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

mewbie_2

GDB2222 wrote: »

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.

My list was totally finger in the air, not sure I believe it any more than the next person. Just trying to cover some possibilities. The main income reference was really intended to convey the difficulty with investing everything in one illiquid asset. If main income goes, instead of being able to draw down cash, Isa's, etc. some BTLers might only have mortgaged properties as collateral they can't realise.

I am not sure that drawing up a list was right anyway, and I think my 'figure' of 70% failure for year 2000+ new landlords was actually rather low. Here's why.

It is now accepted that housing has been a bubble for many years - I'll say 2002 as my rough starting point. At the peak of that bubble (if bubble's can have a peak) was BTL, InsideTrack, new build flats, mewing, lie to buy mortgages, relaxed credit availability.

When bubble's burst they take down those who are invested in them. So when dot com shares crashed, and boy did they crash, people got severely burnt. Some continued to buy in, yet they continued to fall.

So lets assume that a large percentage of those in the bubble will get burnt. The difference with this bubble that makes it worse than others is that a very large part of it is financed on geared borrowings.

Dot com shares - spend 10k, lose 10k.
BTL - spend 10k, lose - 50k. This figure loosely based on a 10k deposit, 90% mortgage on 100k flat, soon to be worth 50k. I know its a rough figure and there will be many variations, but you get the idea.

That is the difference, and the reason why this bubble could be more savage than most in wiping out people.

I appreciate some people have done all right, and some will survive, some will profit - and that's all fine. But I do think the majority of those who jumped in, and sunk all their money (times whatever multiple they could get from the lenders), will get very badly burnt.

I really should apologise for whittering on about this, I promise to go back to off topic one liners in the near future.

mystic_trev

mewbie wrote: »

That is the difference, and the reason why this bubble could be more savage than most in wiping out people.

Very good post mewbie. A couple of years ago I pointed out to BTL'ers on here the problems they could end up with, with 'gearing' Of course (as House prices only went up) they dismissed me as a crackpot. You don't see these Folks around any longer:rolleyes: I believe they're to be found, licking their wounds, over on the Farting Pig. :rotfl:

neverdespairgirl

ncooper1974 wrote: »

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

What about the obligation to contribute when the roof does need fixing, though?

Speaking personally, I wouldn't rent a place without gas. I'd guess it does narrow your market a bit.

neverdespairgirl

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?

Yes. I'm sure I said on another thread that I own 5% of my Chambers via my SIPP. Everything is tax free.

neverdespairgirl

shellbell63 wrote: »

Why do you think someone doing BTL is sinking all eggs into one basket?
I've already said diversification is the key. I think few BTLers on here will be doing ONLY BTL. Just that BTL is part of our program as it were.

Because unless you are very, very rich, owning a few BTLs will be a very substantial part of the egg count.

neverdespairgirl

shellbell63 wrote: »

People round here still prefer - given a choice - to rent from a private landlord than council.

On the whole, they'd be nuts - lower rent, better security, etc.

Jonbvn

neverdespairgirl wrote: »

Yes. I'm sure I said on another thread that I own 5% of my Chambers via my SIPP. Everything is tax free.

TBH this past year the performance of a lot of commercial property has been shockingly poor. Have a look at the performance of most of the property funds. (I am considering jumping in soon).

NDG's niche property investment looks like a great idea. The problem most of us have is identifying such investments.

neverdespairgirl

I bought this 5% this year, but at 1st January 2005 prices (our deal with Head of Chambers) so I'm well in profit, so far.

I had to put some money in my SIPP to buy it, the rest is mortgaged, and the rent more than covers the borrowing and pays it off over 5 years.

shellbell63

neverdespairgirl wrote: »

On the whole, they'd be nuts - lower rent, better security, etc.

On the other hand - private in my area - means better location, nicer surrounding, nicer properties......Can only speak as I find.

baby_boomer

Read any newspaper and you'll get the picture.

The Council of Mortgage Lenders has stopped predicting the housing market because it's so afraid of the future.