Dave,
I don't mind showing that I'm a bit of a sucker for a deal. Problem is, I can't tell you for another 2 or 3 years if I will be happy with the newbuild investments I made last year.
I had traditionally bought (long time ago) with 75% mortgages on ten year repayment plans. Needless to say, this was a long, slow accumulation. Yields were about 16% back then, so it was actually possible to amortize a BTL investment in 10 years (those were the days). The problem came, after about 13 years, when we decided on a paradigm shift in investment philosophy. Armed with a stash of cash, we bought a big replacement exec let, then realized we would get much higher yields by buying smaller props. Around the same time, we went to a TMC presentation and met ordinary folks with over 30 properties, and we saw the light. A bit impatiently, we set about analyzing the newbuild flat market. We bought 4 apartments in Leigh, OMV £118K, bridge financing for a net purchase price of £101K and mortgages of £101K to boot (NMD, except fees and carpets/curtains). Total costs including finder fees were about £6K per apartment. We went through three letting agents before we found a reliable one (no area knowledge - first mistake). From a headline rental price of £525pcm, we settled down 3 of them at £450 pcm and the last one at £425 pcm. Now these are cash flow negative - very nice flats, but cash flow negative. I reasoned that, had I bought traditionally, I would have invested about £20K per apartment instead of £6K, so with the -ve cash flow, I would be no more cash poor in seven years' time by doing the bridging finance.
So here's the problem, and why I can't tell you if I am happy or not with the investment. And this indecision is solved if you follow all of the property guru's advice. Here's some advice from Robert Kiyosaki - a simple definition of assets and liabilities:
An asset is something which puts cash in your pocket.
A liability is something that takes cash out of your pocket.
This definition works in all markets. In the UK, because of its peculiar combination of positive population movement, demographic change of Brits leaving and foreigners arriving, and the continuing shortage of housing, prices seem to continue into the stratosphere without abatement.
I have bought a liability, not an asset, and if and only if property prices do continue to rise, will I see a return on investment. If property prices remain static for a period (like 1993 to 1998), I will have bought a negative return on assets.
Be careful how you play the leveraging game with new build property. If you can't easily afford the negative cash flow, you could very easily become bankrupt as the cash flow stops and you have no savings or income to stem the losses.
A bit of a long post, but I hope it answered your question by practical example.
