Buy to Let now...or wait a year??

dopester

Conrad wrote: »

WHY WILL IT GO UP £50,000+?
The prices today for DESPERATE sellers are £50 - 100k less here. However, the bulk of sellers are not desperate so will not sell now.
As soon as rates fall, and sentiment improves which it always does, those desperate situations will simply vanish as buyers return in number and prices go back to where they were.

Yes. The system is so flush with money. The CDO market growing from £650 billion to $47 trillion in 7 years and flooding out money everywhere... well that is sure to come back online very soon isn't it.

Sentiment - the key to house prices.

Dithering_Dad

shellbell63 wrote: »

Sorry found this a bit comical really.

Firstly you assume we haven't already used up our ISA allocation & secondly a lot of your costs do not apply in our case.
We don't provide furniture, white goods etc. Thats not norm in our preferred area. We buy locally, so don't employ agents, except for sourcing a tenant. My other half is pretty handy & is actually looking forward to pottering around in retirement doing odd jobs - says it'll keep him sane (dunno if thats 'cause I'll drive him INsane!).

Yes there may be a bad tenant or two(though if you pick wisely, this is less likely than if you rent out a *hole in a bad area) - but there may be a crash & your stocks & shares are worth little when you want to retire, or interest rates may dive & you don't get your 5.5% on your ISA.......

Thats the problem - if we could all just get those crystal balls working properly, we'd all be heading in the same direction & quids in. Unfortunately lifes full of twists & turns, & none of us quite know.... so we all take our best guess & hope we're right..... or somewhere handy at least.

Mind you if we were all heading in the same direction - we'd grind to a halt wouldn't we. Imagine everyone decides to buy..... whos gonna sell? Everyone saves & noone borrows.... banks don't need savers money anymore as they're drowning in it, so rates plummet.
Thats the beauty of this world - we're all different & we need to be - to keep the world turning.

I'm not against your strategy at all - just think theres a place for BTL as well. - at least for me there is. And as they say, never put all your eggs in one basket. So diversify, is my motto. But I still see our BTL strategy as backbone/constant of our retirement plan.

The last bit was very tongue in cheek, glad you found it funny.

It is a personal choice and if you think it's for you, then go for it. As I said at the start of my rant/debate I had nothing against BTLers and see it as purely an investment. I tried to break it down as such and just don't see the returns. I'm not baised one way or the other and so looked at it without rose tinted glasses, but also without any preconceptions. After all that, I just thought that yes, if you have great tenants for 25 years, no major building or boiler disasters, mostly full tenanted periods and a boom just as I'm ready to sell up, then maybe it'd be worth it. However I'm a realist and know that things can and do go wrong and that more things can go wrong with a property than can with a savings account.

As far as being an odd job man - you have to be corgi registered to fix gas problems and NICEIC registered to do electrical work and at age 60+ I wouldn't want to be climbing around on roofs (at age 30+ I wouldn't to be honest). This kinda cuts down the number of jobs you can do on the cheap to just a bit of painting and decorating.

Conrad

BTW - quite a few of us do ISAs and B2L

B2L might not suit you DD, as there is the hassle / worry factor.

I'm only looking at it again in view of the 30% price reductions to be had, coupled with 10% HMO yields

shellbell63

HammersFan wrote: »

What an absolutely terrific post. I couldn't have put it better myself. Good luck and well done for provoking such a debate (it was a shame people felt the need to get nasty throughout, but that's just this corner of MSE for you - don't let it put you off!).

Thanks for support.
I must admit a few pages back, I was about to run for the hills. It now seems to have settled into a decent discussion. And I'd like to think at the end of it we can all agree - or agree to disagree - & wish each other well in doing so.
:beer:

Dithering_Dad

Conrad wrote: »

BTW - quite a few of us do ISAs and B2L

B2L might not suit you DD, as there is the hassle / worry factor.

I'm only looking at it again in view of the 30% price reductions to be had, coupled with 10% HMO yields

Hi Conrad. I think you're right BTL doesn't suit me - I think I'm slightly risk adverse and putting so much money into a single investment worries me. I'm also pretty lazy and after doing a full day's work wouldn't want the hassle of a tenant phoning me up at 9pm to moan about the central heating playing up or that Sheryl is a real cow and the other girls can't live with her anymore. I also wouldnt want my weekends to be taken up painting or laying down carpet to prepare for a new tenant coming in.

When I read your post I did think "ummm, commercial letting, now there's a thought". I do know that you get longer lets with commercial properties, but again the downside would be if the business goes bust (owning you rent) and your shop is empty for a long time. The Video shop near me has been empty for over a year now with its 'for lease' sign slowly being bleached out by the sun and rain.

Good luck with your investments though, it sounds like its the right way for you to go.

carolt

HammersFan wrote: »

DD I can only assume this is a wind-up since it is so full of holes. I will point out just two.

1. Do you really think that the property will have gained only around £50k in 20 years. That is cloud cuckoo land. Even the most pessimistic commentator would expect the propert to double from today's vaule. This would make the amount of equity around 130k as opposed to the 87k in the ISA.

Surely you can't be serious? Name me one serious commentator who can definitely predict prices will double over that time frame. From current highs? Highly unlikely.

HammersFan wrote: »

2. Do you really expect rent to be £600 in 20 years. It will be around double that figure if rents just keep pace with increases in earnings of, lets say, 3.5% per year. You know you will get around £400 from the ISA which will just about cover the monthly electricity bill in 2028.

Who knows what rents will be. As there is no speculation involved in rental levels - people don't gamble large amounts by borrowing to pay the rent on a monthly basis, they only pay what they can actually afford - if we do face a massive recession or significant unemployment (and I sincerely hope we don't, but I wouldn't bet on it not happening either), then rental levels may have no choice but to fall. As it is, the big increase in rental properties as people who can't sell attempt to rent out their properties instead, has already caused rental levels to decline.

Who's to say how far they can fall?

You could be right - in both predictions - but I find it highly unlikely.

Given the success of your previous predictions - that house prices would not fall at all, would rise in 2008 etc etc, I think I'll take your predictions on this with a pinch of salt, too. :rolleyes:

HammersFan

Dithering_Dad wrote: »

Is my example any more 'biased' than the ones put forward by the BTLers? As Edward Heath once said "I only believe the statistics that support my argument" and I think this is the case here. If BTL is as lucrative as you say it should be easy for you to confirm this, but apart from some vague figures from people who have been doing it for a couple of years, I've seen nothing.

To address your points...

1. We established earlier that if you flatten out the booms and busts, the value of houses roughtly keeps pace with inflation/average earnings. We also established that to realise the gains in the house you have to sell it and pay capital gains tax and other costs. I'm a bit tired of doing the calcs so please have a go yourself at calculating the cap gains on this property and then compare against the ISA, then tell me what you will do with the equity once it's in your bank in oder to avoid 20% tax on the interest.

2. You will pay income tax on any profit on the rent that is above the cost of maintaining the BTL. this is 20% or 40% depending on your tax bracket. You pay no tax on the ISA.

3. If you overpay on the BTL you just make more of the rental income subject to tax. However if you decide to overpay anyway, you could also pay more money into the ISA over the years. All of which is tax free.

I came into the debate after actually looking at some properties with a view to BTL. I leave the debate thinking that it's just not worth the effort and I'd be better off finding a different vehicle. The fact thet you're now trying to stifle the debate because of the issues I've raised leads me to think that if the investment is so shaky that someone gets annoyed because one person pokes holes in it, then it really is best left alone!!

DD - I am in no way trying to stifle debate. That is a straw man - because I disagree with you I stifle deabte? Come on.

Of course there is merit in the issues you raise - its a risk analysis of BTL. But there are potential benefits too that you seem to underestimate. Especially over a 20 year time frame.

Dithering_Dad

My god, carolt has come to my assistance.

I'm off home for a lie down.

Dithering_Dad

HammersFan wrote: »

DD - I am in no way trying to stifle debate. That is a straw man - because I disagree with you I stifle deabte? Come on.

Of course there is merit in the issues you raise - its a risk analysis of BTL. But there are potential benefits too that you seem to underestimate. Especially over a 20 year time frame.

Sorry if I mistook your words and thought you didn't want the debate to continue.

As I said earlier. I am not a BTL landlord and so don't really know all the ins and outs of it, nor all the benefits or risks. That's really why I kept asking for experienced BTLers to provide all the info (but realistic stuff like including all the up-front and on-going costs). But it wasn't really forthcoming. I can only go with what you guys tell me .

Luckily I have had an email from one forum member who is going to supply me with details. Obviously I wont be able to pass this on which is a shame, but at least I'll personally be able to really see how BTL works in practice over a long time frame (hopefully).

Cheers.

HammersFan

carolt wrote: »

Surely you can't be serious? Name me one serious commentator who can definitely predict prices will double over that time frame. From current highs? Highly unlikely.



Who knows what rents will be. As there is no speculation involved in rental levels - people don't gamble large amounts by borrowing to pay the rent on a monthly basis, they only pay what they can actually afford - if we do face a massive recession or significant unemployment (and I sincerely hope we don't, but I wouldn't bet on it not happening either), then rental levels may have no choice but to fall. As it is, the big increase in rental properties as people who can't sell attempt to rent out their properties instead, has already caused rental levels to decline.

Who's to say how far they can fall?

You could be right - in both predictions - but I find it highly unlikely.

Given the success of your previous predictions - that house prices would not fall at all, would rise in 2008 etc etc, I think I'll take your predictions on this with a pinch of salt, too. :rolleyes:

Carol,

An average rise of 4% pa over 20 years in house prices would see them double. That isn't very much at all. Or do you not agree. Of course, no-one knows what they WILL be in 20 years, but I'd say that's a reasonable estimate that takes into account peaks and troughs. I'd argue its highly unlikely that they won't at least double.

Rents very much track average earnings. Again 3-4% pa is quite conservative. Are you suggesting that any recession will last 20 years?

Feel free to take my predictions with a pinch of salt. We will never agree, I suspect. I thought house prices woudl rise from Dec 2008 to Dec 2009, by about 2-3% (Land Registry Figures).

So far they are only very slightly down on the year, and that based on really small volumes. So although i was worng, it wasnt by a huge amount. And that's another thing we won't agree on.