In his story, he revealed that after securing 90% LTV loans from his bank in 2007, he decided to invest in 2 off-plan properties (1 worth £415,000, the other worth £375,000). However, after Berkeley’s property prices fell by 40% in 2008, banks would no longer loan him this sum offering him a maximum 75% LTV. Faced with either having to fulfil the shortfall himself or abandon his deposit, Dowd tried to default on his deposit only to be confronted with court action from the property developers.

It is a sad reality when a man has to pay over £100,000 in damages, because the economy has turned against him.

But the thing is he is not alone… A further 300 legal claims – in London alone – have been taken against homeowners wishing to default on their off-plan properties.

Who is in the right?

Now on the one hand I can understand that as homeowners have signed a contract on these properties they are legally obligated to complete the deal. BUT when statistics state that property prices in London have fallen by only 14%, not 40% like on these property developments it really begs the question of: what has happened?

The truth is, back in 2007 property developers were seriously overestimating the value of their properties – by a lot. As a result they are now experiencing greater property price drops of an extra 26%.

And it is this 26% that is really biting homeowners such as Dowd…

I imagine, many homeowners may have easily been able to work around property price drops of 14%, but 40% is ridiculous! Who has got an extra £100,000+ spare to cover such a shortfall? Not many and that is my point… It is not completely homeowners fault. Property developers have got equal responsibility for creating this situation after valuing their properties too high in the first place.

It is undeniable that some sort of comprise has got to be met before this situation escalates any further. In London alone, Berkeley signed over 3,300 contracts in 2007 with homeowners, 85% of which were off-plan.

Fortunately many homeowners are forming collectives to help find alternative routes for resolving this issue, and so far they have come up with 13 options. However, with many having signed contracts on these prospective properties, it is going to be a long road ahead before this situation is completely resolved.

Wendy xx

1. Take advice

Much of what I have learned as a property investor has come from seminars, property courses and mentorship programmes.  Property investing advice from those who know the industry well is invaluable and you should take every opportunity to learn from the experts.

2. Know your market

Always make sure you know as much as you can about the location of your property, the market, rental demand, travel links and anything else that might affect future saleability and rentability.

3. Be patient

Property prices in the UK generally rise…in the long term.  Investing in properties should be considered a medium to long term strategy and you should expect to be in the business for the long haul, not to make a quick buck.

4. Look after your tenants

Good tenants are, effectively, good customers of your business.  Treat them well by undertaking maintenance and repairs immediately, being fair with rent increases and allowing them to enjoy their home without interference.

5. Have an exit strategy

It is all very well building up a property portfolio, but you should have some idea of what your long term plan is. Are you keeping all the properties long term for income, selling them one by one or looking to sell them all in one go?

6. Listen to professionals

In addition to the advice of property experts, investing in properties is likely to be more profitable if you also take advice of solicitors, mortgage experts and tax advisors.  Good brokers can save you a fortune in finance costs, tax advisors can help you reduce your tax liability and solicitors can ensure you encounter no boundary, tenants or other property problems.

7. Diversify

Anyone with an investment portfolio will tell you that it is vital that you diversify your investments into low, medium and high risk.  It’s the same for property – buying lots of properties on the same street is riskier than buying property in various diverse locations.  Be careful not to put all your eggs in one basket.

8.  Be professional

A successful property investor treats their property business exactly as any other proprietor treats theirs.  Make sure your records and books are always up to date, that you keep your paperwork in order and that you carry yourself in a professional fashion with estate agents, tenants and solicitors.

You don’t have to leave your 9-5 job and sell all your assets to make money from property.  Many people I have met at seminars and property courses take time out from their own career to pursue property investing without giving up their main source of income.  It is possible to combine a career with buying investment property and there are various strategies you can adopt.

There are three main things that take up my time as a property investor.  In no priority order they are my tenants, the properties and the financing.

Finding and looking after tenants is crucial to the armchair property investor.  You should always be ruthless in pursuing references, information and other documentation to ensure the quality and veracity of your tenants at outset.  Make sure also that you have a watertight tenancy agreement signed.  If you are unsure, think very hard before taking tenants on.  In the long term you could very well end up spending more time and effort trying to deal with problem tenants.

It is also vital that you look after your tenants by responding quickly to any maintenance or repair requests.  Ensure the property is in good condition at all times and your tenants will be far more likely to stay with you for the long term.  You should also be careful when considering rent increases. A £25 monthly increase might result in your tenants moving elsewhere, leaving your property vacant for a period.  This void will very well cost you more than the £25 increase you had proposed.

It is also important that you look closely at the condition of the property you are buying.  New homes may have a slight premium in terms of initial price but they are much less likely to result in high maintenance costs in the early years.  Choosing a property with a large garden might appeal to families but is likely to cost you more in maintenance.

Ensuring you stay on top of the financing of your properties is also a major consideration.  Mortgage deals come and go and so making sure your finance is always at the most competitive interest rate should be any armchair property investor’s aim.  Most people buying investment property use mortgage finance and with a wide choice of products and lenders it is vital for you or your broker to stay on top of all the borrowings.

Investing in property isn’t the reserve of the super rich and so if you are looking for additional ways to invest in your and your family’s future, becoming an armchair property investor could well be an option that is open to you.

Properly vetting tenants and taking the time to choose the right tenants for the right property has been one of the main factors I have concentrated on during my property investment career.  Bad tenants have cost me a lot of time and money.

There are many landlord resources out there, and as someone who has made money from investment in property, here are my four top tips to finding good quality tenants.

Word Your Advertisement Well

If you are careful with the wording of your newspaper or internet ad, you may well attract better tenants.  I advertise my properties as ‘well cared for’ or ‘immaculate’ as it suggests that I only let great properties and that I expect my tenants to treat them in the same way.  If the property has a special feature – in a village location, near a great school etc – then say as much in the advertisement.  I find that it means that great tenants looking for specific lifestyle choices will respond, not simply anyone looking for a place to live.

Be Professional

I read a recent survey that found that almost half the tenants questioned ranked the appearance and attitude of the landlord and the landlord’s staff as the most important factor in selecting their present place to live.  When I show a property to prospective tenants I always make sure I am smartly dressed, on time, and that the property itself is in good order.  First impressions last.

Vet Tenants Carefully

I take great care in examining the tenants I consider for my properties.  I think nothing of asking them to provide identification, payslips and other references.  I know of landlords who insist on an employer’s reference alongside a reference from their previous landlord or letting agent to confirm good previous conduct.  This does put some tenants off, but if they aren’t prepared to confirm what they earn, I don’t want them renting one of my properties.

Look at the Long Term

The main way I have saved and made money from investment in property is by finding those tenants whose intention is to stay in the property for the long haul.  Tenants who just want a six month agreement might help you in the short term, but you will incur advertising fees, possible redecoration costs and other expenses when they leave.  Finding tenants with permanent jobs who are looking to settle down in a certain area means they are much more likely to stay in the property for a long time, meaning regular, consistent income for the landlord.