X

Sign Up

or

By signing up I agree to Property Tribes Terms and Conditions


Already a PT member? Log In

Sign Up

Sign Up With Facebook, Twitter, or Google

or


By signing up, I agree to Property Tribes Terms and Conditions


Already a PT member? Log In

Log In

or


Don't have an account? Sign Up

Forgot Password

To reset your password just enter the email address you registered with and we'll send you a link to access a new password.


Already a PT member? Log In

Don't have an account? Sign Up

  • Property Prices

    A landlord's thoughts on capital growth

    I think most Landlords take for granted that they will have Capital Growth at some point in their Landlord Journey

    Some of us have made huge gains some have not depending where you have been located in the past 25 years the difference is stark

    in 1988 I purchased a Flat for £21K and its now valued at £100K.

    A dear friend of mine purchased her flat in London for £100K in 1988 and its now worth a Million!

    Long term should we factor this factor in or should we concentrate on the here and now rather than think of something we have so little control over one way or another

    I can see why a Landlord can add value it makes sence to improve a property or build a property

    But once its completed again you dont have much control of it in regards to capital growth in future years

    I prefer to concentrate on something I can control

    Fixed rate Mortgages

    Competitive Building Insurance premium

    ect ect

    My own view is If you Borrow wisely run a good business on yield, the Capital Growth will take care of itself

    I just get on with today.  Tomorrow may not come, so why take time out to worry about Capital Growth

    A good friend of mine buys high yielding shares and he only looks at the value of the shares every year when he is doing his accounts

    As long as he gets his Dividend in the bank he is happy

    I look at property in the very same way

    Capital Growth is a good thing to have.  That's why most of us realise property is such a good thing to have

    But if someone asked me what percentage do you put in your Business Plan, I say Zero

    Because its a guess. I prefer facts to run a business not a Guess about capital growth.

    DL

    3
    1

    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    While these are interesting thoughts, and certainly conservative ones, you’re missing a trick by not considering capital appreciation when choosing an asset class to invest in.

    The FACTS are that over the long term property outperforms cash, bonds, and even stocks over some lengthy periods.

    One has to be very careful chasing yields, and in stock markets certainly some of the highest yields are associated with the poorest performing stocks. The yield is the dividend received as a function of the stock price.

    So for the yield to be high, one of two things must happen.

    Either the dividend goes up, or the price is coming down. All too often, it’s the latter.

    Vodafone is a case in point, the stocks has fallen 40-50% over the last year or two, and so the dividend yield got as high as 9%. The price did not go higher because of this, instead it was a warning that the fundamentals of the business were in trouble and that the dividend yield could not be sustained. What happened? The company slashed the dividend in half.

    The same theory applies to property too.

    Yields are high on properties where typically there is no capital appreciation for one reason or another.

    When considering stocks (which I know you’re interested in and own now), one should not be fishing out high yielding stocks, but instead stocks with a reasonable but growing dividend (not yield). In the U.S. there is an index called the S&P Dividend Aristocrats Index constituting 40 stocks I think it is that have grown their dividend payout (not yield)for 25 consecutive years.

    That is a sign of a healthy, robust, growing business that can stand the test of time. I invest in this index and allocate some of my 3 children’s ISAs to this index for that exact same reason. Similar principles apply to property..
    1
    0

    You know my views DL so I wont expand for now save to say............

    There is a big big difference between a `guess` and an `educated forecast `

    And in  business an educated forecast on CG growth  is advisable .

    You can do DD on where CG might be higher than average and make investing decisions based on that DD

    100K to 1 mil in the SE is significantly better than 21K to 100K in the NE

    Selecting a good CG area allows better opportunities to  add value and thereby add more CG

    Then by releasing equity you can buy more and add more value and compound  your wealth

    2
    0

    Jonathan Clarke. http://www.buytoletmk.com

    I agree with you but how do you know where you can get high growth? London and SE both has seen high growth and low yield, but now they see negative growth and low yield. It is hard to predict the future and why I’m going after yield in safe areas and looking less at capital growth and capital growth is not in my plans.
    0
    0

    I agree with you Capital Growth is nothing until you either remortgage to extract profits or see the asset

    If your not doing either  its of no use

    Its just a fig on a Balance sheet



    0
    0

    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    CG   ``Its just a fig on a Balance sheet``

    Yes but that like saying 

    Having a car on my drive is nothing - till i drive it

    Having food in my fridge is nothing - till I eat it

    Having a fig on your balance sheet is indeed nothing - till you sell or remortgage

    But so much better to have that fig at the 200K level rather than 100K


    1
    0

    Jonathan Clarke. http://www.buytoletmk.com

    ``I agree with you but how do you know where you can get high growth?``

    That`s down to hard work  - doing involved research and  DD.

    You will never know 100% of course .  It will always be an educated guess 

    But an educated guess is much better than just luck .

    Delve into the detail of what the  town planners are planning

    On a wider scale what is the government planning eg HS2

    Look  where they put the new school / fast rail link  / road by pass  / create employment etc 

    You also check out property cycles / economic data / world data

    Which areas are undervalued. Small pockets exist where for various reasons they lag behind

    Some areas get ahead of themselves so you lay off them for the time being

    They may come again . Some areas are  in tune with the bigger  picture  or run counter cyclical to it

    Know your area inside out

    Some I bought in 2001 have quadrupled some have only doubled on the same estate

    If I had picked the quadrupled ones I would have made twice as much

    Yields were about the same at 10% on both though so the CG was a key element

    But at the time I couldn't see it . Completely blind to it . Now I understand better why

    Because the specific property types  where it quadrupled were undervalued

    So a 1 bed quadrupled in the same time as a 2 bed doubled

    At the time I should have bought more 1 beds but I only bought 2  of them

    I bought 4 x 2 beds though as i thought they would rent better and be more in demand

    So the accelerated CG in those 1 beds dwarfed the yield maths

    It made the 1 beds in effect the equivalent maybe of 20% yield instead of 10% yield

    And that was purely down to the extra CG

    Also do your DD on people movements

    I did Geography at school and like Human Geography . Study why people do what they do

    How do people react to boom and busts and recessions and Brexit and a new PM

    How do they react to a new wildlife park being built

    People will only travel around the corner to get milk but they will travel 50 miles + to a wildlife park

    People dont move house because of a bottle of milk though

    It is all predictable to a certain extent but yes its not  an exact science. Its an Art

    I struggle when DL just dismisses CG as if its of no consequence

    To do so misses in my view one of the most vital aspects of property investment




    0
    0

    Jonathan Clarke. http://www.buytoletmk.com


    If you read the other comments JC you will see I am not alone with my views

    I come back to this point

    No one knows for sure if we will have capital growth its a Guess

    If we have a low inflation environment and low wage growth and restricted lending its hard to see Capital Growth

    we could see a very long time span of Stagnation in property prices

    But even thats a guess too?

    I'm not into Guessing games JC  just hard figs that pay taxes and pay me a living

    I can't spend a fantasy figure

    0
    1

    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    Property investment is full of unknowns

    Do you know when your next boiler will blow ?

    Do you know when your next 1 mth void will be ?

    No of course not  - you know none of these things for sure

    But you do a forecast and take an educated guess

    CG is just one part of that forecast . Its an educated guess as to how much it will be

    I dont understand why you take an educated guess on broken boilers and  voids 

    But you dont want to take an educated guess on CG

    What has CG ever done to you to deserve being airbrushed out of your strategy

    Your 21K property has gone to 100K but you pretend its of no consequence to you

    But surely having the security of equity allows you to be bolder in your future plans

    You may never use it but its a massive comfort blanket to go on to greater things

    Give poor unloved CG the recognition it deserves I say



    1
    0

    Jonathan Clarke. http://www.buytoletmk.com


    i think we have boared everyone to death on this topic

    This is like religion My Make believe friend is better then yours is Ect

    The truth is no one knows JC what will happen


    0
    1

    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    You started the topic and you are bored already! I am truly disappointed DL

    I agree no one knows  -

    What we are doing though is unpicking what we reasonably can be expected to know

    Some things in life I can have a wild  guess at - How many grains of sand on Bournemouth Beach

    657,000,000,000 I reckon

    CG though I feel I can have a more  educated guess at

    Using the Rule of 72

    3% growth pa will take 24 years for your asset to double in value

    1
    0

    Jonathan Clarke. http://www.buytoletmk.com