shimself
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Post by shimself on Jan 9, 2016 10:08:06 GMT
Which means that instead of paying 4% we are paying 3.2%. (this is why I said a bit less than 2%). I wondered if there was something fancier. The illustration is said to show the effect on total returns, but actually only shows the effect on what they call capital return, and ignores the effect on dividends. The effect on total return is much closer to my illustration It looks like a solid investment to me. Are you investing in this one? No, I am stuck on not borrowing money and paying interest.
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ben
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Post by ben on Jan 9, 2016 11:16:16 GMT
It looks like a solid investment to me. Are you investing in this one? No, I am stuck on not borrowing money and paying interest. I will be investing in this one as the sums add up, although still think it would be better for them to raise as much as they can then get the mortage for whatever they do not raise. In the last one I got about 90% of what I wanted and that was for a block that was twice the price so the demand must be there and it vanished from the secondary market pretty quick
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j
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Penguins are very misunderstood!
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Post by j on Jan 10, 2016 9:47:40 GMT
In the last one I got about 90% of what I wanted and that was for a block that was twice the price so the demand must be there and it vanished from the secondary market pretty quick Do we know what the min allocation was on the Lincoln block? Was it 90% of the min £250 for pre-orders or was it fairly higher than that? If the former, then this one willend up fairly less than the minimal£250 pre-order allocation & quite a few will end up with much smaller stakes than they want. I still agree with you though ben, I'm sure they could fund the full amount with no need for gearing.
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Post by highlandtiger on Jan 10, 2016 11:48:08 GMT
It looks like a solid investment to me. Are you investing in this one? No, I am stuck on not borrowing money and paying interest. Like Ben, I too will be investing because the sums DO add up. The whole point of taking out a mortgage on these sort of properties (usually blocks of properties together) is to INCREASE the possible future profit from the capital increases, (although to be fair, they do explain you will get even less profits if house prices fall). Since most of these blocks of properties have been bought at a massive discount, in this case a 14% discount, anyone who gets into this investment will already be ahead of the game. Add that to the expected forecast capital growth of 16% over the 5 years, we could be seeing a total growth of around 30% on purchase price. If this property had been bought outright, then whilst we may have got an extra 3.2% per year from rental, (the money that will be paid to finance a mortgage), which in turn would be 16% over the 5 years, thanks to the gearing, expected capital rises would give an additional 30% with a mortgage of 50% of the property value. Like all investments, it is a risk, that depends on property prices to rise at a minimum of 1.6% or so per annum to balance out the mortgage payments. Anything above 4.8% per year, then gearing will in effect double your profits. As I expect property prices to increase, year on year for many years to come, (part from the odd dip every now and then), then these sort of investments are a no brainer. Until this country starts building MORE homes than are required by population increases, in order to catch up, then supply and demand dictates housing prices will continue to rise.
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littleoldlady
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Post by littleoldlady on Jan 10, 2016 12:36:49 GMT
Until this country starts building MORE homes than are required by population increases, in order to catch up, then supply and demand dictates housing prices will continue to rise. You will be able to find these homes by following the flock of flying pigs.
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Post by Financial Thing on Jan 10, 2016 16:02:03 GMT
No, I am stuck on not borrowing money and paying interest. Since most of these blocks of properties have been bought at a massive discount, in this case a 14% discount, anyone who gets into this investment will already be ahead of the game. 14% is far from a massive discount. In property investment terms it isn't much of a discount at all, especially when you add in all the extra purchase cost fees and mortgage origination costs. Most investors who truly make money from property look for properties that are 20%+ under market.
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j
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Penguins are very misunderstood!
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Post by j on Jan 10, 2016 16:29:07 GMT
Since most of these blocks of properties have been bought at a massive discount, in this case a 14% discount, anyone who gets into this investment will already be ahead of the game. 14% is far from a massive discount. In property investment terms it isn't much of a discount at all, especially when you add in all the extra purchase cost fees and mortgage origination costs. Most investors who truly make money from property look for properties that are 20%+ under market. Have put my pre-order after opting out of the Lincoln block. I doubt if the allocation will be more than the£250 mark per person though as the demand usually outstrips supply.
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hazellend
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Post by hazellend on Jan 10, 2016 18:05:19 GMT
14% is far from a massive discount. In property investment terms it isn't much of a discount at all, especially when you add in all the extra purchase cost fees and mortgage origination costs. Most investors who truly make money from property look for properties that are 20%+ under market. Have put my pre-order after opting out of the Lincoln block. I doubt if the allocation will be more than the£250 mark per person though as the demand usually outstrips supply. You're not going to get a 20% discount on property in desirable areas, except in rare circumstances. I think 14% on this type of property is more reliable than 20% + on PM, THC type properties. What I'm not sure about is if the property is ever sold if they will sell it off as individual units to maximise value or as a complete block. The 14% discount is the break up value but if you read the valuation the bulk buy value is 840k which is at par with property partners purchase price. These units are good yielding properties and I think there is room for capital growth as well, even sold in bulk. Also, 250 is the minimum investment but there is no maximum. For example if you pre-order 10 - 20k and they are a bit oversubscribed everybody will get the same percentage of the amount they bid. So if it's 96% 10 k will get 9600.
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ben
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Post by ben on Jan 10, 2016 19:38:57 GMT
Have put my pre-order after opting out of the Lincoln block. I doubt if the allocation will be more than the£250 mark per person though as the demand usually outstrips supply. You're not going to get a 20% discount on property in desirable areas, except in rare circumstances. I think 14% on this type of property is more reliable than 20% + on PM, THC type properties. What I'm not sure about is if the property is ever sold if they will sell it off as individual units to maximise value or as a complete block. The 14% discount is the break up value but if you read the valuation the bulk buy value is 840k which is at par with property partners purchase price. These units are good yielding properties and I think there is room for capital growth as well, even sold in bulk. Also, 250 is the minimum investment but there is no maximum. For example if you pre-order 10 - 20k and they are a bit oversubscribed everybody will get the same percentage of the amount they bid. So if it's 96% 10 k will get 9600. My order is in now so unless I go on a midnight spending spree I will let you now about what percentage I get I got about 90% on £500 last time, not expecting as much this time as is half the amount needed to raise
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Post by highlandtiger on Jan 13, 2016 8:38:21 GMT
I have to apologise to my fellow forumites, but it suddenly dawned on me, that we have all made some serious mistakes in our calculations, whilst discussing the "geared" properties.
The mistakes we have made is with regard to the rental yield and assuming that it would be higher if we didn't have to pay a mortgage, well we were wrong.
Bear with me as I explain. and for ease of calculation, we'll ignore costs at the moment
All properties are split into 1,000,000 shares.
The property cost £840,000
Each share would cost 84p if bought outright
Each share would cost 42p if only 50% was bought (the rest is bought with a 50% mortgage)
The forecast rent PA is £56,100. Divided by 1,000,000 shares is 5.61p per share.
5.61p of 84p is 6.67% rental dividend yield
5.61p of 42p is 13.36% rental dividend yield
As you can see, not only does gearing increase the capital if house prices rise, it also doubles the yield on the rental dividend
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ben
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Post by ben on Jan 13, 2016 11:08:08 GMT
they have another one upcoming now in eastborne, figures not as good as last two but still not to bad, property looks nicer to
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shimself
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Post by shimself on Jan 13, 2016 13:39:59 GMT
I have to apologise to my fellow forumites, but it suddenly dawned on me, that we have all made some serious mistakes in our calculations, whilst discussing the "geared" properties. The mistakes we have made is with regard to the rental yield and assuming that it would be higher if we didn't have to pay a mortgage, well we were wrong. Bear with me as I explain. and for ease of calculation, we'll ignore costs at the moment All properties are split into 1,000,000 shares. The property cost £840,000 Each share would cost 84p if bought outright Each share would cost 42p if only 50% was bought (the rest is bought with a 50% mortgage) The forecast rent PA is £56,100. Divided by 1,000,000 shares is 5.61p per share. 5.61p of 84p is 6.67% rental dividend yield 5.61p of 42p is 13.36% rental dividend yield As you can see, not only does gearing increase the capital if house prices rise, it also doubles the yield on the rental dividend And the 16800 pa mortgage interest cost?
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Post by Financial Thing on Jan 13, 2016 14:02:01 GMT
we have all made some serious mistakes in our calculations The property cost £840,000 As have you, once again the property cost isn't £840k, you need to add all the expenses that come with purchasing and taking out a mortgage.
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Post by highlandtiger on Jan 13, 2016 14:17:30 GMT
we have all made some serious mistakes in our calculations The property cost £840,000 As have you, once again the property cost isn't £840k, you need to add all the expenses that come with purchasing and taking out a mortgage. It was for ease of calculation that I showed the GROSS rental dividend yield. The point is providing the cost of a mortgage is LESS than the difference between the two percentages (which it is) then having a mortgage on certain properties also amplifies the rental yield as well as the capital yield
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Post by highlandtiger on Jan 13, 2016 14:21:17 GMT
I have to apologise to my fellow forumites, but it suddenly dawned on me, that we have all made some serious mistakes in our calculations, whilst discussing the "geared" properties. The mistakes we have made is with regard to the rental yield and assuming that it would be higher if we didn't have to pay a mortgage, well we were wrong. Bear with me as I explain. and for ease of calculation, we'll ignore costs at the moment All properties are split into 1,000,000 shares. The property cost £840,000 Each share would cost 84p if bought outright Each share would cost 42p if only 50% was bought (the rest is bought with a 50% mortgage) The forecast rent PA is £56,100. Divided by 1,000,000 shares is 5.61p per share. 5.61p of 84p is 6.67% rental dividend yield 5.61p of 42p is 13.36% rental dividend yield As you can see, not only does gearing increase the capital if house prices rise, it also doubles the yield on the rental dividend And the 16800 pa mortgage interest cost? [br This is paid out of the 6.7% extra rental yield. It's all about percentages on your investment
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