I wanted to supplement my pension as there were rumours that we can't depend on the State Pension. Although I'm part of the Local Government Pension Scheme (LGPS) which is based on the final salary, I felt that due to political risks, I can't take chances. Besides, state pensions cannot really be relied upon. Despite the fact that the LGPS is not a state pension, it's still administered by the Local Government i.e. still a government.
Looking back at the private pension schemes with all the mis-selling debacle, I felt safe with the LGPS. However, I felt that investing in pension schemes is like dicing with death because when you retire, you can't really fight for your rights. I mean a lot of crooks have entered the stock market where our pension fund money is being invested.. Remember Robert Maxwell? He built most of his empire using the money he stole from his pensioners. His children inherited his stolen millions who did not return the stolen money. Instead, they lived off the immoral earnings. As far as I'm concerned, they're a bunch of spineless thieves with no conscience.
The market place is now dependent on casino financial techniques where they use your money to gamble and, if they win, you get a pittance and they keep the rest; and if they lose, they still get paid and you lose the money they gambled for you. Because the government underwrites these transactions, the taxpayer pays these losses AND pays the salaries and bonuses of these spineless thieves. With this in mind, would you still invest in the stock market? Not while these crooks are in there.
I decided to invest in the stocks themselves in this case property. But, as I started buying a property in 2007, the property price bubble burst in my face. It seems that the crooks, liars and cheats have entered the property market as well - there's no getting away from them. They were deliberately over valuing the assets so that they can get bigger commissions and left the lenders holding the baby. And the lender's weren't that innocent either; they were borrowing from the money markets and giving them away without checking the assets they were mortgaging.
Fortunately, I had only bought one property which, for 2 years was in negative equity AND negative cashflow. But I had a well paid job as a computer programmer and I managed to sustain it until I came out of the fixed rate period by which time base rates were 0.5% and they still are. Although my property is still in negative equity, it's now cashflow positive.
Now, in 2009 with low mortgage rates and cheap property prices, I re-entered the market and bought one property which is barely looking after itself mainly I took a 25K personal loan over 10 years in 2008 - the mortgage companies do not accept loans as deposits because it increases the risk as they are more expensive. But, after 8 months, they accepted it as a deposit and by that time, my disposable income has accumulated so that I was able to refurbish the house to a high standard. I remember the double glazing inspector asking my why I was pampering the tenants. I replied that I'm not; I'm trying to impress the valuers so that in 6 months time, I will get a decent enough further advance to release the deposit and the refurb costs.
Alas, it wasn't to be. The lenders had tightened their criteria and refused to give me a further advance. It's been more than 18 months since I took out the mortgage and they're still refusing to give me a further advance. Still another 18 months and I can remortgage and release my costs and probably buy another 2 properties with the proceeds. Also in 2009, I remortgaged my unencumbered main residence and used half the proceeds to buy 2 more properties. I'm getting £922 pcm after management fees and a net £474pcm after mortgage and insurance costs. I'm also getting £478 for my other 2 properties so that's a net profit of £952pcm before tax. Oh, I forgot the £166 pcm on my residential mortgage - how cheap those mortgages are.
I'm planning to borrow the deposits and refurbishment costs and then remortgage after 6 months to pay off as much of the loan as possible and consider the remainder as the purchase costs. For example, if the agreed price of a property is 75K and its value is 98K then the deposit will be 15K since I qualify for 80% LTV. If the refurb costs are 8K then my total outlay is 23K which, at 1.5% pcm will cost me £4140 over 12 months + 2913 in mortgage costs over the same period giving total costs of £7053. The rent must be £650 to break even because the refurb will take around 3 months to do. This will be offset by a realistic of 575pcm over say 8 months = £4600 giving a net cost of £2453.
After the remortgage at 80% of 98K, this will release £16,300 which will leave £6,700 to be paid at the end of 12 months. This can be accumulated at a rate of £559pcm. With the £205pcm borrowing costs this comes to £764pcm for the 12 month period.
