Ten Real Estate Tips from a Failed Investor: How to Avoid the Coming English Property Crash

by NB Armstrong (July 2013)

People often ask when it was that I first realized property investment wasn’t for me. “Aah,” I say, casting my mind back to a time when Britain’s population explosion guaranteed decades of housing-based prosperity (it still does!). “It went like this…” And I tell them my story.

My first investment was three adjoining terraced houses on a Midlands council development. The Shidely Estate, formerly a glory of slum replacement municipal housing for the people, was now entirely occupied by the offspring of one giant single mum. Good local amenities included a four storey chip shop, a movie poster of Al Pacino reclining in a hot tub with a machine gun, and access to the sky every second Wednesday. The development was fully up to modern scratch since, after residents’ complaints, the council had replumbed all one hundred and fifty properties so that each had access to hot running cider. Streets around Shidely were safe, too. So safe, in fact, that locals rejected the need for any police presence by physically preventing them from entering. The Shidely Estate, I judged, was an opportunus platinumus for a callous money-making man such as I am.

First, I checked on the serviceability of the properties by viewing them through a pair of binoculars from a nearby countryside. Their frontages appeared sturdy, solid, and with nary a chipped brick or damaged window pane, it would take little more than a few colourfully arrayed external window boxes before happy whistling laboring men would be restoring Shidely to its glory days of 19[research this point]. At £7,000 per unit, I paid in cash that afternoon. A bemused local gardener whom I set to the task of fitting the window boxes oddly insisted on completing the task at 5am with his engine running. I took this as a sign of the entrepreneurial diligence and thrift which must suffuse the local area. Finally, I placed adverts in the regional print press and waited.

The very same day, I was inundated with responses. A queue of local journalists besieged my young family's Portakabin. Why, they asked, was I trying to sell three condemned and semi-demolished properties? Was I perhaps perpetrating some fraud? Businessmen never share their secrets so I demurred, by passing out. Later that afternoon I investigated. I hitched a ride in an ambulance whose driver’s job it was to serve the Shidely Estate on a loop. Outside property number 1, the waiting cameramen surmised my bemusement as I took in a perfectly decent nay “bijou mid-town terrace”. I passed through its handily unlocked door out into three open-air yards of strewn bricks and half demolished walls. A perfectly still wrecking ball, unimpressed by the wind, hung conclusively in its middle. I keep a photo of my expression, caught at that moment by a local photographer, and circulated amongst the world's online media as a reminder to

Tip No 1. Check on those little jobs that might need doing before purchase.

On the bright side, my portfolio was growing. Inversely, however, as I bought more property my debts increased. I couldn’t figure it out. What were these sudden demands for payment from creditors? I had always thought the world’s money men to be in shrewd alliance with the property owner, the two both smoking metaphorical cigars while value appreciation stacks up as promised by the general culture of daytime television. But, unable to pay interest on the prime, and having just learned that day from the bailiff what “the prime” is, our Portakabin was repossessed in the January chill and taken away by a man in a white van half its size and to this day I don't know how he did it. I stood there scratching my head as he drove off, marveling at the brute injustice of it all, and his feat of low loading. How could this have happened? Why was the new investor not provided with more institutional support? Then it hit me. My wife and child were still in the Portakabin. Wife dutifully and graciously forgave me, once the prescription medicine had dulled her ability to reason, communicate, and, effectively, be. However it did irk her that we were now homeless in the nesting season, so

Tip No 2. Avoid winter repossession.

With less and less capital to invest I tried to be “cute”. I'd read in a Sunday magazine about the novelty property sector, the niche market. Unconventional living spaces –the caravan, the tree house, the beach hut – were enjoying a surgence. One could spot a rare competitively priced oddity on the Monday, convert it to modern metropolitan livability on the Tuesday, and promote its chic eccentricities during the sell on the previous Sunday. I watched spellbound one morning, as a shoulder length-haired rugged man on The Living Channel renovated a decaying houseboat into something in which you could host a Chilterns contact bridge tournament (on a Hull canal). You had to be in on this thing. So I bought a tepee erected in the middle of a traffic island. Having been sold on the idea by an estate agent, I could be certain that it was a sure and honest investment. I moved my family in and we waited a sensible period of time for its value to rocket.

Those first eighteen months on the A237 are some of the happiest memories of our early family life. I always say. Too, it was quite an adventure for the little one and he became fully adept at not getting knocked down and killed. But there was one let down vis-a-vis the location. The passing traffic was disappointingly thin. Indeed, there were occasional moments between 2 and 4am when the sound of not one articulated lorry nearly caused the thin outer sheets of our home to split in reverberation. And so my “wam” (as I advertised it) proved a challenging sell. I soon grasped why. No one was willing to risk money in the middle of such an unpopular link route. As I collapsed the damp cloth triangle that we called home into one of the pizza boxes local youths throwingly supplied us with while they jeered encouragement, I recalled (ruefully!) how the agent had initially offered me the opportunity to invest a little more and go for two sheets of plastic spanning the central reservation of a nearby motorway. But, ladies and gentlemen, I had been mean. Investors don't follow my example. Instead,

Tip No 3. Risk a little more poundage on location.

After being evicted from a tepee, my wife expressed her latest frustrations with the bewildering machinations of the property market. Jokingly, she threatened to advertise my organs on eBay. But I knew how deeply she still loved and cared for me. One night, I caught her tenderly writing my own suicide note. I told her not to despair, that I would never, ever give up on the property market. She burst into tears of joy. Long term, I reminded her, property is a guarantor of profit. That is just something it says in the bible somewhere. Otherwise, why would politicians in marginal seats always promise it so to the electorate? We must persist. This calmed her down considerably and she took to bed for the next eleven weeks. Luckily, as it turned out. For this time she missed me making what was perhaps my most embarrassing elementary investment error.

I decided to get into negative equity.

I had studied Latin at school, and memory served to inform that any derivative of the word equus is related to horses. Ipso factotae, the term negative equity must refer to an absence of horses. Helpful estate agents told me about several sellers “desperate” to offload properties with growing negative equity. A property suffering an increasing lack of horses has never caused me serious upset (I think I picked that quirk up from the north Somerset side of the family. They were sheep men, all of them).

On the way to court a month later, the solicitor shook my hand. He had never before handled a case of repossession which had won him a case of champagne at the Law Society's Christmas dinner just for the retelling. The judge then explained to me the meaning of negative equity with an expression so perplexed that I deduced he must have just learned its real meaning himself! Recalling this incident is a perpetual reminder to

Tip No 4. Always deal with the house purchasing process in plain English.

Buy-to-letting was working for everyone. And I mean every British man, woman, and child, especially those who had emigrated. No one had ever lost money on it. Time after time, I had seen overweight bus passenger types making a repeated success of it on Homes Under the Hammer. More articulate presenters than they would ease them through the house buying auction process and sometimes even make phone calls requiring middle class negotiating skills on their behalf. So I attended my first auction, prepped for the bargain hunt. I left with a tea chest stuffed full of Victorian sex aids and vowed to be more focussed next time.

Next time, I was undefeatable. I determinedly secured my quarry by leaving a stiff hand in the air throughout the bidding. As the gavel-wielder raised his eyeglasses onto his head and looked at me inquisitorially, the multiples of 1,000 layered up. How easy the whole thing is, I thought. There was admiring laughter from the floor as, finally, a member of staff whispered congratulations of a sort. I had got myself a house without so much as the need to verify empirically that it actually existed.

Construction and redevelopment ideas began to whiz through my head. During a swift makeover process, I would replace all the original features with new original features and rip out the dated unfashionable listed oak staircase. In its place, I would install a cheap external elevator system to a newly built two storey underground valet car park. Not wishing to be seen as a penny-pinching landlord, I planned to replace the floorboards with marble. One must balance good budgeting with “kerb appeal”, I thought, as I waited at the back of the auction hall for my TV presenter to arrive.

The sky darkened. Men in t-shirts and jeans started to put the chairs away. I enquired of the auctioneers what time BBC 1 or 2 (I wasn’t fussy about which) would turn up. Does the television company put the deposit directly into the bank account of mine or the auctioneers? Quite an odd debate ensued between them as to whether I was on day release from a nearby institution or they should prosecute. Wife, son, and I were obliged, for a short while thereafter, to reside in an art installation at the public library. What I should first have grasped is that

Tip No 5. Certain television programmes are edited in the market’s favour.

For a while, high-rise property was in vogue. Taking an elevator would be no hardship, I supposed, especially since my wife was now suffering from the sort of stress induced ailments that required her to be housebound and horizontal. The plum development we moved into was advertised as “overlooking a river with concierge”. I couldn't understand why a river would need a concierge. The agent just smiled when I asked him. The apartment was part-buy, which I had mistakenly taken to mean mostly free. What it actually meant was that there was a problem with crime. Evidently, those that “part-buy” borrow each other’s things with a view to selling them back to the original owner using threatening techniques of sale. However, I did need my toothbrush on a regular basis and came to philosophically look on the object as something that I rented daily. There was, about the place, a strong ethos of communality. I later changed the word “strong” for “violent,” and, when I was mugged over the intercom by an individual demanding my intercom, it was clear that one should

Tip No. 6. Never live with or around the incontrovertibly poor.

The situation was now bleak and we needed cash urgently. Disillusioned with the previous one, I retained a new estate agent. He was a man I conveniently met in the pub who said he didn’t “have a business card on me right now. But I can make you one. Give us a pencil and that scrap of paper.” He immediately referred me to an opportunity in Falmouth, Cornwall. Falmouth, Cornwall? I thought: The Lakes, the moors, the Peak District. It’s all there on your doorstep. Who could resist? “And,” he concluded, “it's a rent machine.” I shook his hand and bought it sight unseen. It turned out to be a machine on which we had to pay rent. With this (actually quite enjoyable) expensive round of all-afternoon drinks in mind, I must advise aspiring speculators to

Tip No 7. Never do business with a man whose tattoos are second hand.

It was time to go upmarket again. I talked to my wife (through solicitors, alas, due to a raft of injunctions) and we couldn't believe our luck when an affordable Chelsea mews came onto the market. “Can we pay 10% less that the regular London market value?” I coyly asked the agent. “Sure,” she readily agreed. “In fact I'll put that into a new agreement for you immediately.” I wanted to see the place for myself and so she kindly obliged, driving me there after you sign these documents first, sign them now, yes, all of them, now, I quote. I always feel that a female realty agent is that bit warmer and more disposed to the client, don't you? As she took the M1 north and we passed Nottingham and Sheffield and joined the M62 just past Wakefield we were chatting so much that it clean slipped my mind to ask why we were now 200 miles north of west London. When we parked outside a block of flats from which screams could be heard requesting an exorcism and more needles, I started to query the matter. The agent pointed at the block’s signpost which read “Chelsea Mews” and quite reasonably but tersely reminded me, “You've already signed the revised contract.” She then lit a cigar. Neighbours included a man with a conviction for GBH against the cousin he had already murdered. Remember

Tip No 8. London isn't the only place in England. There's the rest of the south, too.

There are, I believe, a lot of media-hyped prejudicial fears perpetrated against the traveler community. When I needed a place to stay, it was they who offered quiet rented solace away from it all. I felt, too, that the time was right to downsize. Country air and the balm of nature would, I hoped, afford the whole family an opportunity to recuperate.

We moved into a bouncy castle. It was permanently inflated on a brown field site handily located next to a spot popular for weekend rave events. I soon learned to sleep through the pounding bleeps and, pace my philosophical objections to teenage drug use on or around the Sabbath, not to fuddy-duddily object when sweaty individuals with dilated pupils used my home as a leisure object. In fact, I grew to quite enjoy their conversational lucidity. But I was disappointed when it transpired that my rental rate was to match the public ticket cost for continuous use of the castle and I was charged pounds eleven thousand. So, investors, I must counsel that one should

Tip No 9. Carefully examine the small print even when it is written in crayon by a man whose involuntary gurning it soon becomes clear is not a twitch but a homosexual seduction technique.

I was, by now, struggling to deal with financial officialdom. “It is not what you have,” my late father had always said, “It is what people think you have.” Though he did make the remark while wearing plastic shopping bags on his feet at a church wedding, there was practical wisdom in the old saying. So, in an effort to appear pecunious, it was my habit to turn up at court hearings wearing expensive Swiss watches. Obtusely, his honour would insist on them being seized and taken away before I left the court room. Eventually, and after many years spent trying to turn an honest profit gaming the less well off, I had become a constant media crisis story. Former “friends” ignored me when I asked them for their jewellery. Men in top hats cycled around in small circles outside Lloyds of London not demonstrating on my behalf. The Albanian embassy refused me a visa even when I offered them some butter. Relatives in north Somerset told very very funny jokes about me. Was this the end of my property career? My portfolio was nothing but receipts with numbers written in red. It was time to gain back some dignity.

I declared bankruptcy. At least I tried. But I was unable to do so because it requires a couple of stamps. The end had come. I was homeless. I am homeless. And so, potential investors everywhere, as I open the lid on my wheelie bin to emerge into property and population boom England, to start another day’s dreaming outside the windows of city centre estate agents, I should like to provide you with my last piece of counsel.

Tip No 10. Do not invest in property. Just live in it.

 

NB Armstrong is a writer and translator. His latest books, Korean Straight Lines andThis Gangster is One of Your Own, are now available. [email protected]

 

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