Another twist to btl

Pobby

Yesterday, again I heard of a landlord steeply subsidising his tenant to the tune of £500 a month.:eek: He now plans to sell up but from what I gather he will find it hard to get back what it has cost him. Last year spmeone I know bought into the Dublin market subsidising his tenant to the tune of 750 euros a month.

I wonder how many are in this situation?

Generali

My LL subsidises me to the tune of ~£1k/month.

However, given that the average borrowing on a BTL at the point of purchase is either 40% or 60% of the price I suspect that the vast majority make a rent greater than the mortgage.

Old_Git

my tenant subsidises my mortgage

Gorgeous_George

Old_Git wrote: »

my tenant subsidises my mortgage

:rotfl:

I'm sure most LLs have their BTL mortgages more than paid for by their tenant. Of course, that doesn't help the BTL bashers argument so is rarely mentioned.

At 6%, my tenant would need a 51 year mortgage to buy my property with monthly repayments equal to the current rent. I am not subsidising my tenant.

GG

moanymoany

My LL was living in this house in 2002 - so I think my LL is making money from me.

I don't care, he is the one with the house and I am the one with the need!

mewbie_2

There are lots subsidising their tenants, where rent and other costs does not cover mortgage payments. These are the greater fools, who bought into the peak. They are the ones who excused the need to top up monthly, by saying "it's the capital gains that make the money", and looking at you as if you were stupid.

However far more than that are losing money, by simply not achieving a decent yield on their capital. For example - 100k property, rents at 500 month. Yield before any costs and assuming 100% occupancy, and not using a management company - 6%. I can't be bothered to work out the costs, etc. So less than 6% yield on an [strike]asset[/strike] liability that may well drop by another 30% - doesn't look very clever to me.

MissMoneypenny

Some of the people on the DFW forum were talking about a LL who posted on the bankruptcy board, as his rents didn't cover his mortgages payments anymore. His mortgages came to 5.5 million.

Tassotti

The problem with it is that many people look for a get-rich-quick scheme, or a pension.

There are many people that bought new-build properties promising £1000 per month rent

It take very little research to realise that these type of properties fetch £700 max, average, £650 per month.

Many people may have fallen into this trap, and I don't feel any sympathy for them. Research is the key..Even if I am buying a monitor which I expect to cost £100, I research the net and save £15!!!

When you are talking about £1000s, it is unbelievable that people dont do their research.

At some point, the owners are going to realise that they have no option but to ditch the property.

What happens to that property then?

Microstar_2

Obviously whether the rent covers the mortgage or not is important, but it is the YIELD (against the current market value of the house) which is critical. Yield on anything bought in the last four years in my neck of the woods just doesn't compute. Lots of amateurs jumping in without doing a business plan, making figures work on the basis of HPI and viewing rent as the cherry on the cake, rather than the other way around.
BTL has not been a viable business for the last couple of years and by rights should be stone dead now. Invest your money elsewhere or start some other form of business.

Gorgeous_George

Not far off Microstar. Rather than current market value I would use current market value after the following deductions:

1. EA selling costs
2. Capital Gains Tax
3. Buying costs (at future date) if applicable
4. Legal fees when selling
5. Legal fees when buying (at future date) if applicable
6. Void while selling
7. Void when buying (at future date) if applicable
8. Preparing house for letting (at future date) if applicable
9. Preparing house for sale.

I'm sure there will be more.

GG

Microstar_2

Gorgeous_George wrote: »

Not far off Microstar. Rather than current market value I would use current market value after the following deductions:

ETC

GG

Assuming someone is buying a property to let then these costs would not be deducted from the market value of the property, they would be ADDED to it for the purposes of yield calculation. i.e. the BTL'ers "investment" would be somewhat greater than the market value of the property due to the non-recoverable transaction costs involved. This has the effect of pushing down the yield slightly.