Goochie

Right, I know we have countless threads on here about BTL's and "how do i make money from home" etc but I've recently been wondering a few things. Please consider the following situation and give your opinions;

Mr Smith has no pension because he considers, in his opinion, property to be a better investment. Currently he's living in a house he's owned for 9 months and has about £20k equity in it.

Mr SMith is considering his first BTL, but not having the required deposit he thinks he could secure the BTL's deposit on his own home. Once this is done and the first BTL in place, he moves to buy his second BTL, securing the deposit for number 2 on number 1.

This continues for a while until Mr Smith has several properties secured on each other (and his own). When he is happy he has enough, he secures a loan on the final property to pay off the original loan on his own. This then isolates his own home from the chain.

My questions are:

Would Mr Smith's scheme be possible?

How many properties would Mr SMith need to have a big enough pyramid to sit at home doing nothing all day but admiring his portfolio?

Is Mr Smith mad?

NACRO

No he isn't he's just 6 yrs too late. Been there, seen it done it and now sitting on the safe house while raking in the cash from others.

May be possible if you pick the right area of the UK to do it in and get cracking sharpish.

Faire D'Income

The theory is well tried and tested but it relies on sufficient equity growth upon which to leverage your gearing but I think you are a little late to the party to expect the kind of growth you're hoping for.

It's possible to continue the gearing until you have sufficient income to jack you job in but you end up with a job in itself looking after all the properties you've accrued.

If you want to invest in property cheaply, then I'd suggest you look at Bulgaria but I'd be very cautious and do your homework thoroughly.

Goochie

So would Mr Smith be better off waiting until the predicted fall in house prices to take effect before starting this scheme?

Would he be able to obtain some nice houses following re-posessions etc?

Faire D'Income

Yes.

ProperCharlie

of course he would. if mr. smith can predict the future, then so much the better. in fact, he might as well not bother buying property and make all his money at the bookies.

Goochie

He wouldnt need to predict the futiure though, would he. He'd be able to read about falling house prices and see them falling in estate agent windows. Once this steadies he jumps in.

ProperCharlie

fair point, Goochie. But:

maybe there won't be a collapse in the market.
maybe there will gbe a collapse in the market and mr. smith will incorretly assume half way down to be the bottom.
maybe the econmy will go into massive recession and mr. smith won't be able to find any tenants.
maybe interest rates will double, and mr. smith won't be able to afford the repayments on his loans.

or maybe everything will work out fine and mr. smith will be a successful property magnate.

hard to say how it will turn out, isn't it?

NACRO

Indeed, perhaps Mr Smith would have been smart enough to see stagnation in his local market then use the capital gleaned from the sale of a property in the falling market to invest in an area like the NW for example (too late for this now) and make a killing. Before of course moving to as yet undeveloped markets in other countries.

At least that's what this "Mr Smith" did.

mad_dr

My surname's Smith!

Am I going to be rich then? Quality!

Tiggs

so mr smith is daft enough to have skipped his pension planning on the basis of expolring a money making plan that is allready at its peak....yet now he is going to be clever enough to spot the bottom of a market he knows sod all about by reading the papers?

mr smith needs to get of the net and start doing some normal work he can get his head round!

NACRO

No Tiggs, Mr Smith identified a growth area in the market, ring fenced his most important assets and salted away some cash for a rainy day. He then went on to buy more property in growth areas,made a mint and is now considering biting the bullet and paying the CGT in order to cream the profit. Sweet as.

ProperCharlie

NACRO - I think you are talking about a different mr. smith to the gentleman that Tiggs is referring to.

NACRO

Possibly, Mr Smith has to keep his end up though as there are two sides to this discussion.

Tiggs

maybe Mr Nacro reads posts with the same ability that Mr Smith invests?

Faire D'Income

NACRO. If you live abroad then you're not subject to CGT on your properties in the UK.

NACRO

I'm aware of that but my status is about to change.

jjones

buy 20 properties in moss side for 100quid and rent them to asylum seekers via the DSS.