The story of a Value Investor – Part 3Make Text Bigger
Now you may think this sounds all too easy. Don’t get me wrong, I have also made some bad investment mistakes. Two out of ten mistakes is acceptable as long as you learn from them and shed such investment mistakes as soon as you can. Albert Einstein said “Anyone who has never made a mistake has never tried anything new”. Do not become so cautious that you never buy anything. With property investment there’s always ups and downs, a lot of hard work, and a fair share of bad tenants.
Bad tenants, now there’s a subject in itself. You really have to be hardened in this game, and not get too emotional when a tenant damages your property. Using the courts to recover one of your properties is no quick fix.
There was one time when I finally recovered and reopened the door to one of my properties only to discover a previously painted property needed repainting all over again. Not to mention the animal faeces and drug needles everywhere. It was all very disheartening. Some tenants on hard drugs can and do literally live like animals. No worries, we rolled up our sleeves, repainted, repaired the damage and made it ready to let again. A few days later the previous tenant broke in, and removed the gas central heating boiler in broad daylight. The ex-tenant was last seen walking off into the sunset with a gas central heating boiler strapped to his back. It was probably sold for as little as £50 just so he could get high. “It’s a Mad, Mad, Mad, Mad World” (I loved that funny movie), you just have to laugh sometimes or you will cry!
Another time I had to evict a tenant that was selling drugs from the one of the properties, she had CCTV cameras on Police guard looking up and down the street. She took her revenge after we evicted her by breaking into the property at night and proceeding to light a fire under the stairs. Fortunately she couldn’t even do that right. Maybe she was too high at the time? But the property was badly smoked damaged in several rooms.
Don’t worry, there’s always a silver lining somewhere, you just have to find it. The insurance company paid for the repairs, so in the end the property was better off. So if you want to play the Landlord game you better toughen up your emotions. Remember after all it’s just bricks and mortar so enjoy the ride, and don’t take it personal!
For some diversification, from 2005 to 2007 I concentrated on sourcing and buying new build properties at discount by pooling my buying power with other investors. Even back then buying four to six properties at a time from National Home Builders created a nice price advantage. That coupled with the ever increasing property appreciation created even more equity. However, the buying was no longer about rental yields. It was all about the expected capital appreciation.
In hindsight such expectation philosophy was fundamentally wrong. You should never buy a property just because you are expecting it to go up. That is not a given, what if it doesn’t, and what if it goes down? After all what goes up must come down at some stage or another, nothing can keep going up forever.
By 2007 I had bought and sold some properties for a profit in places like Manchester and resold some houses in Grimsby too. It just didn’t make sense anymore, every one man and his dog were now investing in property. Therein lies the answer, “When everyone is buying you should be selling, and when everyone is selling, you should be buying”. Don’t follow the herd, trust your instincts, be a “Maverick”.
I remember attending a launch open day for the Edge apartment building in Manchester City Centre, located next to the 5 star Lowry hotel. It was just madness; people had literally lost their minds. Reservation cheques were literally being thrown at sales agents. Newbie investors were paying £200,000 for Studio apartments, some costing £500 a square foot. That was London pricing and just plain silly for Manchester. I thought then that this is all going to end in tears.
Early in 2008 it was time for me to exit stage left. There was literally no value to be found in the UK property market, rental yields were around 5% or lower. With that in mind I headed back to Cape Town for some R & R to contemplate my next life and wealth journey move.
My R & R didn’t last long as it turned out the property madness both on the lending and purchasing front was far more insane on the other side of the pond. Over there a state of delirium existed and financial lenders became blind and drunk on their success.
“Why has the West forgotten that only lasting wealth is created from a manufacturing base”? “You just can’t go on creating and taking money out of fresh air with clever paper shuffles”. I just wish I could understand Chinese. There must be plenty of Chinese jokes circulating about reckless Westerners?
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