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  • Property-a-holics

    Rents on flats holding up better than houses

    I hope the headline grabbed you attention. Like most headlines it is economical with the full truth.
    There is an article in this weekend's FT highlighting how the market behaves differently than people think if all they think about is city centre flats vs. homes.
    The quick version is location and price range matters a lot. When money is tight they want to spend less so they trade down. In the right locations rents for middle or lower end properties are going to hold up better than the more aspirational rental sectors.
    City centre flats in London have been doing better than houses. That might surprise some. The logic is a flat fits a specific demographic while a house in London is normally pretty pricy. The comparison was also based on yields so a fall in prices can make all the difference. The location of the property matters. Homes and flats that are mostly focused on employees of the financial sector suffered more than properties that are targeting a more diverse mix of people.
    So, when someone says to avoid flats, to focus on terrace houses, that detached houses are a winner or anything else that applies across the whole of the US understand they are blowing smoke at best. Know your market. Know the demographics. Study the actual transactions and not just the headlines. People can mess up even when their are in the right sector (as if there is a right sector).
    A deal is done one property at a time. Focus on great deals and worry less about the overall market. Prepare yourself for peaks and troughs in terms of cash flow.
    As Vanessa says, focus on cash flow. Even the wrong deal can turn out great given enough time AND the cash flow is positive while you wait.
    Falling rents split buy-to-let market
    By Sharlene Goff
    Published: April 10 2009 14:03 | Last updated: April 10 2009 14:03

    John Corey
    http://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.

    Thanks John. I do think London is a unique "micro market" and there has always been a culture for apartment living there and I expect that to continue in a healthy fashion. The Olympics will undoubtedly help. My sister has just completed on a new flat in Stratford in a huge block all purchased by investors, and it rented out straight away to a quality tenant at what I consider to be a good market rent. Outside of London is a different story though, speaking from our personal experience ....
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    Vanessa,
    Your personal experience is a tiny drop in the sea when we look at the total market.
    What can be observed is flats target a specific group. Smaller family units, typically city centre, close to good transport, etc. The demographic tends to be young and single or the over 50 married couple with no children at home (lock and go crowd who also like events in the evenings). Professionals might be another way to describe the market.
    Flats as a BTL are a new idea to the UK relatively speaking (12+ years). Flats as self-contained living units have a longer history. If we look outside the UK flats are very popular in most developed countries.
    In total 'homes' will be more common no matter what country one picks. At the same time the bulk of homes tend to favor the owner occupant in terms of pricing. Flats favor the person or family unit that is there for a shorter period. Those with children vs. those without is another way to think of it. You start out in a flat, have children and move to a home and then some move back to a flat when they downsize.
    John Corey
    https://www.ChelseaPrivateEquity.com/blog
    Vanessa said:
    Thanks John. I do think London is a unique "micro market" and there has always been a culture for apartment living there and I expect that to continue in a healthy fashion. The Olympics will undoubtedly help. My sister has just completed on a new flat in Stratford in a huge block all purchased by investors, and it rented out straight away to a quality tenant at what I consider to be a good market rent. Outside of London is a different story though, speaking from our personal experience ....
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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.

    John,
    I can only speak from my personal experience! I can only do more of what works, and less of what doesn't. Anything else would surely be foolish on my part?
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    Vanessa said:
    John,
    I can only speak from my personal experience! I can only do more of what works, and less of what doesn't. Anything else would surely be foolish on my part?
    The flaw in the logic is to believe in a small same size and then extrapolate to the general. It is very commonly done by everyone. People take personal experience and assume it is a trend rather than a series of accidents. Many investors in the BMV/NDM world thought they had a winner based on the 'successful' deals done.
    I am not saying you should not continue doing your deals as you prefer. Just that present data might not be sufficient to prove anything other than it has worked so far; up to this point. What does help confirm the trend is when the process works over the full cycle. Still, some companies can run into problems when the next cycle is a bit different or catches them in a weakened position.
    As you know (preaching to the choir), it is all about cash-flow and knowing your numbers. Being conservative with funding lifestyle before having sufficient reserves to cover slow periods. Being able to sustain or grow during the weak markets so you win in strong markets.
    John Corey
    https://www.ChelseaPrivateEquity.com/blog
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    0

    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.