"Generation Rent must take risks to progress. If they don't, they won't be in any kind of equity - negative or positive"
When Skipton Building Society released their 100% mortgage offering last week, the market commentators erupted in two directions: in one camp, the new product was lauded as the mortgage plan the FTB market had been waiting for. In the other came warnings from the past via the negative equity profits of doom. Both had fair points, but by far the most interesting commentary came from those who would directly benefit from such a product - Generation Rent themselves.
"We wouldn't borrow 100% because we don't want to owe more than the house is worth".
"It's disgusting that people have to go to these lengths - the government should step in and stop prices increasing so much".
The Daily Torygraph even announced that "The return of the 100% mortgage threatens to destabilise the banking system". Oo-er missus, not sensationalist at all then.
And so on.
As someone who currently provides housing for over 100 Generation Rents, I should be talking the product down. But I won't.
Why? Because it's the best goddamn opportunity that they're ever going to get and at the best possible time. Prices and activity are subdued, but that window won't last long.
My own start in property was a combination of balls and luck. I had set myself a goal of owning a property by the turn of the millennium. Partly because it seemed about the right time having spent years in student hovels in one country or another. And partly due to my parents drumming into my brothers and me that owning property was the way to go. Right-e-o then.
The search began and a newish build two-bedroomed property was identified. It needed some light refurbishment to bring it back to glory and it was about the right price, i.e., my salary would cover the mortgage. My builder best mate, Tim, was handy when it came to paintbrushes and hammers, and I knew I could count on him to roll up his sleeves and dig in.
An offer was made below asking price. A small Dutch auction ensued and after two nail-biting days, a final offer was accepted - £51,000. The buzz was incredible. But then the reality kicked in. I needed to find a mortgage and appoint a solicitor to handle the legal part.
I chose a 90% deal with Cheltenham and Gloucester. This meant I needed to find 10% plus a few fees and stamp duty. I assumed the transaction would take a few months, so I set about bolstering my non-existent savings quick sharp.
Alas, it was not to be - a lot quicker than I expected, the solicitor called to say that we would be exchanging shortly and that I should bring a cheque for the deposit and fees.
Double-f**k. I had less than £200 in my savings account. I’d always been a bit of a chancer and I operate best under pressure, but this was my most serious cock-up to date.
Without the luxury of being able to fall back on Bank of Mum and Dad or any other source of safety net funding, I had to think on my feet. I went through the kitchen drawer, remembering I had some MBNA credit card cheques... 'for life's little emergencies".
Yup, this ticked the box perfectly. Embarrassed about handing an emergency form of payment to my solicitor, I made it out to my bank account up to the limit of my credit card and then wrote a personal cheque to the solicitor. Bingo! In 2023 that's known as a 100% mortgage.
A few weeks later the transaction completed, and I was on the first rung of the property ladder, although up to my neck in (good) debt. My buddy and I spent months working into the night after our day jobs to get the place looking just so.
A full repaint, kitchen doors and tops replaced. A bit of tiling, some new windows, an electric shower and a smart new patio and lawn. It wasn’t Buckingham Palace but it was looking ten times better than when I’d picked up the keys.
6 months into ownership, I applied for a further advance to consolidate the credit card debt and make the payments a little easier. 12 months after that I sold the property and pocketed £17K.
I used the money to buy a much larger property in a very smart neighbourhood. By applying the same principles as the first time round (minus the credit card cheque) I then sold that property and made a whopping £140k profit. That was the initial lump of capital I needed to buy 3 BTL properties and start my rental portfolio. 3 years later at 32 years old, I had over £1m of property under my belt.
It took a number of years and it wasn’t easy, but nothing that’s worth doing is, right?
I experienced some very hairy moments and often ran out of cash, supplementing my illiquidity with credit cards when I had to. Growing the asset base was always the goal, and everything else was just something to be worked through.
Generation Rent must take risks to progress. If they don't, they won't be in any kind of equity - negative or positive. Anyone who is renting has a decent provable income and can show that they have paid their rent in full and on time for the last 12 months should at least apply for a 100% mortgage and attempt to get on the ladder. I'd have killed for a product like that when I was in my twenties.
Those of you who let the opportunity pass by will retain your name - Generation Rent. One fine day in 10 years' time you may look back and wish you jumped onto that property ladder 10 years ago, but by then you will have left a lot of money on the table.
And if that offends you and hurts your feelings, well, in your own words, sorry, not sorry - lol. xoxo.
