After the Property Boom: Intro

Ah yes, volume one. I sent it to several publishers, and they all turned it down. It therefore gives me a certain masochistic pleasure in outlining what I predicted in that volume, and updating you on how I got on.

The Way to a Large Fortune in Property Investment. Your Pension Dreams Come True. They were some of the headings in volume one.

The date of this work was 1993. It was right at the bottom of the property slump. No-one wanted to invest a cent in houses. But I had this plan. It was brilliant. It was a no-brainer. But no-one wanted to buy it. This is how it went.

You go down to the South Coast. You look at property. There are houses for sale everywhere. In Dover, Folkestone, Hastings, Bexhill, Eastbourne, Brighton; it didn't matter where you went there were places for sale at silly prices.

I remember once applying to several mortgage companies and asking for a mortgage to buy a flat. When I said the flat cost £10,000 they stuttered in disbelief. "But we dont offer mortgages of less than £40,000." I couldn't believe it.

In the following chapters I tell the whole story, and explain precisely how I got round these problems. The story is just one example of how to make money out of property investment. The story also carries on to explain how it wont work now. And then goes on to show what you should be doing now, which is precisely the opposite of what most people are telling you to do.

And this is the trouble. Because I have been in this business for so long I do actually know what I'm talking about. And I am a contrarian. I do the opposite of what everybody else is doing. That's precisely why I am so successful.

But I digress. What was it I was trying to get across in that earlier book, and how successful was my venture?

Quite simply, one day, messing around with charts and mathematical formulas, and at the same time listening to a friend talking about buying a house, just for fun I started applying my formulas and charts to the house prices on the back pages of the newspaper.

Suddenly I had a revelation. Suddenly I was staring at a large fortune. I was looking straight at my pension.

The idea that hit me was buy to let. This was in 1991. I decided to go out and buy houses, and rent them out. As far as I could see one week's rent would pay for one month's mortgage payment. This meant I could go out and buy up the whole of the south coast, and become incredibly rich. It also meant that as time went on all my tenants would pay off my mortgages for me, and I would be left collecting the rent with only repairs and renewals to pay for.

I did a quick calculation. I could get 15 year mortgages, and go out and buy at least ten houses. This would mean my income immediately would be enough to live comfortably on, and in fifteen years, when the mortgage payments dropped out of the picture, I would have a really nice pension.

I sat there and doodled on a piece of paper. One property bought at £10,000 would bring in £60 a week rent. The mortgage was £45 a month. I reckoned I could get one up and running, and then buy a new flat every six months. Over five years I could build up to ten of these things.

I totalled up my projected profits and then worked out what I would get in fifteen years time. And then I went out and started buying.

After I'd been doing this for just over a year. (I bought my first buy to let in january 1992) I had three properties and I reassessed the situation. I decided to do two things. The first was to go upmarket. The second was to write a book on how to do this and try and get it published. Both ideas turned out to be a mistake.

Funnily enough it has been the cheap and cheerful properties that have made me most money. And wherever I presented my book for publication it was greeted with hoots of laughter and disbelief. I donÕt think anyone bothered to get past the first paragraph.

But, the real question is, here we are fifteen years later, what is the state of my property empire, and what are my pension prospects?

And the implied question this chapter poses is: Were those publishers complete idiots back then not to publish my book?

Well, things have changed, and because of the current state of the market my pension scheme is in ruins. I have changed course. I decided at the beginning of 2003 to get out of property in the UK, and I have divested myself of two-thirds of my portfolio. Half of the rest goes next year, and I will sit on what's left.

I have only decided to sell up because I can make more money elsewhere, so the scheme wasn't a failure. I could still be sitting on all those properties, but I explain why I'm selling in another chapter later in the book (Buy to Let -- The Letdown).

However, let's just assume I hadn't started selling a couple of years back. If I had still been sitting on those initial ten properties at the beginning of 2007 my mortgages would be gradually dropping away at the rate of two or three a year over the course of the next few years.

However, I can now do the maths again on my scheme and report whether my pension idea was indeed a great idea.

First: the income.

The rental schemes have worked so amazingly well that the entire pension scheme has cost me nothing at all. My first investment was £750 (5% deposit on the first flat I bought). That was a mistake. I could have got the flat for £5,000 less than I paid. But we all make mistakes. The rent came in from day one, and after I put aside the first week's money for the mortgage payment, I had three weeks of rent that could go into my pocket, a little over £150. It took me five months to get my money back. I then bought flat number two. My first flat was in for nothing from now on.

I repeated that pattern over the next five years until I had a substantial number of flats, and by the end of six months each flat was in for nothing, and was producing a substantial profit.

The weekly rents I was getting before I sold were as follows: £70, £90, £90, £160, £275, £305, £305, £120, £115, £175. This totals to £1,705.

Bearing in mind the fact that this pension scheme cost me nothing, that is not a bad weekly return for a fifteen year investment scheme. Can you think of a better plan?

Second: the capital gain.

I bought flats on the sea front for £10,000. I donÕt need to tell you what they are worth now. Some of my properties are worth twelve times what I paid for them over a decade ago. That means that every year the original investment has returned its value 100%. Since my own input was paid back by the rents, that return is entirely on someone else's investment (the mortgage company).

What this means is that I am writing this from a large study overlooking a very large balcony overlooking a pleasant valley somewhere in the sunny south. I have had to leave the UK because it is the only way I could afford to sell up. I donÕt intend coming back, except for the occasional visit.

Because of the blinkered attitudes and mistaken hilarity shown by several publishing houses back in 1993, the rest of the world did not get the benefit of my great idea when prices were on the floor.

Of course now (January 2007), everyone and his dog and lawnmower are trying to buy property for their pensions. Fools! DonÕt they know the party's over? Of course they donÕt. They are heading happily towards ruin.

So, here is my next book. This will tell you what to do after the property boom. (Always assuming it gets past the publishers.)

Next Chapter >>>

Investing in Property. How to be successful in property. From rents to a pension in fifteen years.

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