I am not sure that the Seller will go for that.  We have already negotiated the price down from £175,000 to £140,000. Will the Seller go for a further reduction? The property has a lot of potential. But we are worried about the condition of the property and how easy the property will be to let especially in regard to the shop.

After a lot of discussion, we come to the conclusion that we are just not happy about this purchase. This is not an easy decision but as the old saying goes ” when in doubt leave it out”

I telephone the Seller. My approach is not to ask for a price reduction as such (which I feel would not be fair to the Seller as we have already negotiated the price down) but to express our concerns and say that we are worried that this may not be the right property for us and to warn him that we may not be able to proceed. He had said another party was interested and if that were the case then it might be better to go with them in view of the fact that we were not sure about our position. He says he understands our position

I also hear that a viewing has been arranged for Sunderland and get some details about the Ownership. It seems the freehold owner is creating a new 125-year lease for the top floor which will be good. There is a fixed ground rent of £1,000 which does not rise during the term of the lease.  I have also been doing more research and am getting increasingly interested in the location which I think has potential. The flats are only a 5-minute walk from the centre, the station and the local shopping centre The Bridges. Interesting.

Is the London Rental Market about to crack? The final outcome




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We are asking whether or not Europeans may not be coming to the UK in the same numbers as pre Brexit. I cannot find any current statistics to confirm what is happening but based on anecdotal evidence a story is emerging that is backed up by my own experience of renting in London and which to me makes sense


In the last 8 years or so Europeans have flooded into the UK   Not just from Eastern Europe but also from the rest of Europe. The type of person coming will be young and ambitious and wanting to make a new life in the best country in Europe for young people to thrive (if you think that is wrong spend some time in Countries like Spain with mass youth unemployment and static economies offering few opportunities to get on not least because of very old fashioned ideas about Buggin’s Turn and only hiring local staff)


They come here knowing there will be opportunities but also knowing it will take time to establish themselves. But if they can then they have a chance to make a better life.


These people are prime candidates to use the Private Rental Sector and so they have been renting in large numbers.


Very different from the vast majority of the two million Brits who have gone to Europe who will tend to be older wealthier people looking to retire (and buying rather than renting when they go across) In some places they have fuelled a frenzied building boom. In areas, such as the Costa Del Sol the amount of properties purchased was allowed to run out of control and left an absurd oversupply which any sensible Country would have avoided. But Brits have done very little for the PRS market in those countries


However, making a new life in the UK only works for these Europeans if they know that they can take the time needed to establish themselves. Up to Brexit that was not an issue They had the right to live here for ever if they wanted


Once they believe there is only a window of two years before they are all asked to leave then despite all the opportunities here it starts to make less sense to go in the first place. Yes, the opportunities are great but to really take advantage of them you need more than two years. And is it worth it if you make a life for yourself and then have to leave? There may be promises that this will not happen (although as yet there have not been) but even those may not be reliable. So, a significant number are saying it is not worth it.


Now again I do not have the numbers to confirm this only anecdotal evidence (and if anyone has the figures please do let us have them) but I can see from a common-sense point of view this is likely to be the case


One example of anecdotal evidence is an issue of The Bottom Line on Radio 4 where a person from PWC the Accountants said they had noticeably fewer applications for training contracts from Europeans for exactly this reason.


And it only needs a relatively small decline in numbers to have an impact in a market in a process of continual expansion in expectation of an ever growing rise in demand. That I believe is what happened to me and is going to be happening increasingly causing rents to move down.


At some point the overall effect of all of this combined with the planned tax rises and the large numbers of properties coming on stream to meet expected rising demand could mean a halt to growth in the London market for the first time in 20 years.


And if growth does stop then suddenly the whole London Market makes no sense and panic could ensue.


Because we have had 20 years of virtually continuous growth since 1996. 20 years in which properties in areas like Leyton have gone from £120,000 to £900,000 and in which almost no one who purchased a property could fail to make a profit.


So, you have a whole generation who simply cannot conceive of prices in London stabilising letting alone going down. Yields already make no sense. So, if this happens at a time when rent fall then you really do have a scenario where panic could ensue.


And maybe that will not be all bad because suddenly homes will become more affordable for first time buyers.


But for those left holding the parcel when the game ends it might not be such good news


Let me be clear I could be wrong. This is only a point of view and no one reading this should take any actions based on what i have said alone. You need to think it through and take your own advice and then decide what to do.


Who knows may be 5 years’ time we will look back on this and see London prices have continued to soar and the £900,000 property in Leyton is worth £1.2 million, that we did a deal with Europe that allowed Europeans to continue to come in the same numbers as before and rents have continued to rise.


However common sense says you need to consider all possibilities and it has to at least be    possible that my scenario will play out. That Europeans will stop coming or not be allowed to come in the same numbers. That rents will fall. That the combination of falling rents and increased costs of operating as a Buy to Let Landlord will mean fewer people want to invest so there is less demand and so price growth stops or even falls slightly and then those who have properties with very low yields panic and want to get out of a market that makes no sense without substantial growth. That is before one considers what might happen if we get inflation due to Brexit and interest rates have to get up.


So I make no apologies for putting this out there to give people a chance to consider all their options and to take this into account when deciding how to plan for their own future.


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