If you don’t move forwards, you go backwards


This week I had a 77 year old gujarati man from Wembley come to see me. He has been reading our articles for years now and finally took the plunge to come in and speak to me. He had a substantial amount to invest, about £300,000 which had been lying in a personal account and fixed rate bonds not doing very much.

In fact it had been depreciating. I explained the kind of thing we could do for him and it’s always important to understand as much as we can about the client. Many factors affect the purchase of a property and therefore the more we know the better we can provide a solution. It is not just a case of finding a good deal and getting the client to purchase. Things like the tax situation and comfort levels of the client have a big bearing on what type of property will be suitable.

As we were speaking one thing didn’t add up… Exactly why was this person interested in investing and making money? He told me himself he’s perfectly settled and he’s paying a high rate of tax due to the level of income he’s earning. He has enough income to do what he wants.

Judging from his character I could not see him suddenly buying a Bentley or spending half his time in a hot country playing golf. This was an old school thinking man and so the glitter which attracts the younger generation did not have the same appeal for him.


So I asked him what the reason was for him to wish to invest: you have enough money, your lifestyle will not change even slightly. So why would you wish to embark into property at this ripe age?


He gave a very sensible answer. He didn’t want further headache and I was right in my perception he will not do anything with the extra money either in terms of lifestyle or purchasing. He felt it almost a sin to have worked so hard and saved so hard for the money now to be depreciating in the bank. He wanted to put it into a physical asset which will work for him and not erode what he has currently.

It seems in life if you don’t move forward you move backwards, the same can be said with funds in the bank. They erode if you do not put them to good use. The current RPI index released 17th January 2012 is 4.8% while the best one year fixed rate savings account only pays 2.85% per annum. This means according to these figures you will be losing 2% per annum on your funds.

You cannot take statistics at face value as the only way to find out what’s behind them is to analyse what they use for measurement and what maths is used to come to this figure. Often they can be massaged and don’t always represent the true on the street experience.

Take for example petrol price which affects most people. At the moment we are looking at 142.5p compared to 129p last year which means a rise of 10%.

So if you stuck your money into a fixed rate bond last year you would have been able to purchase roughly 7% less petrol with your money. In retrospect you would have been better of filling a few large water butts with petrol up and leaving them in your back garden than keeping your funds in the bank!

Basically there are two things the in the economy: goods and money. Inflation occurs because more money has been released into the economy than there are goods to purchase. Given the amount which has been released into the economy, £325bn to date, it is obvious what will follow – you will see further inflation and erosion of your money.

A good way to hedge your funds against inflation is to invest in real investments. Property is one such investment and central London especially is forecast to still carry on rising despite the turmoil. One reason is people see property in this location as a safe haven, not just UK investors but overseas investors are increasingly parking their funds in the London property market.

This is why London house prices continue to climb even as the rest of the country’s fall.

London house prices hit a new peak in December 2011, 7% higher than their level before the global credit crisis began, as the most expensive parts of London became even more expensive, despite the downward trend across the rest of the country.

A survey by estate agents Knight Frank stands in stark contrast to recent reports of the national housing market from Halifax and Nationwide, respectively Britain’s biggest mortgage provider and building society. But, with a 35-year track record, the estate agent’s report is the longest-established analysis of house prices in the capital and it reinforces reports in this space and elsewhere that London property prices are decoupling from the rest of the country.

Foreign buyers helped expensive housing in the capital become more expensive, with prices recovering by 40% from their post-credit crunch low in March, 2009. Liam Bailey of Knight Frank said: “Demand from European and Asian investors for prime London property, despite uncertainty resulting from the Eurozone debt crisis, outpaced supply and led to strong price performance, taking total growth over the last 12 months to 12.1%.”

The Real Deal

Cheapest 2 bed in Wembley

Chestnut Ave, Wembley, Middlesex

GUIDE PRICE: £60,000


This ground floor two bedroom maisonette that benefits from its own garden requires a fair amount of updating and modernization throughout. The property does include double glazing and gas-fired central heating and is being sold with the benefit of vacant possession. The property forms part of a popular development that surrounds a central area of greenery and is within walking distance of local shops, bus connections and Sudbury Town Piccadilly Line Station.


Entrance hall, living room 12’10 x 12’7, bathroom, kitchen 12’3 x 7’1, bedroom one 11’1 x 11’10, bedroom two 10′ x 8’4, private rear garden


Leasehold – 23 years unexpired

This lease hold flat should be bought in cash or by refinancing an existing property. The lease can be extended after a two year period of owning the property. In the interim the property will be generating a rental income of £10,000 pa. This represents a yield of nearly 15% assuming you pick it up for around £70,000. We have a lawyer who specialises in lease extensions, this will enable you to get the lease extended at the best possible price. This short lease property represents great value for money. The reason why most people shy away from this kind of investment is due to lack of knowledge – we can plug this hole for you. No one can argue with the figures involved in this deal.

For help and guidance in purchasing this property please call our office.

Suresh Vagjiani

Managing Director

Sow & Reap

A Property Investment Company

Suresh Vagjiani
Suresh Vagjiani
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