Buy to let and the myth of rising rents

mystic_trev

As a landlord of some 16 years standing I continue to report with disbelief the figures from those with a vested interest in talking up buy to let.

Yes – buy to let has had a good run with property prices doubling over the past eight years. But the notion that rental values will now rise to counteract the effect of falling property values is, in my view and experience, flawed.
The Association of Residential Letting Agents (ARLA) is, once again, forecasting that ‘rents will rise significantly in the short term.’

And ARLA is not alone. All the mortgage lenders in this market blithely say that rises in interest rates are not a problem for landlords because demand will remain strong and landlords will be able to increase rents.

Even if this were true, landlords will have to wait until the end of the existing lease, or a break, before they can pass on higher costs. And few tenants are going to accept a doubling in their rent – which is what many landlords have suffered in mortgage interest charges. Those coming off fixed rates of 4.5% are now having to pay 8%.

http://www.citywire.co.uk/personal/-/news/money-property-and-tax/content.aspx?ID=307989

IveSeenTheLight

Increasing retns is not a myth.
Personally I have increased two properties 22% and 14% in the last 18 months. Now I know not all areas will be affected the same, some may stay the same or even drop, however, if you were to take an average, I would estimate that the average rent is increasing

The person in the article is talking about Buy To Let has had a good run with property prices increasing, but BTL should not be calculated on increasing or decreasing property values. It should be calculated against rental income.

The writer also states

I became a landlord in the last recession in 1991 when I couldn’t sell a property for anything like the price I had paid for it. The property, admittedly, has probably tripled in value since then, but I have never made a penny of income out of it.

So for 16 years as a landlord, she only made money out of capital gains and did not make an income, sounds like a poor landlord / investment

So for me, the article failed as soon as it linked BTL to house prices

They did however further down state

But it goes on to say, ‘investment in residential property is driven by capital gains.’ Talk to any serious professional landlord and he will tell you that’s rubbish. They buy on yield – which is why most professional landlords have bought very little in the past few years – and capital gain is largely seen as a bonus.

Which backs up what I have said. BTL is on rental yield, capital gains (and only at the point of selling) is a bonus

IveSeenTheLight

mystic_trev wrote: »

http://www.citywire.co.uk/personal/-/news/money-property-and-tax/content.aspx?ID=307989

:rotfl: LOL:rotfl:
From the same website
http://www.citywire.co.uk/personal/-/diversions/the-money-blog/content.aspx?ID=307422

5 reasons why now is a good time to Buy-to-let

PasturesNew

People can't and won't pay nearly 2/3rds of their salary in rent, like some have been prepared to do to service their mortgage. If you are buying the house you have a keen, vested interest in paying for it with your soul. If you rent then you don't.

I am paying 35% of my wages in rent, if mine went up 20% and I were paying 50% of my wages, I'd just buy. Others will choose to: share, share longer, downsize or stay with parents. And there will always be landlords that aren't over-extended and who will be wanting good tenants at a fair rent.

andrewmp

PasturesNew wrote: »

People can't and won't pay nearly 2/3rds of their salary in rent, like some have been prepared to do to service their mortgage. If you are buying the house you have a keen, vested interest in paying for it with your soul. If you rent then you don't.

I am paying 35% of my wages in rent, if mine went up 20% and I were paying 50% of my wages, I'd just buy. Others will choose to: share, share longer, downsize or stay with parents. And there will always be landlords that aren't over-extended and who will be wanting good tenants at a fair rent.

I pay 43% of my net pay as rent. It's the only thing that makes me think to pay the same and buy a better house and at least fix in the current payment amount.

Pobby

PasturesNew wrote: »

People can't and won't pay nearly 2/3rds of their salary in rent, like some have been prepared to do to service their mortgage. If you are buying the house you have a keen, vested interest in paying for it with your soul. If you rent then you don't.

I am paying 35% of my wages in rent, if mine went up 20% and I were paying 50% of my wages, I'd just buy. Others will choose to: share, share longer, downsize or stay with parents. And there will always be landlords that aren't over-extended and who will be wanting good tenants at a fair rent.

Nearly two thirds of salary on the mortgage. Frightening.

Another fine example of the ever widening gap between the rich and poor in this country.

Snooze

PasturesNew wrote: »

People can't and won't pay nearly 2/3rds of their salary in rent, like some have been prepared to do to service their mortgage. If you are buying the house you have a keen, vested interest in paying for it with your soul. If you rent then you don't.

I am paying 35% of my wages in rent, if mine went up 20% and I were paying 50% of my wages, I'd just buy. Others will choose to: share, share longer, downsize or stay with parents. And there will always be landlords that aren't over-extended and who will be wanting good tenants at a fair rent.

I agree. Mate of mine has just told his LL to sling his hook because he's announced a 10% increase from August. That's nearly £120 a month extra he has to find! LL says he has no option because his mortgage has gone up!!! :rolleyes: :rolleyes: :rolleyes: :rolleyes:

In fact, there was a thread on here about some female LL increasing her rents 10% not long ago - this could easily fit the situation with my mate, but obviously as the tenant. He is the ideal tenant and has been there for 4 years now and not caused the LL any hassle whatsoever; even doing small repairs himself to save troubling the LL, and this is how the LL repays him!! F*** them is what I say. Many LL's are getting too big for their boots these days and it needs everyone to vote with their foot to put them in their place leaving them with empty properties due to their silly prices or them being repaid by getting in tenant's from hell.

As for my mate, he's found a new place for only a fiver more than he was paying before and of roughly the same size, but this one's closer to where he works and comes with off-road parking. Tenant 1 - LL 0.

Rob

ruggedtoast

Its been a long while since rents have gone up too so there is some slack. Im really not noticing any great rental increases in the areas Ive been monitoring however, unlike the for sale prices.

There also appears to be big increase in both rental and for sale property on rightmove. With the effects of the credit crunch only just beginning to become manifest, and the UK about to enter recession I really wouldnt bet on rising rent saving the housing market now.

JayZed

PasturesNew wrote: »

I am paying 35% of my wages in rent, if mine went up 20% and I were paying 50% of my wages, I'd just buy.

If your rent went up by 20% you'd be paying 42% of your wages. It would need to go up by 40% before you get close to 50% of your wages.

GDB2222

I can't say I've seen any increase in rents in the last 5 years.

WTF?_2

andrewmp wrote: »

I pay 43% of my net pay as rent. It's the only thing that makes me think to pay the same and buy a better house and at least fix in the current payment amount.

You should really be looking around to get a lower rent.

Ideally, max 1/3 of disposable income on accommodation costs (rent or mortgage) otherwise you won't be able to save.

I'm paying about 22% of my net income on renting where I live - leaves me with nice cushion to save. It hasn't gone up since I started renting 18 months ago and is unlikely to do so any time soon.