Who wouldn't?

Question

Hi

I've been offered 25 rental properties in the midlands. All with tenants and producing an income higher than I would get from a bank account. They are being offered at an average of 20% below open market value. Given the present limited availability of buy to let mortgages it seems like a good medium term cash investment? I know it's about £1.5 m but it could return over £4m in 5 years.

I mean who wouldn't buy below value if the market was sure to rise again in the next 5 years?

Answer 1

Put it that way, you have a darn good point.  I wouldn't personally myself, too much of a risk factor - I'm meaning tenants damage properties.  Otherwise, go for it.  You're on to an earner

Answer 2

I wouldn't unless i have enough money to keep the properities running. what if housing slump is not over yet for another 2 years

Answer 3

Your expectations are VERY high if you think that you can sell these in 5 years for 2 or 3 times what you paid for them.  Rental properties produce income first and foremost and "can" appreciate over time.  

I don't know the area you are talking about but where I am real-estate appreciates between 5-7% per year on average, and I doubt you are buying at the bottom, from what i hear UK in general is just starting to see prices slip.  Using the last several years to determine how much they will appreciate is probably not a good idea.

How much actual experience so you have with real-estate?  Unless you have a lot of experience that is a lot of cash to put into something you are not an expert at.

Answer 4

You say 50% of the annual rent = Depost rate+ a bit more? So the properties as a whole are yielding about14%?

How much do you think these sort of properties will fall by in the medium term? and how much do you think interest rates will increase by over the medium term? Seems to be about the right price. If house prices do 'collapse' how quickly will they recover in the Midlands? You could buy Barratts for £1.2 bn today! Good luck.