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The maths alone will tell you the answer imho.If you have two properties, one at £40K and one at £400K and they both capital appreciate at 3%, the £40K property will earn £1200 capital appreciation per annum, whereas the £400K property will earn £12K.So the following year, the lower value property will earn capital appreciation on £41,200 and the higher value property will earn capital appreciation on £412K.Einstein described compounding as the "eight wonder of the world". The money that money makes, makes money, and the money that that money makes even more money.So, even if you adjusted the figures to the £40K property earning 10% per annum, it is unlikely to ever capital appreciate more than the £400K property earning 1% per annum at the same time.
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
Have a look at my figs
The 12k flat is in a working class area and ex Local authority and its made more than the Penthouse in a swish area
The North again turns the Norm upside down
Its all down to areas again
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.
Ah V but you have to compare like with like
Total appreciation on A 400K property or 10 x 40K properties
Its the same
But the 400K could be in a poor area and the 40K one in a wealthy area or vice versa ...
which is what Mr Paye is getting at I believe
So that area may affect the capital appreciation positively or negatively
Jonathan Clarke. http://www.buytoletmk.com
Thats a very interesting question
I will kick this off with a few historic prices
in 1988 I was looking to buy some property and I had two choices and two areas
one was up and coming a penthouse flat built on the river front plus a Marina Mrs Thatcher opened the development the Penthouse
flats were selling for 99K each
My other choice was to buy a number of small two bed flats for 12k each
If I compare the prices today the Penthouse is now £250,000
The two Bed flat is £75,000
you can see the lower priced property in a worse area has made more than the Penthouse in a Marina
It was a new build and i think that is a factor
But If I look at other projects its been a similier outcome over 25 years
The North East is a Odd place compared with the rest of the UK
I think its a market of its own with very different out comes
This is why I model my new company and a supermarket
Its what I sell every day which is most important I call it the baked beans (Yeild)
The value of the building is not my priority I know over time it will make money just like the Penthouse flat
But its not my driving force to be honest
I think the SE landlord would look on there business in a very different way
The more I blogg the more I see the differences
Maybe I should write a book called the Northern Landlord Handbook
I dont think the NE is alone I think you would find lots of areas very different from the SE.
This is not a phenomenon associated with just the NE
In the SE I had 1 beds in a poor area that quadrupled whilst a 3 bed in a decent area only doubled
Likewise i had studios in poor areas that tripled in the same time span
These anomalies will be found in all parts of the countries
And vice versa in some areas the wealthy ares will take off on a steeper incline disproportionately to the poor areas which become possibly no go areas and get boarded up and lose loads of value like a mobile home or car . They will remain that way until the government cash is there for regeneration
The skill is spotting the undervalued houses, streets , estates, districts, towns local to you which are likely to become in time valued ares
This is done only by intensive DD and some good fortune
I have several on an estate which is being regenerated . I will do well out of it
But that is good fortune .
My DD when i bought them 20 years ago didn`t spot this possibility
What i did spot though was they were undervalued compared to the estates in the vicinity
In similar vein DL - Sovereign Harbour development in Eastbourne has performed poorly.