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

andrewmp

ncooper1974 wrote: »

but why not?

Everyone has their own business model. I prefer to reduce the debt on the investment before buying another. That way I can always be sure that I dont go into negative equity, but also, so that I dont need to rely on the tenants income to pay the mortgage.
I can tell you that I certainly plan to be buying in the falling market. And I probably wont make that much profit in the next couple of years, but this doesn't bother me, because over the long term (with or without a HPI) I plan to live on the income from the tenants rather than rely on any pension from the gov't

Because if you buy now and don't make a profit on the rent then you are buying something which will be worth less in the medium term. Long term, yes it will probably be worth more but you'd get a better return in savings.

ncooper1974

I always make a profit. I wouldn't buy otherwise.
But the value of the yield drops as I pump more money into paying the investment of. Its my strategy. I've been doing it since I started, and I see no reason to do any different (for now).

ncooper1974

Dithering_Dad wrote: »

I must admit that I wrote off apartments in my BTL considerations because they have an annual management charge and always seem to be the first type of property to lose their value in a crash. I also thought that apartments limited one's tenant market - i.e. if you have a terraced house with two or three bedrooms you can rent to singles or to a family (or retain a single tenant who starts a family).

Rightly or wrongly, I discounted houses as I didn't want the hassle of gardens (and the maintenance that comes with it). You need to supply gardening equipment if you expect your tenants to maintain the garden, and then you're at the mercy of the weather to ensure the fence panels dont get blown (i've suffered in the past on my own house). And most houses have gas, which I dont really want to deal with. I guess I'm just trying to limit things that can go wrong with a rental.
I understand what you say about apartments as they carry the extra charge of service charges and ground rent, but this is normally reflected in the price, and you can charge a bit extra as the water rates are normally contained in the s/c.
Apartments are the market I'm familiar with. I fully expect that in a crash they will be the 1st to suffer, but I very rarely find that they remain empty for long.

andrewmp

ncooper1974 wrote: »

I always make a profit. I wouldn't buy otherwise.
But the value of the yield drops as I pump more money into paying the investment of. Its my strategy. I've been doing it since I started, and I see no reason to do any different (for now).

Someone said they didn't make a profit on the rent, I said it wasn't worthwhile them buying on that basis at the moment.

You then asked why not stating you intend to, but you make a profit on the rent still. Too many people are happy to make no profit or even a loss as house prices always rise........

IveSeenTheLight

andrewmp wrote: »

Then you won't be buying any more BTL houses in this falling market then will you?

Ok I dont take out any profit
But your right, I'm not looking to expand my portfolio at this time.
Properties in the area I invest in is still rising and I am looking to reduce the risk on my current portfolio at present:T

GDB2222

neverdespairgirl wrote: »

Then the Great Mortality (AKA Black Death) hit in the late 1340s to early 1350s, and perhaps 33% - 50% of England's population died.

Therefore it is extremely likely that land prices were significantly lower over many different 25 year periods in the 14th century.

England's population in 1300AD has been estimated to be about 6 million, + / - 500,000. By 1355, the population was an estimated 2.5 million. It didn't reach 1300 AD levels again until about 1660. Even in 1801, at the time of the first census, there was a population of about 8.5 million.

I was aware of this, and I guess that some of the rather odd "squatter's rights" laws we have in this country must stem from that period. There must have been many empty buildings / untended fields. Indeed, the population changes radically altered the balance between labour and capital at the time.

The figures on population are interesting, because they give an indication of the number of people this country could support if the modern economy breaks down - for example because the banks are allowed to fail. About 1 in 10 of the present population may survive, and your average flabby townie is going to be amongst the 9 out of 10 who don't make it. Suddenly, having a croft in the Hebrides sounds more enticing.

However, as an argument against BTL, it's not very convincing. I am quite sure that one of the risks most landlords do not take into account is that of a pandemic wiping out their client population.

GDB2222

mewbie wrote: »

I hadn't really thought about the figures in that sort of detail. But let's try it based on what we know. Last ten years, ever increasing numbers of people become BTL's. Some still buying even now. So new entrants to the market, ie. non professional landlords easily outweighs the old school landlord? Here comes a total guess for new BTL landlords since 2000.

10% - bankrupt. Lose BTL and home.
20% - BTL repossessed. Keep personal property. Just.
20% - negative equity on BTL, and personal property due to mewing. Survive, broke, for many years.
20% - negative equity on BTL. Get rid of BTL as soon as possible taking the hit. Survive, recover, lesson learnt.
20% - losing money as prices drop. May still have equity remaining. Didn't want to be a landlord anyway. Sell when they can. They may have gained on the way up, if they didn't subsequently mew to buy another one.
10% - made money in early years, reasonable equity, genuinely in it for the long term. Losing money currently but can afford to take the hit and hang on. If they don't lose their main income - ie. job.

I reckon 70% will lose out. If we have a serious recession then those figures could be much higher.

I know its a guess!! But it was interesting to think about it.

To be frank, though, it depends when people bought their BTL properties. I'm in the category "10% - made money in early years, reasonable equity, genuinely in it for the long term. Losing money currently but can afford to take the hit and hang on. If they don't lose their main income - ie. job."

I don't get the bit about losing main income, though? It's very unlikely that somebody who bought a long time ago would have a problem. To give you some idea, a BTL property bought between 1992 and 1996 would typically be showing a current rental yield of 30% to 50% of the original purchase price.

Dithering_Dad

Has anyone thought of buyign a commercial property within a SIPP and then rent it out?

I think that all the rent and any cap gains from sales will be free of tax because it's held within your pension. Would liek to have this confirmed though. It could be the best of both worlds between BTL and ISA?

shellbell63

ncooper1974 wrote: »

DD has made some guesses into the true cost of owning/selling a BTL investment. For what its worth, here is my take on things
1. In the past I've been able to sell a property for less than 1% commision, not the 2% stated.
2. All my properties are self contained flats (not new builds I might add), so no need to repair a roof.
3. I never buy anything with gas. Hence no need for gas certification, and certainly no expensive boiler to replace
4. As others have said, I deliberately keep rents low to ensure no voids. With 3 properites, I've experienced about 6 weeks void in total over 8 or so years
5. Because I keep rents low, the yeilds don't always stack up when compared to interest received from the bank, but that’s a strategy I decided on when I could see HPI in the investment. Now this is not going to happen for a while, I may consider raising the rents a little to increase the yeilds (while still staying below market rates)
6. I use an EA just for the tenant find. They want commision, usually 6-8%, based on the duration of the tenancy. So I normally get a 6 month tenancy and then let it go periodic.
7. I live within 20 mins to all my properties, so I can manage them myself. No EA fees to pay
8. From experience, the only goods I supply are fiited. Tenant is more than welcome to bring his own things with him, but if they brake, its not up to me to replace/repair them

:T Great post. There are a lot of us operating similar business plans!

I'm amazed at some of the 'what if' scenarios perpetuated on this thread about BTL. I wonder what reaction I'd get if I applied a similar 'what if' scenario to ISAs, pensions, stocks/shares???

Let start - what if ISAs are long gone in 20 years, what if chancellor decides to tax them as pension fiasco, what if int rates plummet & stay low? What if - the very year you want to retire - your pension/stocks etc are worthless due to share prices at that particular time? What if inflation is rampant & your ISA income is worth half - in relative terms - 10 years into retirement.......What if What if...

We're all taking a calculated risk one way or another, surely?

shellbell63

Dithering_Dad wrote: »

Has anyone thought of buyign a commercial property within a SIPP and then rent it out?

I think that all the rent and any cap gains from sales will be free of tax because it's held within your pension. Would liek to have this confirmed though. It could be the best of both worlds between BTL and ISA?

SIPPs can be good - though I don't think I'd buy commercial property just yet - not with economic downturn at present. We do have commercial property though.
Only downside - if you can call it that - is if you do want to sell up, all proceeds have to go into your pension pot, not into your own sticky mits to pay for that round the world cruise or whatever.