The Power Of Mantra


Prior to Sow & Reap I was working in an estate agent in Paddington, this was when I caught the property bug. This is a disease much like gambling, but worse, as it is not officially recognized. Without even recognition how can there possibly be a cure? The symptoms of this disease are you must be doing property deals at any cost, otherwise life loses all meaning.

This was in around the year 2002. My background was in Mathematics having done a degree in Actuarial Science, but having little interest in the subject. So estate agency and property was not on the radar, ever.

I landed myself into this role accidently.

As with many things in life, you have your plans, and destiny has hers.

Sow & Reap started as a mortgage company, and then evolved to include sourcing UK properties and India property.

In the beginning I was attending all the investment seminars I could, eg Inside track and all the shows, learning about no money down deals.

I also started buying properties with no money or very little money. Many times we even bought property and got money back!

Very quickly it was apparent there were many brokers and agents in the market who were long timers but did not know the loopholes in the system. As they kept to the same groove.

Naturally there are regrets about what properties we had bought at that time. Not all were selected well. But as I have said previously, buying a dud property is like having a bad haircut, if you wait long enough it will grow back.

A group of properties we bought in particular was based in Luton. The reason we ended up in Luton again was completely accidental. I went to auction focusing on a property we went to purchase. Not coming away with a property left me incomplete, therefore as an addict I had to purchase something. So I quickly looked at the catalogue and picked something cheap which we could buy for the cash we had without the need of a mortgage – just in case it required work. A Buy to Let mortgage is given on the basis the rental pays for the mortgage from day one. A property requiring work does not fit into this criteria, as work and money will be required. Consequently this is classed as a special case. Often in these scenarios the lender will either refuse the mortgage or insist on a retention meaning they will hold on to say £5000 and release this on completion of the works which will involve another survey. In an auction situation and purchasing blind this was not a risk worth taking.

So the property we picked up was in Harefield court, for £45,000. This was purchased in cash and in those good old days you could refinance at a higher valuation straight away. This meant we buy the property for cash one day and then we refinance the property at the valuation the next day. To illustrate we bought this property for £52,000. It was worth £62,000. Therefore remortgaging at 85% meant we got all the money we paid for it back: £52,750.

So we got all our money back and the property rental was £450pm and the mortgage payment was only £234pm, leaving roughly £200pm in excess.

So we bought the property for free, got a little cash back and then had a positive rental of £200pm. Looks like a no brainer right? So after a few months we bought four more in the same block and why not as they were for free and there’s money coming in on each right? Wrong!

There were a number of problems. All the numbers given above are correct. The main crux of the issue is this if you give out peanuts you will get monkeys. The tenants we were attracting due to the location of the properties in Luton, were all DSS, I do not even think you could get a professional in there. Note – I’m not painting all DSS tenants with the same brush. We have had stable DSS families in properties for years with zero issues.

The problem here was with a one bedroom property in the rubbish part of a undesirable town. Luton was voted as the worst place to livein 2004 in the officially named crap town survey. Therefore you will not be attracting one parent families as they will be wanting two bedroom properties which have at least some stability. You will be getting the unemployed single youth.

We would have phone calls to say the rent had stopped being received, we would go and visit the properties to discover the tenant had left and simply given the keys to their mates to use as a drinking and smoking den. There would be holes in the wall – obviously one of them was a Kung Fu Expert… and cigarette butts on the carpets.

The hassle factor on these properties was too much and well outweighed the benefits. If you have an episode like this once a year, by the time you take off the agent’s fees, you’re in negative cash flow. Added to this the building was poorly maintained and so this added to the maintenance costs.

Clearly there is a big disparity between the theory and the practicality.

In a nut shell the issue I forgot here was the first mantra of property investment which is Location, Location, Location.

The location and the property will govern the kind of tenant you will attract. A good property in a great location means you will be in a position to choose who your tenant is.

Even a poor property in a great location will still put you in a position of strength.

We had a rubbish property in a rubbish location!!

The other opportunity I had back around this period was purchasing 10 properties, new builds in West End Quay a new development in Paddington. I could get each of these at £275,000. Valued at £350,000 the mortgage company would lend 85% equating to £297,500. The left over would be used to pay the sourcing fee, stamp duty and legal fees.

In short this means you pay nothing. The cherry on the pie was they were rented to a Swiss bank for a two year period.

At this time a one bedroom property priced at £275,000 was unheard off. As the banks were throwing money at this time I could have bought all ten without any issues.

I didn’t.

Currently you cannot purchase a property for less than £450,000 in this development. This means an uplift of £175,000 per property, about £1.75m for the 10 properties minimum.

Of course in life you cannot look back and it moves forward, as do property prices.

Many investors stand on a hill and look downwards at how high property prices were historically, they do not turn the other way to see the future potential.

Property prices will always increase, in the long term, especially when there is an abundance of cash injection into the economy.

These are lessons learned which will never hit you strongly if you simply read about them. Only through the practical experience of going through some of these experiences you tend to realize and avoid similar issues in the future.

There is a reason the mantra in property investment is location, location, location

stick to this and you won’t go wrong! This is the essence of property investment regardless of time and place. Countries’ laws and regulations may change, but location is key wherever you go in the world.

Suresh Vagjiani

Managing Director

Sow & Reap

A Property Investment & Financing company.

Suresh Vagjiani
Suresh Vagjiani
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