Hello and welcome back to Mortgage Advisor on F.I.R.E. This week I look at the impact of the Grenfell disaster on apartment blocks and take a slight detour into science-fiction.
Weekly Update
I have barely had a chance to pause for breath in the last week. I’ve been extremely busy at work, and then looking after my partner who can hardly move after injuring her back. Between that, looking after the cat and trying to study, I’ve been pulling 14-15 hour days with just an hour or so here and there to rest. I’ve not had the energy for exercise and I’ve been eating a little too much junk food because it’s easy to prepare and it’s a quick hit of energy. I don’t see this letting up much in the next few weeks until society returns to some sort of normality. I feel that normality will be short-lived until we see another surge in Covid-19 cases.
Last week I talked about selling my apartment to fund BTL purchases in a couple of years time. There may be a problem with this approach. I’ve been talking with another apartment owner who is trying to remortgage his BTL in my block. He is having a number of issues regarding fire safety. It seems that no mortgage lender is willing to lend on our building following Grenfell. What happened there was a tragedy, and the response from the UK Government has been disgraceful. I’ve seen a number of apartment blocks have similar issues where lenders are not comfortable securing debt against those properties. As a mortgage advisor, I’ve had first-hand experience of this. The surprising thing about our apartment is that we have no cladding. It’s a simple brick construction and has only four floors of apartments. There are some small areas of wood panels on the outside of the brick, but I’m talking about a single layer of wood that covers less than 1% of the surface area of the block. It is almost certainly a case of lenders being too cautious, and I suspect our apartment building meets a few criteria that raises a flag on their system. Probably something like; it’s over X meters tall, has more than X dwellings etc. From what I understand, we need someone to come out and certify the building as safe. However, the cost of such an exercise is quite high and no one is willing to pay for it. All of this means that we may only be able to sell to a cash buyer, and typically a cash buyer will want the property for below market value. The other option is to rent the property out. I’ve been reluctant to do this as the numbers do not stack up very well. However, if I can bring the mortgage balance down and negotiate a reasonable management fee, then I might be able to make it work. I would not be able to remortgage to a BTL though, and would have to obtain Consent to Lease from my current lender. This means I would not be able to switch the mortgage to interest only which will impact on the rental return.
Science-Fiction Interlude
As I’ve mentioned in the last few posts, I’ve been reading a lot of science-fiction in the past few weeks. I have just finished the first book in a trilogy written by Cixin Liu, called The Three Body Problem. I saw a film on Netflix based on a book by this author called The Wandering Earth, and it’s a story which sees the Earth turned into a spaceship so that planet can be moved to a different star system to escape our dying sun. It’s a fun film and a fascinating premise. I came across The Three Body Problem whilst reading about the last sci-fi book I finished (Rejoice! A Knife to the Heart). First, a bit of background.
The Fermi Paradox
The Fermi Paradox was suggested by Enrico Fermi who argued that there is an inconsistency between the lack of evidence of extraterrestrial life and the models that suggest that our galaxy should be teeming with life. Related to the Fermi Paradox are the Drake Equation, which puts forward the formula for how common life should be in the universe, and the Great Filter, which argues that whilst life might be common, there may be something in the development of intelligent life that results in its extinction before it can explore and colonise space.
With the universe being billions of years old, it is theorised that if life was common in the universe, many civilisations should have risen and evolved into space-faring powers, who would have explored the galaxy using self-replicating spaceships, known as von Neumann probes (named after mathematician John von Neumann). The idea behind von Neumann probes is that if a race was able to explore and exploit the resources of its own solar system, it could build a fleet of probes that would explore space and use the resources they find to build more probes. This utilises the power of exponential growth. Let me explain with an example.
- Alien race builds ten von Neumann probes.
- The average distance between stars in the Milky Way is approximately five light-years.
- The fastest probe we have created takes around 20,000 years to travel one light-year.
- As such, we assume it takes 100,000 years to travel from one star to another on average.
- Assume each probe builds two new probes at each star system it explores.
- After one million years, there would be 590,490 von Neumann probes exploring space. If I’ve done my calculations right, they would have explored over half a million cubic light-years of space.
- After one and a half million years there would be over 143 million probes exploring space.
Your first thought might be that no intelligent life could endure for millions of years, but these probes would be unmanned and once launched would require no outside control. In a universe as old as ours, if just one race had created von Neumann probes then it would be likely we have evidence of their existence.
I don’t think we will ever have face-to-face contact with an alien race, but I could see a time when we discover evidence of intelligent life from another star. I would put money on that evidence being a type of von Neumann probe.
How does all of this relate to the book I’ve just read?
One theory that explains why we have no evidence of alien life is described in the Dark Forest theory which states that alien civilisations are afraid of revealing their location and hide their existence as much as possible. With travel and communication between stars difficult, if a race discovered the existence of another race nearby (relatively speaking) then both would fear the other was planning to destroy the other, out of fear the other race was planning the same. As a result, everyone is hiding out of a sense of self-preservation.
The book I’ve just read explores the Dark Forest theory, and it was absolutely fascinating.
Thank you for indulging my impromptu TED talk.
Health Update
Current Weight: 116.4 (up 0.7kg from last update).
Current Body Fat: 38.1% (down 1.4% from last update).
BMI: 35.1 (up 0.2 from last update).
Weekly Goal: lose 0.75kg.
Ultimate Goal: 90kg.
Weekly Steps: 33,875.
Another rubbish week healthwise. Exercising at home has ground to a halt because there’s only so many hours in a day, and I’ve been exhausted. I’ve also had a few bits of shoulder pain which always freaks me out, having had multiple surgeries on my shoulders in the past fifteen-years. What I really need is for the gym to open so I can get on a cross trainer or rowing machine. I can’t cycle because of the injuries I sustained a few weeks ago that led to me going to hospital. On that subject, I’m still suffering because of that injury and have just been prescribed gabapentin to treat the symptoms. I’m going to try and start intermittent fasting again as I’ve had some success with that in the past, but as I’ve said before, food is my go-to support when I can’t exercise and I’m stressed out.
Financial Update
Premium Bonds: £19,250 (up £100 from last update).
Stocks and Shares ISA: £12,256.01 (up £399.41 from last update).
Fuck It Fund: £0.00 (no change from last update).
Property Value: £185,248 (no change from last update).
Total Assets: £216,754.01 (up £499.41 from last update).
Credit Card: £310.20 (down £32.77 from last update).
Residential Mortgage: £143,528.46 (no change from last update).
Total Debts: £143,838.66 (down £32.77 from last update).
Total Wealth Figure: £72,915.35 (up £532.18 from last update).
Investment Income in 2020: £86.36 (no change from last update) (target £2,000).
A positive week for my finances with gains made in the stock market and a small addition to my BTL fund. My credit card balance has come down slightly, but as I mentioned last week it might be a little longer until I clear it completely.
BTL Update
We have completed a viewing today that came about through a chance conversation on a Facebook group. The property was nice enough for an owner occupier but needed work to be considered safe for letting, as well as some decorating and carpets being replaced. Also, the washing machine was located in the garage under the property which meant you had to leave the house, walk around the outside and down some steps into the garage to get your laundry. I think this would be a bit of a hassle for people, especially in the middle of winter. The vendors were clear that they are holding out for the asking price but between the work that would be needed, and the fact they’re holding out for the asking price, it would not be a deal that would make enough money to be worthwhile.
We’ve been trying to view another property through Purplebricks but their website is the absolute shits. It does not recognise our password, so we request a password reset. The password reset comes through and we select a new password. Then, we try to sign in and it states the email address needs to be validated despite the fact we’ve validated it several times before. I emailed Purplebricks and their response was to send me a link to log-in on the website to arrange the viewing, despite me explaining the nature of the problem we are having. I doubt I will be looking for a property through this agency, as it’s just too much hassle arranging the viewing.
Another issue we have is arranging viewings around work. Both myself and my investment partner work full-time jobs. Agents tend to prefer completing viewings in the week, during working hours. I’m starting to get very frustrated at the lack of progress we’re making, but it’s difficult to see what we could be doing differently. The biggest frustration is that the main way to find properties when you’re starting out is online. We haven’t cultivated the relationship with agents to be able to view properties before they go to market. So, we rely on what’s online. Then, you judge the properties by their photos which have been edited to make them look as nice as possible. I said earlier, when we left the viewing, that I’ve never seen a property in person and been pleasantly surprised that it’s nicer than the advert suggested. In almost every instance I’ve been angry or disappointed that the property has little resemblance to the listing.
It’s back to the drawing board and we will try to line up some more viewings next week, and as always I will keep you all updated.
Final Notes
Thank you for reading this week, and I hope you have a great week ahead. If you are following F.I.R.E. or would like to know more about it, please get in touch via Twitter (https://twitter.com/NowWeLive01) or leave a comment on this post.
Mortgage Advisor on FIRE. 