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It’s No Good Building Too Many Homes In The Wrong Area

By Andy Shaw | January 23, 2010

Originally Posted 25th August 2007

The government is trying to build enough homes now; well they think it’s enough anyway. And what they are going to do is let people build properties in the wrong areas, believing the Kevin Costner comment that ‘People Will Come’. I think they are right, Buy to Let Investors will come, but tenants won’t.

Well not for the money that would make it worthwhile for Buy to Let investors to go there in the first place.

But at least the government will be able to say they’ve increased the numbers.

I received this email from a site member the other day following some advice I gave them, they had gone for the easy route and they now found themselves trapped with new build properties in negative equity and negative cashflow.

***Start***

Hi Andy

Having looked at all the options, we realise we have to sit tight and hope that this sector of the market (which seems to be separate from the rest) comes right sooner or later. The big problem is that they are still building these types of property in all the major cities (and otherwise I suppose). Since there is a huge over supply at the moment, it can only get worse and there seems to be no control over the development of these numerous brown sites. I’ve spoken at length recently with estate and letting agents in Manchester and Glasgow and there are large numbers of investors/landlords in dire straits. Also re-letting is getting to be a problem because there are always new properties available, which is driving rentals down. We just found a tenant for our Glasgow property after 5 weeks. Trying to tempt the punters with £100 discount off the first month’s rent didn’t work so I think we’ve got someone now at 50% discount.

The only way we’ll get out of the mess we’re in is to follow your strategy, so thank you again for the book and I hope we’ll get to meet you sometime soon.

Regards

XXXX

***End***

Hi XXXX
I think this sort of thing is going to become much more common place in the news over the next few years. It will be the media’s way of saying to everyone, see we told you Property Investment was a bad idea and look at what has happened to all of these unfortunate people.

As usual they will be generalising and saying the whole market is bad instead of showing the real truth, which I covered in my last article, that some newbie investors through not having a clear strategy opt for an easy route to wealth that could end up eating them alive.

Now I’ll give you my point of view as a property investor. I think it could be a good thing. It keeps the amateurs away from where the real money to be made is. Their future and current failures will keep many more would be clever investors away from the market. The government gets its figures so that it can say ‘well look we’re now building more, maybe it’s not enough but hey we’re getting somewhere’. And from my point of view the housing crisis continues, demand increases, rents go up, capital value goes up.

Life is good for me as a property investor that knows what they are doing.

Best Wishes

Andy

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