We're all familiar with the term BMV = below market value.

Most savvy people like to buy almost everything BMV - not just property!

I think it was John Corey who suggested that the D's were the reasons that sellers may become "motivated" or "distressed" meaning that they would sell their property for less than it was worth in order to facilitate a quick sale.

Death
Divorce
Debt
Delinquent (faulty) or short lease or title problem
Developer gone bust!
Derelict or in need of considerable refurbishment

Signs that a property might be available at BMV:

Long time on market
Advertised with multiple agents
Price reductions (See Property Snake)
Pictures of property show it unfurnished
Says it is "open to offers" on the marketing.

Then there are properties that are BMV for other reasons:

No one wants to live there.
Anti-social neighbours
Signs of drug use & crime in the area.
Major employer has gone bust and left the area.
Over-saturation - too many flats for instance.
Over-saturation of rental properties.
Area has a bad reputation.

What other reasons might a property be BMV?

What other signs are there that a property might be BMV?

The first list I consider "low risk", the second I consider "high risk".

What's your BMV and why?

I'd just like to add "with vacant possession" or "no onward chain" as being a couple of possibles to add to your first list Nick?

Personally, I'm not too worried about BMV any more in terms of the value. We've seen them go up and down, so I just look at the rental achievement after all loans, costs etc. are paid on a monthly basis.

With regards to BMV leads (some here may know I offer to investors), the percentage amount BMV that a vendor is willing to accept for a fast sale could also be a factor in motivation, but ultimately the 'D's above are very good reasons as well.

The S.A.P. ( Stress Argument Panic ) effect

When premature Stress and Panic sets in they combine to create an Argument
This can lead to a saving of ££££`s overnight if you are in the right place at the right time and the BMV property is yours

10 viewings in 2 weeks but no offers will lead to a tea time conversation between weary couples along the lines of .....

It must be overpriced dear .
No its on at the right price I think
But no one wants it do they
I know I know - but give it time its only been 2 weeks
Maybe we should have tarted it up.
Shall we change the pink carpet.
No I like it, it brightens up the room
Your sister says we are asking too much.
Well we have done well out of it are we being too greedy.
The one round the corner is 10K more than ours so the price is about right for a quick sale
I really dont want to live here anymore.
I agree I want out of here
Its doing my head in.
That last couple who viewed thought the 2nd bed was too pokey.
Well i said that when we bought it but you said we should buy it.
Dont blame me its all your clutter in there
Its not cluttered we just need a few shelves
Well when did you last pick up a screwdriver and put up a shelf
Dont start on me we wouldnt even need more shelves if you didnt keep buying stuff we dont need
Oh stop whinging
You started it.
Look we need to get out of here all we do is argue now
Yes I cant settle.
I really love that house round the corner.
Yes its perfect for us
I hope we dont lose it because of this stupid house not selling.

The S.A.P. effect has now sapped their energy to fight

Yes I just want out now
So do I
But what shall we do
Shall we drop the price do you reckon.
Its only been two weeks though
Yes but no one has offered yet
Yes we could drop a bit I guess as we got lots of equity.
It was 100K we said we would accept 90K
So 85K ?
No lets go to 80K .
Thats a big drop
I know I know it sticks in the throat but we need to do it if we want to sell
That investor the other day seemed interested so he may go for it at 80K
Ok ok but you ring the agent tomorrow
Ok will do
Are you sure
Yes
Ok dear lets go to bed now i`m exhausted .....



12 hrs later...

Hello Mr Clarke its Taylors Estate Agent here
You know that 2 up 2 down i showed you last week.
Well it was 100K but the good news is that there may be a bit more flexibility in the price now.
We are talking maybe not 90 not 85 but maybe just maybe 80K. Interested?
Come and have a second look..........

6 weeks later

Heres the keys Mr Clarke you did well to get that at 77.5K......... Are you ready for your next one.......

@AdamB Thank you for those extra additions.

@JC

I feel sorry for that couple!! What was the reason they were motivated though?

The lesson I got from your post was it's important to "keep your powder dry" after you have put in an offer. Let them mull it over and have their SAP.

Does the investor ever suffer a SAP??!?!

(24-09-2012 08:53 AM)vanessa warwick Wrote:  @AdamB Thank you for those extra additions.

@JC

I feel sorry for that couple!! What was the reason they were motivated though?

The lesson I got from your post was it's important to "keep your powder dry" after you have put in an offer. Let them mull it over and have their SAP.

Does the investor ever suffer a SAP??!?!

Stress and panic in couples create positive and negative motivation in the human condition. The peer pressure both feel can motivate them to collude together to do all manner of sometimes negative things they would not perhaps do if they were alone. eg Bonnie and Clyde. Butch and Sundance. Ross and Brand. Rose and Fred West.

The positive flip side could be when someone is stressing out about a big decision. Their partner / trainer / line manager motivates them and you then hear phrases like.... I could never have done it without you. You helped me through this. You backed me all the way. You supported me from the start.

And yes investors suffer from SAP.
eg Raising an offer too quickly rather than being patient.

I have suffered from SAP and will do so again
You have to train the mind to deal with it and see the bigger picture.
Use it to your advantage though and thrive on positive stress

Timing is everything

Do you have any other signs of BMV possibilities Jonathan and do you prefer the second list to the first, or you're not fussy?

Most of the BMV factors are covered I think in Nicks post

No I`m not really fussy where the BMV comes from. I kinda like investing in areas where there is some ASB and associated problems not because of the attraction of BMV so much but just because the intrinsic MV is so low compared with other estates in the vicinity. The yields are therefore higher. If you manage to get BMV in a low value area as well its double joy but if you aim for 10% yield even buying at MV then you dont have to search so hard or wait so long.

I`m often happy with 5 or 10% BMV which you can pick up all day long. Within a year or so you have obtained the cashflow equivalent to if you had hung around to try and get the elusive 25% BMV.

Additionally In 25 years the original extra BMV you might have got but havent held out for will pale into insignificance as your cashflow profits in that time plus capital growth and allowing for inflation will have reduced that significance to a bare minimum.

Thanks Jonathan.

Are your yields based on LHA rates in poor areas? Do you have any concerns that these will drop as benefits cuts bite?

I`m often happy with 5 or 10% BMV which you can pick up all day long. Within a year or so you have obtained the cashflow equivalent to if you had hung around to try and get the elusive 25% BMV.

Very good point. Yes, BMV is important, but it's not the be all and end all!

Short term and long term projections are a very good way of looking at a deal. I think most people are short termists which is important to ensure cash flow in the short term, as that means that the property is more likely to survive and benefit from long term factors.

(24-09-2012 06:00 PM)vanessa warwick Wrote:  Thanks Jonathan.

Are your yields based on LHA rates in poor areas? Do you have any concerns that these will drop as benefits cuts bite?

Yes V my yields are based on the poorer areas. If I went to the upmarket areas the yields could be cut to almost half what i get now. So two for the price of one where I buy! The LHA rates are ring fenced and guaranteed for a year from April to April. I can therefore better predict my cash flow year on year. Rents are rising so the LHA rate ( which is based on the 30th percentile of the broad rental market area in MK) should hopefully rise next April

Hi Jonathan

Hope you are well, long time no speak. I used to invest buying BMV (when you could do the whole day one re-mortgage). Then I switched to buying, adding value, refinancing to get back initial funds and renting out.

Now I'm just looking at buying in a decent condition - leave funds in and getting a decent return on the cash invested. Could you talk through an example or two of yours that shows what you achieve as it would really help me benchmark against my own.

p.s. I still owe you lunch I think.

(24-09-2012 06:59 PM)Jonathan Clarke Wrote:  

(24-09-2012 06:00 PM)vanessa warwick Wrote:  Thanks Jonathan.

Are your yields based on LHA rates in poor areas? Do you have any concerns that these will drop as benefits cuts bite?

Yes V my yields are based on the poorer areas. If I went to the upmarket areas the yields could be cut to almost half what i get now. So two for the price of one where I buy! The LHA rates are ring fenced and guaranteed for a year from April to April. I can therefore better predict my cash flow year on year. Rents are rising so the LHA rate ( which is based on the 30th percentile of the broad rental market area in MK) should hopefully rise next April