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    • Property-a-holics

    not getting emotional

    Replies 13 Views 1.3K Activity 8 years ago Users 7
    Go to first unread post
    fernando_duzaza 18 Jan 2011 at 18:09

    hi all,

    i remember there was a post about numbers never lie, or you should not get emotional about investing as it will cost you money, can we get some thoughts as you will never be able to buy a property for btl if the rent never exceeds the mortgage x 125%, and if you have bought at a good 30% discount, so just wanted to know different ways emotion will cost an investor.

    thnx

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    Vanessa Warwick to roisin_chambers 18 Jan 2011 at 20:40

    Sorry, but I do not really understand the question.There was this post Numbers do not lie.And John Corey and I recorded this video "Numbers never lie".

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    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**

    fernando_duzaza to roisin_chambers 18 Jan 2011 at 21:10
    thanx vanessa, all i meant I was looking for a post about the numbers never lie and how you can lose money by getting emotional in property
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    JP Source to roisin_chambers 18 Jan 2011 at 22:02
    Maybe getting too attached to a vendor selling to the point you are offering more to help them out without thinking that you'll be stuck with a property that's not bringing in good cashflow. This is something I sometimes do as my compassionate side takes over. Good as a person but bad for business??Fernando Duzaza said:
    thanx vanessa, all i meant I was looking for a post about the numbers never lie and how you can lose money by getting emotional in property
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    Jayne Owen to roisin_chambers 19 Jan 2011 at 11:27

    Alternatively, falling in love with the property itself rather than the deal? Also, I've never bought at auction, but I understand that emotions can run away with a person at that time, as they get caught up in the bidding process and go over their limit.

     

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    Jayne Owen @jayneowen

    Editor and Writer: Your Property Network magazine

    Investor: Mozaique Property, South & West Wales and South West England

    Occasional reviewer at The Property Bookshop (@Property_Books)

    Vanessa Warwick to roisin_chambers 19 Jan 2011 at 11:39
    We once paid £5K more to buy a blue house!  Was that emotional?  Maybe.  But the way I saw it was that the "blue" was a USP (unique selling point) as it stood out from the crowd in photos (it was a holiday let).  The number of guests that have said they chose it because it was blue ... The developer has also apparently had people asking for more blue houses to buy, as they are mainly white cladded now, to the extent that they have re-applied for planning permission to include more blue cladded properties.I also apply emotions in the respect that I would not buy any property that I would not be happy to live in myself.  That is an important benchmark for me.
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    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**

    Ahmwaah Charles to roisin_chambers 19 Jan 2011 at 12:32

    On the flip side maybe understanding emotions can help.

     

    For example as an investor if I buy X property, on a Buy-to-Sell (BTS) strategy, whereby the target end user is a homeowner (as oppose to another investor) then it may be good idea to understand what emotions a homeowner may have when they walk through the door and how to evoke/amplify it.

     

    I only say this because it's often said that homeowner have a tendency to buy based (partly) on emotions...e.g. I like the curtains, isn't that carpet cute, etc.

     

    So maybe you want to keep your emotions in a little black box, ready to be released at short notice.

    I actually remember that not too long ago I was with an estate agent friend, looking at a house, with another viewer (unrelated to me). They were a couple with a small child. I could very quickly tell that that the lady liked the house, and had more of an emotional attachment because it had a little room for the baby, the interior was nice and a host of other things. On the other hand the husband was trying to make practical decisions, e.g. parking, council tax, etc. After the viewing the Agent told me that the husband started to make a few demands, based on practicalities (e.g. parking). I told him to (politely) forget the husband. It was the wife who had the power and her decision making process was less about practicalities and more of a basic emotional need for her and her child to have a house that they can play in a be happy. So the agent rejected almost all of the demands of the husband and instead re-enforced what fun the wife and child would have playing in the garden, taking their first steps in the lounge – she was won over. The husband had to choose between the practicalities and his wife…guess who won!

    Hope that makes sense.

    Ahm

    ---

    Property Investor

    London Based

    Mobile: 079 1279 4925

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    Vanessa Warwick to roisin_chambers 19 Jan 2011 at 12:51

    Perfect sense Ahm!The woman is the one who puts down the roots, she is the "home maker" - whether looking to rent or to buy.  Therefore, it's good sense to appeal to her.  The two most important rooms for her are the kitchen and the bathroom and that is where the money should be spent.

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    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**

    Jayne Owen to roisin_chambers 19 Jan 2011 at 13:16

    That is so true, and Ahm - spoken like a true investor who understands the power of emotion.

     

    Vanessa, that point about the blue house is interesting. I am always surprised at the number of people who "see it as it is" (ie a white house) rather than "see it as it could be" (blue).

     

    J.

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    Jayne Owen @jayneowen

    Editor and Writer: Your Property Network magazine

    Investor: Mozaique Property, South & West Wales and South West England

    Occasional reviewer at The Property Bookshop (@Property_Books)

    john_corey to roisin_chambers 20 Jan 2011 at 09:42

    Fernando,

     

    I am not completely sure I understand the question.

     

    If I am reading it right, I focus on the cash flow when looking to by a rental. If the property does not pay me monthly to own it I am taking on a liability. I will need a day job to support the property in that case. If the property does pay me each month (after all operating expenses plus debt service - similar to the 125% in your question), then I can afford to own the property for a very long time. In this sort of situation you are buying an income stream and not speculating on future appreciation.

     

    To make the cash flow work you might need to raise the amount of equity you put in.

     

    One caution. Almost any rule or thumb, ratio or other measure lives in a context. Just because a lender asks for 125% mortgage cover does not mean that is the right number for an investor to use. You need to understand the underlying details and you have to be prepared to change the indicators as the ground shifts. Just be careful about lowering standards to chase business rather than sit on the sidelines.

     

    John Corey

    Follow me on Twitter-> https://www.twitter.com/john_corey

    https://www.ChelseaPrivateEquity.com/blog

     

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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.

    fernando_duzaza to roisin_chambers 20 Jan 2011 at 11:05

    Hi John- with the latter part of the answer, do you mean just because the lenders use the 125% mortgage cover (which may work for them to lend to you), although may cover the mortgage, running expenses in your locality etc may be higher which could mean the property shortfalling so it is cash flow negative and you having to fund it every month?

     

    Side question: why do lenders care that the rent has to meet the running expenses, what skin is it off their nose if you stop paying letting agents, (i can understand insurance,voids) etc, surely they shold be concerned with you paying the mortgage, as you do not get repossessed if you stop paying agents, boiler repairs etc

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