Sheffield/Rotherham/The North targeted by hedge funds - property

[Zamo]

Hmmm. Just had a thought. If you had cash and enough to buy an asset in the expectation of a significant capital gain a year down the line then you would take good care of that asset.

 

Is it possible that people might buy property and never rent it out at all? After all if your primary expectation was capital gain rather than an income flow you would want to keep your asset in prime condition for when the time came to sell it. Obviously a property isn't like an antique or car you can put in storage but a small team of people could keep quite a few empty properties ticking over.

 

Ever thought there might be a reason you're not a property tycoon yourself?

[I1L2T3]

Ever thought there might be a reason you're not a property tycoon yourself?

 

No. The thought has never entered my head because it isn't something I would ever do in a million years.

 

What I was driving at is that if you could say buy 100 houses at £100k each now, and expected them to be worth on average £120k in a year and were confident you could sell in a year then what is the point of renting them out. You could just treat them as a hard, no-income producing asset, and make a £2m profit minus of course having a team of say 5 people constantly touring the properties to do basic maintenance making sure minimal heating was on etc..., council tax, covering bills and maybe a small security team to keep an eye on things at night. You could make a gain of well north of £1.5m and walk away after a year. No pesky tenants to deal with, no wear and tear on the properties.

 

All depends of course on how much you expect prices to rise, but now the bubble is being pumped up again.....

 

Buy to leave:

http://www.standard.co.uk/news/london/scandal-of-the-buytoleave-investors-who-keep-flats-empty-8702570.html

[Zamo]

No. The thought has never entered my head because it isn't something I would ever do in a million years.

 

What I was driving at is that if you could say buy 100 houses at £100k each now, and expected them to be worth on average £120k in a year and were confident you could sell in a year then what is the point of renting them out. You could just treat them as a hard, no-income producing asset, and make a £2m profit minus of course having a team of say 5 people constantly touring the properties to do basic maintenance making sure minimal heating was on etc..., council tax, covering bills and maybe a small security team to keep an eye on things at night. You could make a gain of well north of £1.5m and walk away after a year. No pesky tenants to deal with, no wear and tear on the properties.

 

All depends of course on how much you expect prices to rise, but now the bubble is being pumped up again.....

 

Buy to leave:

http://www.standard.co.uk/news/london/scandal-of-the-buytoleave-investors-who-keep-flats-empty-8702570.html

 

Sounds like a get poor quick scheme to me.

[I1L2T3]

Sounds like a get poor quick scheme to me.

 

Risky of course but then if you were a Dubai hedge fund awash with hundreds of billions of dollars looking for somewhere to invest.....

[Cyclone]

No. The thought has never entered my head because it isn't something I would ever do in a million years.

 

What I was driving at is that if you could say buy 100 houses at £100k each now, and expected them to be worth on average £120k in a year and were confident you could sell in a year then what is the point of renting them out. You could just treat them as a hard, no-income producing asset, and make a £2m profit minus of course having a team of say 5 people constantly touring the properties to do basic maintenance making sure minimal heating was on etc..., council tax, covering bills and maybe a small security team to keep an eye on things at night. You could make a gain of well north of £1.5m and walk away after a year. No pesky tenants to deal with, no wear and tear on the properties.

 

All depends of course on how much you expect prices to rise, but now the bubble is being pumped up again.....

 

Buy to leave:

http://www.standard.co.uk/news/london/scandal-of-the-buytoleave-investors-who-keep-flats-empty-8702570.html

 

Or you could take an extra £4k profit on each profit for a year, that's an additional 20%.

Why would you not do that?

 

The money you are investing has an opportunity cost (the amount you could have made investing elsewhere, or possibly the cost of borrowing the money). If the rent simply covers the interest on borrowing the money, and the capital inflation is profit then why would you not take the rent for a year?

Even if you use a management company and the profit is only 2k/house, it's £200,000 (in your example) that you would otherwise not get.

 

---------- Post added 01-10-2013 at 13:33 ----------

 

Sounds like a get poor quick scheme to me.

 

It was only an example I assume, a 20% increase in 1 year on housing is a bubble, and investing in a bubble is speculation. You have to get out before it bursts or you get badly burnt.

[I1L2T3]

Or you could take an extra £4k profit on each profit for a year, that's an additional 20%.

Why would you not do that?

 

The money you are investing has an opportunity cost (the amount you could have made investing elsewhere, or possibly the cost of borrowing the money). If the rent simply covers the interest on borrowing the money, and the capital inflation is profit then why would you not take the rent for a year?

Even if you use a management company and the profit is only 2k/house, it's £200,000 (in your example) that you would otherwise not get.

 

---------- Post added 01-10-2013 at 13:33 ----------

 

 

It was only an example I assume, a 20% increase in 1 year on housing is a bubble, and investing in a bubble is speculation. You have to get out before it bursts or you get badly burnt.

 

Of course you would naturally think that eating additional income from the assets would be sensible and rational.

 

But since this thought popped into my head earlier I've researched it a bit and it seems that it is a growing phenomenon. And it seems there could be two quite rational drivers for it:

 

1. Not all investors seek to maximise profit. Some are content with forgoing rental income to focus on capital gain. In a bubble environment this would become more common.

 

2. Or, property may be a focus for money laundering activities. So properties may be purchased but left empty because rental income needs to be declared as taxable income. Not renting out the properties therefore means one less touch point with the authorities.

[Bigthumb]

Couldn't agree more.

 

But don't count on the LibLabCon to deliver it. All of them seem happy to see property as a focus for speculation by investors.

 

You mean speculators like Tony Blair?

 

http://www.dailymail.co.uk/news/article-2272239/Blairs-paid-1-35m-cash-home-number-SEVEN-Bought-storey-Georgian-townhouse-son-Nicky.html

 

Blairs paid £1.35m in cash for home number SEVEN: Splashed out on a four-storey Georgian townhouse for son Nicky

 

The house bought for Nicky Blair brings Blairs' empire to £20million

New property is walking distance from Blairs' five-storey £3.65m mansion

[I1L2T3]

You mean speculators like Tony Blair?

 

http://www.dailymail.co.uk/news/article-2272239/Blairs-paid-1-35m-cash-home-number-SEVEN-Bought-storey-Georgian-townhouse-son-Nicky.html

 

Blairs paid £1.35m in cash for home number SEVEN: Splashed out on a four-storey Georgian townhouse for son Nicky

 

The house bought for Nicky Blair brings Blairs' empire to £20million

New property is walking distance from Blairs' five-storey £3.65m mansion

 

Did you have to mention ThatcherBlair? That guy turns my stomach.

[Bigthumb]

Did you have to mention ThatcherBlair? That guy turns my stomach.

 

Not to worry. Tony is toast. Surely you can rely on Ed Balls to get rid of greed.

 

http://www.express.co.uk/news/uk/318035/Ed-Balls-fat-cat-brother-shares-in-57m-bonanza

 

Ed Balls’ ‘fat cat’ brother shares in £57m bonanza

THE younger brother of Shadow Chancellor Ed Balls has pocketed part of a £57million payout as a director at the world’s biggest bond dealer, it emerged yesterday. Andrew Balls, 38, shared the mega-payout with six other directors of the European arm of Pimco.

[Cyclone]

Of course you would naturally think that eating additional income from the assets would be sensible and rational.

 

But since this thought popped into my head earlier I've researched it a bit and it seems that it is a growing phenomenon. And it seems there could be two quite rational drivers for it:

 

1. Not all investors seek to maximise profit. Some are content with forgoing rental income to focus on capital gain. In a bubble environment this would become more common.

 

2. Or, property may be a focus for money laundering activities. So properties may be purchased but left empty because rental income needs to be declared as taxable income. Not renting out the properties therefore means one less touch point with the authorities.

 

I imagine money laundering causes some behaviour that from the outside looks really quite odd.

Number 1 though, what kind of investor isn't looking to maximise their return? It's an odd kind of investment ethos, what do they look for instead of the best return?