A rainy Tuesday evening commute. I found myself sardined into an overcrowded tube carriage.
To my left, a miserable looking giant stooped under the low curving roof. His umbrella steadily dripping down the trouser leg of the old man sandwiched in front of him.
To my right, a tiny woman with a huge handbag furiously tapped away with both hands on her smartphone. Too short to reach the handrail, she leaned and jostled against her neighbouring passengers like a teenager in a mosh pit.
It was hot and humid. The air reeked of sweat, wet wool, and quiet desperation.
Seated along one carriage wall were three young children. Ginger-haired twin boys aged about six, and a younger toddler. All the kids were pale. One looked decidedly green.
The train was driven by a frustrated boy racer. Alternating rapid acceleration with sudden braking. Each change in momentum causing the passengers, and the boy’s stomach, to lurch alarmingly.
Those close to the boy initially gave him looks of sympathy and concern. Then, as they attempted to back away only to discover there was nowhere to go, the looks swiftly evolved into consternation and fear.
Suddenly the train screeched to a dead stop. Momentum causing unwary passengers to careen into their neighbours. Nobody fell. There simply wasn’t the room.
The ill boy’s stomach could take no more. Vomit fountained from his mouth, momentum turning his head like a laughing clown carnival game. A half dozen people standing directly in front of him were liberally coated from waist to knee with whatever he had eaten for lunch.
That first technicolour yawn set off a chain reaction amongst his siblings.
The other twin surged forwards. Shoes, bags, umbrellas and briefcases covered in a spectacular display of pavement art that wouldn’t have been out of place on display in the Tate Modern.
The toddler’s diminutive size proved deceptive. He showered the businessman seated next to him. It was a torrent we thought would never end. That kid must have been hollow inside to physically hold such vast quantities of vile liquid, that smelled suspiciously like Red Bull mixed with Haribo.
A disembodied voice mumbled through the carriage speakers: “This train is running ahead of schedule. The line controller is holding us here for a few minutes to even out the gaps in the service. We should be underway shortly.”
The toddler cried.
The green looking twin cried.
The businessman looked like he wanted to cry too.
Rummaging in her capacious handbag, the short woman kindly started handing out wet wipes to those standing nearest to her. “Just think about where you would rather be right now”.
A mental image of the French Riviera popped into my head. The penthouse apartment I had rented a couple of years ago. Sitting out on the balcony watching the sunset over the ocean, on a warm summer evening. Eating fresh bread and cheese.
Ten minutes later I fought my way out of the malodorous carriage and onto the station platform. It was still pouring, but at least the rain should wash the puke off my shoes during the long walk home.
Winning the lottery
As I opened the front door, my elder son ambushed me.
“I read that somebody won £170 million in the lottery! Was it us? Did we win? Are we rich now?!?”
Pointing to my sodden vomit stained suit trousers and shoes, I asked him what he thought?
The excitement in his eyes dimmed. Hopeful expression fell. Shoulders slumped.
I asked him what he would do if we had won? What would he change about his life today?
“I wouldn’t tell anyone. They would treat me differently, be jealous, or ask to borrow money.
I’d still have to go to school. Maybe I would study business studies to learn how to manage it all.
I would use most of the money to solve the problems Greta Thunberg and the Extinction Rebellion spoke about.”
His response surprised me. No mention of Ferraris, private jets, or hiring a maid to clean his room.
Not how I would have answered the question at the same age. If I’m honest, not how I would answer the question now!
I asked whether he would want to attend a better school? Live in a nicer house? Have more stuff?
My son thought about it for a minute.
“No. I already go to a good school and I like my friends. I definitely wouldn’t want to live any further away from either.”
I raised an eyebrow. Did he realise he was essentially saying that even with access to millions of pounds, he wouldn’t change anything major about his current life? That sounded like winning to me.
He thought about it some more, conceding that was the case. The alluring siren song of video games drew him back inside, but he paused as went through the door.
Everything has a price
There will be a price at which most, but not all, properties can become viable investments. The majority of properties will rarely sell at or below that price due to market forces and greater fools.
Very occasionally a property will become available at a suitably attractive price, typically being sold in a hurry by a distressed seller. Bankruptcy. Deceased estates. Disablement. Divorce. Illness. Immigration status. Long term care.
Other people’s tragedy providing opportunities for investors who are prepared and to ready to act.
Long ago I had done the thinking to identify several locations offering good long term investment opportunities, subject to a suitable property becoming available at the right price.
I defined the relevant search screens to watch for them, and set alerts to fire should a property matching my criteria come onto the market. Then I waited.
That evening one of those property alerts landed in my inbox. This doesn’t happen often, maybe three or four times a year at best.
Dishearteningly often, the alert will be a false alarm. A sausage fingered estate agent making a typo when listing the property. Or an owner wanting to sell a property that doesn’t fit the standard listing parameters, such as a houseboat or parking space.
Today’s alert notified me that a house a few doors down from where I currently live had been put on the market. After an epic half-century battle of wills, it appeared the stairs had finally defeated the little old lady who lived there alone.
London property prices have pulled back from their inflated highs. Brexit uncertainty and xenophobic “foreigners go home” rhetoric combining to repel cashed-up buyers in a global market. The high-end estate agent Savills guesstimates that prices have fallen 14% from their lofty heights. LonRes reported a 19% fall in sales since the referendum.
It appeared that in my neighbourhood the fall in asking prices was nearing my threshold where “ridiculously overpriced” morphs into “attractive opportunity”.
I wasn’t in the market to buy a property. Particularly of the owner-occupier variety. Especially in London. Yet experience has long taught me to keep an open mind and make well-informed decisions.
The next morning I got in touch with my mortgage broker. He specialises in obtaining finance for those who tick the “it’s complicated” box on standard mortgage applications. Business owners. Freelancers. Semi-retirees.
We spoke briefly about the house down the street, and my current winter working hibernation. I headed for the dry cleaners to drop off my puke stained suit, while he promised to run some numbers.
Half an hour later I emerged from the tube station near my client’s site. The contrast to the previous evening’s commute was marked. No crowds. No delays. No puking children. I even got a seat!
An email from the broker was waiting in my inbox. He’d found several lenders who would offer a mortgage with interest rates as low as 1.19% per annum.
I performed some quick mental arithmetic, then did a double-take. Subtract the inflation rate, and the real interest rate was -0.51%.
One of the interest only products he suggested had monthly repayments roughly one third the amount I currently pay in rent. A third!
That blew my mind.
I stopped in the middle of the footpath and skimmed through the email again to make sure I had read it correctly. Disgruntled suits tutted in exasperation as they jostled past me.
Granted the house for sale was the 100-year-old original “before” to my rental’s modernised and fully extended “after”, but the location, aspect, and block size were essentially the same.
Where do you see yourself in 10 year’s time?
That evening I thought some more about my housing situation.
My elder son had said he was quite content where we were, and didn’t want to move.
My younger son’s school was just a short walk away. He tells me he is going to marry his after-school nanny and they would live happily-ever-after together in his current bedroom.
My lady wife loves the area but loathes the fact we rent rather than own where we live.
It occurred to me that in just 5 years time my elder son will most likely have gone away to university. 6 years after that, his younger brother will have followed a similar path. Possibly without the nanny.
The need to live within viable commuting distance of the boys’ schools would be removed.
For the first time in 24 years, “Dad’s taxi” would be retired. No longer needed to ferry kids to the endless stream of birthday parties, music lessons, parks, play dates, and weekend sports.
Would I want to remain living in the neighbourhood at that point? Almost certainly not. That penthouse balcony overlooking the sea is worlds apart from the drab grey suburbs of London.
And yet, 11 years is a long time.
Longer than a typical property cycle.
Long enough to entertain the high transaction costs associated with purchasing property.
Possibly even long enough for the dust to settle and a direction of travel to emerge for post-Brexit Britain.
Could it be worth taking an educated bet?
Seizing the opportunity to acquire a “cheap” property while prices are depressed by uncertainty?
Take advantage of the virtually “free” financing on offer at once-in-a-lifetime low interest rates?
This approach would not be without risk. Some likely. Others less so.
The work pipeline for my company may dry up.
Predatory HMRC regulations may further cruel my ability to generate passive income tax effectively.
My lady wife’s long-suppressed decorating instincts may overcapitalise the property. Or bankrupt us!
Brexit could end in tears, seeing Britain descend into some form of dystopian hellscape. The pound could collapse as the world realises just how spectacularly incompetent both the government and alternative governments actually are. Interest rates could soar, the Bank of England forced to dangle an ever larger carrot to attract foreign investment. Property prices may become a casualty of the Heathrow revolving door, as those with means take their money and skills in search of opportunity elsewhere.
And yet, despite all those risks I find myself strangely tempted.
The opportunity to slash my largest lifestyle cost, without unduly disrupting our very comfortable lives. To a level that, with some minor financial acrobatics, passive investment income could reliably cover. With a sufficient loan-to-valuation safety margin to insulate further falls in market prices.
It wouldn’t be a lottery win, but it would shift the needle on the Financial-Independence-o-meter firmly into Financially Independent territory. Winter working hibernations would become an optional indulgence rather than a financial necessity.
Once released, a genie can seldom be put back in the bottle. It will be interesting to see how things play out over the next few months.
Who would have thought a confluence of unrelated events would result in my premises being challenged regarding living arrangements, and some long-held beliefs being re-evaluated as new information coming to light? Not the ending I was expecting when this journey started out with my wearing some random kid’s lunch on a peak hour train.
- BBC (2019), ‘Euromillions £170m jackpot won by UK ticket holder’, BBC News
- Office of National Statistics (2019), ‘Inflation and price indices‘
- Savills (2019), ‘Residential Indices‘
- Wisniewska, A. (2019), ‘Brexit bargains: London’s luxury homes take big price cuts’, Financial Times