I was recently asked for my views on this YouTube video on Buy-to-Let posted by Graham Rowan, The Renegade Investor (note there's more than one out there).
So, when asked what I thought when Graham suggested Buy-to-Let investors are mugs, here is my response:
I think he's right!
OK, so you might not have been expecting that response from a Buy-to-Let investor when I man on a video calls us a mug.
First off...an old pal of mine once said 'look for the personal motive when anyone expresses an opinion' and this has stuck with me well. Here, Graham offers coaching and mentoring services and promotes investments like forests in Costa Rica...so that's the personal motive. He may well have done well from his wide range of alternative investments but some of those shown on his website could only be described as 'racy', which is probably why he wants to work with HNWIs/sophisticated investors. Why take a swipe at BTL then? Well he might want to switch a few BTL investors over to his investment club perhaps?
I may be doing Graham a dis-service but that's how I see his stance at least. However, I did say he is right about buy-to-let and to some extent he is...
If you buy a top-dollar flat at the top of the market and have a low net yield then when interest rates rise you could catch a cold - I agree with him on this.
However, the best way to address this is by not doing that. No, not avoiding buy-to-let but instead...
- Don't buy at the top of the market (remember the 18-year property cycle)
- Do buy with a discount (one of Warren Buffett's investing principles)
- Invest in cashflowing assets (Robert Kiyosaki and others advise)
- Add value to a property to create additional equity (universal investing principles)
- Hold for the long-term (lots say this...especially me!)
- Don't over-leverage either (just Google bankrupt property investors from around 2009/10)
Graham is targeting the novice investor with his 'mug pitch' against buy-to-let and the best answer is to listen to his warnings and then don't do what he is warning against...although I might not join his investment club anytime soon, I do promise not to buy an expensive buy-to-let flat in the south-east at top-dollar with a low net yield
What do you think of this buy-to-let 'mug's game'?