Scott Picken bought his first home in London in
2002 at the age of 24 and used this same logic. At
the time the UK was going to war with Afghanistan
after 9/11 and everyone expected oil prices to go up,
inflation to go up and eventually interest rates to go
up. Scott, however, focussed on the fundamentals of
the opportunity. It was a 3-bedroom house, 5 minutes
from Wimbledon tube station and with a £20 000
investment he could renovate and turn the property
into a 5-bedroom house. With this he would net over
£1 000 a month and decided that if interest rates went
up he would be able to ride the wave.
Unfortunately for the doom mongers, it never
happened. But in late 2008 the GFC came and
Scott was very nervous about what would happen if
all the tenants left. As it transpired, a good property
in a good area, will sustain tenant demand. He
might have lost £100 000 in capital value in the
GFC (although the market has now recovered), but
he doesn’t care as interest rates dropped to 0.5%.
His passive income is more than £2 000 a month
and so he will logically ride the wave until the
market recovers.
Basically it is all about the fundamentals of the
deal or opportunity. The opportunity in the US at
the moment is the same with replacement values at
40% to 60% and net yields ranging from 8% to 13%.
The timing
Although it is an incredible story, the next