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

Gorgeous_George

There are properties that must be sold. Banks NEED to sell repossessed properties.

But nobody is lending money (well, almost).

So, bargains can be had if you choose the right property at the right auction.

I'd be looking for a net yield of 10%+ with rents at 90% of market value. If you can find such a bargain, go for it. It may need the central heating replacing, a new kitchen, double glazing and all the usual bits but I'm confident that bargains can be had.

Sure, prices may fall further - so what? Buy some more if they do.

I keep my eyes peeled for any such bargains in the areas that I'm comfortable with and I'm ready to go if one becomes available.

GG

Cleaver

Dithering_Dad wrote: »

That's what I thought, but surely this is rudimentary mathematics and common sense, so why do people invest in BTL if the returns are less than or equivalent to a bank account and the hassles are so much more?

OP, you must have done the calcs as you're thinking of investing again and you have BTL's already. What price were you looking to buy at, what size deposit would you put down and what would be your rental? Sorry if this is a bit nosy, but I'd really like to see some 'real world' examples!

p.s. I have no animosity whatsoever to BTL people or any other investors, so I'm not having a dig - I actually want an informative debate! (wow, now there's a novelty on here )

I'm finding this thread quite interesting, so thought I'd throw my two penneth in. Not sure if me and the missus are classed as BTL people / scumbags (depending on perspective). We were happy in our little house, were having a drink one evening discussing how bored we were with our town, I applied for a job miles away, and were suddenly faced with the (exciting) prospect of moving away within 6 weeks. Easiest thing to do was to rent our house out (we really love our house, it's unusual and ace) and rent a place in our new city. This would give us time to see what we wanted to do long term and also give us the opportunity to move 'home' if we wanted to.

In terms of the 'paper' profit, we don't really make any. The rent after we pay our letting agent a nice percentage is quite similar to our mortgage on the property every month. So it's cost neautral. Obviously there are the extra costs, so here for you DD is our breakdown for the whole of 07/08:

INCOME
Rental Income: £7440
TOTAL INCOME: £7440

EXPENDITURE
Letting Agency: £840
Insurances: £620
Mortgage Payments: £6624
Repairs: £129
TOTAL EXPENDITURE: £7373

So we made a massive profit last year of £67. Think I'll spend it on a porsche.

The flip side of this though is that aroud 2.5k of capital was paid off the mortgage, so I guess that's our 'profit'? And in 15 years our mortgage will be paid off (if we keep the house that long). Do I think our house will be worth the same as it is now or slightly more in 15 years? I would have thought so. I'm by no means sure but, hey, I'm happy to take the risk.

mrstinchcombe wrote: »

Bloody hell, its you BTL landlords that contributed to houseprices spiralling out of control in the first place.

Stop being so selfish and leave the market alone

Oh come on. They are one small factor in a list of hundreds that has caused prices to rise over the last ten years.

geoffky wrote: »

you are a very very greedy person....

I'm not responding to this post directly, but it's a good example of the general moralising of BTL on this thread. Your opinions are your opinions. But, as another poster pointed out, I would love to know how you operate your life if you feel so strongly about people trying to make some money. Do you use no major financial institutions? Or chain shops? Or have SKY TV? Or stay in hotels? Pretty much every item you buy or service you chose to pay for is from a person who wants your cash, and wants to make cash at the expense of others. This is no different from BTL: people wanting to make money at the expense of others. The general business plan of: "You can't afford to buy a house, I can afford one, so I'm going to to buy one and rent it to you at a premium" is surely no different to 1001 other businesses and services out there.

Max_Headroom_3

Dithering_Dad wrote: »

I also never see any real-world calculations that show the real costs over say 20 years of the investment. No one ever seems to factor all the costs of BTL (i.e. legal fees, stamp duty, mortgage arrangment fees during the house purchase, the mortgage arrangement fees, rental agency fees, dead rental periods, insurance costs, service costs, etc. during the lifetime of the BTL. Plus the legal costs of getting a bad tenant out of your property must be enormous (I know this is probably a rare occurance, but it does happen). Plus the cost of your time in dealing with the BTL and your tenants, decorating and maintaining the property, filling in Inland Revenue self assessment forms each year.

All of that opposed to simply putting your money into ISAs and sitting back for 20 years. It doesn't seem worth it.

But you miss the point old bean. With an ISA you'd have to keep putting money in (compound interest on a £15K start up isn't going to be massive). The idea of a BTL is someone else paying for you, via rental income, so you end up with an entire house after 20/25 years.

I totally agree that right now the numbers don't add up, but they have done in the past and they may again with a combination of dropping house prices and inflation.

Max_Headroom_3

Cleaver wrote: »

I'm not responding to this post directly, but it's a good example of the general moralising of BTL on this thread. Your opinions are your opinions. But, as another poster pointed out, I would love to know how you operate your life if you feel so strongly about people trying to make some money. Do you use no major financial institutions? Or chain shops? Or have SKY TV? Or stay in hotels? Pretty much every item you buy or service you chose to pay for is from a person who wants your cash, and wants to make cash at the expense of others. This is no different from BTL: people wanting to make money at the expense of others. The general business plan of: "You can't afford to buy a house, I can afford one, so I'm going to to buy one and rent it to you at a premium" is surely no different to 1001 other businesses and services out there.

Spot on. The housing market spiralled out of reach based on easy credit and foolish lenders/borrowers. Do people really think there was a BTL purchaser for every single FTB house that ever came on the market (as there would have to have been for them to compltely control the prices)?

And do all these people who hate landlords so much refuse to rent? Bit rich complaining about them and then queueing up to use their services surely?

Cleaver

Max_Headroom wrote: »

But you miss the point old bean. With an ISA you'd have to keep putting money in (compound interest on a £15K start up isn't going to be massive). The idea of a BTL is someone else paying for you, via rental income, so you end up with an entire house after 20/25 years.

I totally agree that right now the numbers don't add up, but they have done in the past and they may again with a combination of dropping house prices and inflation.

Just to use us as an example for this.

Our house was worth £130,000 when we started renting it in April 2007. We have £45,000 of equity in this house. For sake of argument, let's say the house is worth £120,000 in the year 2021 when the mortgage will be paid off (it could be worth 50k, it might be worth 200k, who knows?). As my original post pointed out, we will make no money and lose no money between now and 2021 (aside from the mortgage being paid off - although we would have some extra tax to pay, so we might just keep some form of mortgage on the property). So if we sold the house for £120,000 in 2021 we would be sitting on around 75k.

If we had sold our house in April 2007 for £130,000 and invested our £45k equity in a 5% ISA until 2021 it would be worth around 90k. So therefore a 'profit' of 45k. So we'd make 30k extra through the buy to let option.

The above example is very, very simplistic and I'm fully aware it's subject to many, many variables. We've also made the above decision based on a whole load of other factors: family situtaion, other money we have, our job situations, our lifestyle, future life decisions we may make (we may be moving back to where our families at some point so it'll be great to have our old house available) etc. etc.

Or we could both be hit by a bus tomorrow and the whole argument becomes academic.

mewbie_2

I don't hate all BTLers but here is my reasoning why they might be disliked with some intensity.

One major reason that the boom went on longer than it should is that people with a fair amount of equity in their own homes saw a way to buy into a rapidly rising asset. In more normal times the inability of FTB's to buy at the bottom would slow the whole system, but they were largely replaced by investors, particularly amateur Mum and Dad style investors, who could afford the ridiculous prices by simply drawing some easy money out of their own overpriced houses.

This pushed houses way beyond the reach of all but a few FTB's and extended the bull run. It created for a few short years a pyramid scheme that could be chatted about in every school playground across the country. "Oh yes, we have three now, and buying another next week". Etc.

Now it is one thing to price FTB's out of the market, but the additional irritation has been the propensity of some, not all, but some of those people to then brag about how many thousands they had made by being so clever.

Especially insensitive to those who no longer could afford to buy their dream.

So. If you are a BTL investor, and you have been successful - I don't really want to hear about it. Count your blessings in private, thank your lucky stars, and have a heart for those who are not so fortunate.

Cleaver

mewbie wrote: »

I don't hate all BTLers but here is my reasoning why they might be disliked with some intensity.

One major reason that the boom went on longer than it should is that people with a fair amount of equity in their own homes saw a way to buy into a rapidly rising asset. In more normal times the inability of FTB's to buy at the bottom would slow the whole system, but they were largely replaced by investors, particularly amateur Mum and Dad style investors, who could afford the ridiculous prices by simply drawing some easy money out of their own overpriced houses.

This pushed houses way beyond the reach of all but a few FTB's and extended the bull run. It created for a few short years a pyramid scheme that could be chatted about in every school playground across the country. "Oh yes, we have three now, and buying another next week". Etc.

Now it is one thing to price FTB's out of the market, but the additional irritation has been the propensity of some, not all, but some of those people to then brag about how many thousands they had made by being so clever.

Especially insensitive to those who no longer could afford to buy their dream.

So. If you are a BTL investor, and you have been successful - I don't really want to hear about it. Count your blessings in private, thank your lucky stars, and have a heart for those who are not so fortunate.

So in summary, you're not happy that people saw a business opportunity and tried to make lots of cash at other people's expense? Still don't see any difference between that and any other business.

A smug landlord with bags of cash is very annoying. But no more annoying than a banker, plumber, estate agent, business consultant or anyone else talking about the money they make from others.

mewbie_2

Cleaver wrote: »

So in summary, you're not happy that people saw a business opportunity and tried to make lots of cash at other people's expense? Still don't see any difference between that and any other business.

Incorrect. The point is that BTLers pumped up the price of housing that other people might have liked the chance to own and live in. If some share investor prices shares out of my reach it doesn't really affect me. If someone prices property out of my reach it does.

Edit to add a rider: But anyway - its over now. Prices (and rents) are falling, silly loans are disappearing, and the BTL dream is rapidly turning into a nightmare. How much longer can the gap between rent and interest payments be topped up? Not my problem. And not much sympathy.

dopester

I'm no admirer of BTL landlords of recent years but am not going to get worked up about it.

After all, there isn't much worse I could wish on a BTL landlord than the situation unfolding now.

House/apartment prices crashing - rising unemployment - negative downwards pressures on rents.

The landlords who survive at the end, well fair enough, their model to it worked out, but a lot of chancers and easy-money speculators will be brought down, and maybe lose their own homes too.

Cleaver

dopester wrote: »

I'm no admirer of BTL landlords of recent years but am not going to get worked up about it.

The fact that we're on an internet forum debating specifically about the issue shows we both get worked up about it more than 99% of other people out there.

dopester wrote: »

After all, there isn't much worse I could wish on a BTL landlord than the situation unfolding now.

House/apartment prices crashing - rising unemployment - negative downwards pressures on rents.

The landlords who survive at the end, well fair enough, their model to it worked out, but a lot of chancers and easy-money speculators will be brought down, and maybe lose their own homes too.

Agree with that last statement, and agree with a lot Mewbie has said. You enter in to a business and you could get rich, make a nice living, break even or lose everything. Whether it's BTL, buying gold, owning a pub or plumbing.

I guess my origainal point, which I don't think has been answered, is why the vitriol for BTLers? Still not sure why it's different from any other business venture. All I can see is that people feel it was the catalyst for rising prices (which I don't fully agree with) and that people also resent them for making a lot of money.

If a pub goes bust I'm glad it's not me who bought the pub, would probably have an opinion on where they went wrong but would feel sorry for the landlord.. When an invester goes bust I'm glad I wasn't buying shares, but would feel sorry for them. And when a BTL goes bust I'll feel sorry for them too. All of the three people above were 'greedy' as they wanted to make money. It just seems that BTLers want to make money from something that is close to people.

mewbie wrote: »

If some share investor prices shares out of my reach it doesn't really affect me. If someone prices property out of my reach it does.

See?