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If you do it right, yield is real and bankable over the length of the contract. I have tenants that pay each month every month 14 days after receiving the invoice. Not a day earlier not a day later. I don't need to check the online statement, I know it's there.Capital gains? I would hope so on a 10 year horizon, but even if not, the yield even if not reinvested elsewhere, will have paid off the cost of the purchase.And if you reinvest those proceeds over the years, you can leverage that return even more. So I maintain, yield I know and can bank, capital gains I can guess at, but can't be certain until it happens.
Your trust in human nature is somewhat admirable but personally I check my statements!
Tenants can be fickle and their circumstances can change through no fault of their own
They lose their job , run off with their neighbour , die in car accidents
A fire can overnight make a place inhabitable . I`ve had 3
The rent doesn't always come in then
The Landlord is not always their No 1 priority
All these potential incidences makes it all speculation and are part and parcel of investment risks
Yes we cover the bases as best we can but nothing is 100% real until we bank it .
Some take out RGI some spread bet on the house price index
We speculate on both though in my view
And the only real difference often is the time lag before pay day.
Jonathan Clarke. http://www.buytoletmk.com
If the rent doesn't come in you're not doing it right. That's why I prefer to deal with big national and international companies and not regular folks as they will always disappoint sooner or later. Large firms invest shed loads in your property and intend to stay there for at least the length of the first contract.
Spreadbetting is speculation of the purest form. You are paying financing costs so it could only ever be a short term thing otherwise the financing will eat up any profit. And in any case, having a portfolio of housing and then being long the house price index is just simply leveraging your position and opening yourself to a loss on the downside if house prices dip. You will have to rollover these positions even if you want to keep them, so that will crystalise any loss and thats cash out of your pocket!
Plenty of large companies have re-negotiated their leases downwards, not sure why you put such faith in them? They have very strong legal teams as well - "take it or leave it" iirc is a favourite term during re-negotiations.
Plenty in the rag trade, something that has been apparent a long time before it happened and will only continue to get worse for the shopping centre and retail site owners. This is one area you shouldn't invest in no matter how cheap it gets! But its certainly not an indicator for the rest of commercial! As I said stick to those that earn cashflow and the money simply flows from their bank to yours and everyone is happy!
It's good that you've found your commercial niche.
I have looked many times at all aspects of commercial. I don't see any niche that doesn't have potential to be culled other than warehousing. And that is very area dependent.
Read in the times that next are getting 29% discount on average on new leases. Least they aren't doing CVA's that would be scaring me if I had any commercial properties
`If the rent doesn't come in you're not doing it right``
I could I guess counter with ...If you don`t get capital growth you are not doing it right.
Clearly neither yield or CG is guaranteed as such but both are pretty likely though in 25 years
We speculate on both and our skill level and some good fortune determines the eventual outcome
Sometimes one props up the other .
Big companies are not immune to collapsing of course so they can just as easily disappoint
The world is full big companies that fail and don`t pay their rent just as it is with regular folk
Regular folk work within those big companies dont forget.
Some of my regular folk have also invested shed loads in my properties
New kitchens, bathrooms, full redecs etc all at their own expense
Its not a divisive either /or me thinks - its just an exotic mish mash of speculation
Reality is the profit at the end - be that from yield or/and CG
Not sure its a counter when something is not in your hands. The value of your property may grow in the next year say 5%. But it may also take another 5 years to do that. Or there may be a drop in the market. It is much more difficult or even impossible to ensure capital growth. But you should be sure when signing a contract with a tenant that the 8% or whatever yield you have will flow in over the term of the contract. Rent is in your hands. If you believe its not, then you have the wrong tenant. Switch to one where its not an issue. In retail this is more difficult, so that why most switch to commercial.
``Not sure its a counter when something is not in your hands.``
But rent is not in your hands either until its put in your hands
Your position is that 100% of your rent is 100% cast iron guaranteed 100% of the time.
There is not an icicles chance in hell in your view that any of your tenants will fail to pay
Not sure why you have a contract then if you have 100% faith with your tenant selection process
Presumably there has never ever been a court case involving breach of a commercial contract ?
Sorry - I cant run with what you say because its simply a false assertion
We wont agree I can see