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How buy-to-let turned into a mug’s game
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Squirreler wrote: »I'm new to MSE and must admit to spending hours reading the posts here, particularly on the House Buying etc board. I'm fascinated by all the opinions on here.
My husband and I bought a house to let in October last year, with money left from the sale of my late Dad's house. The rent is £595 a month and the mortgage repayment is £412. I plan to sell it in about 20 years' time. Will this 'investment' have left me bankrupt by then?! We have a mortgage on our own home too but thought about it all carefully and I worked out the figures, and it seems like we can afford it. Am I wrong?
You'll get a lot of replies to this.
I would guess that with a repayment of £412, over 25 years at a rough guess of 5.5%, the outstanding mortgage is approx £66,000
With a rent of £595, a 6% Rental Yield would mean the property would be worth £119k. If it is valued higher, then your Rental Yield will be lower. If it is valued lower then your Rental Yield will be higher
In my opinion, you have ensured that the rent received covers the mortgage payment ( I will assume its a capital and interest mortgage as you say repayment and not Interest Only). This is a good start.
You need to put aside the remaining rent to cover things like maintenance, voids, insurance etc
Depending on your area, you could be affected by property prices lowering to a higher or lower extent.
Many will say that you would have been better waiting to invest in property than you did, which may be the case, however you have bought and you would need to decide if you should sell or not.
A good thing is that you have bought this as a long term investment, 20 years you say.
Some may say that house prices may not recover within 20 years but they dont know for sure.
In my opinion, house prices will definately recover within 20 years and possibly even be at the peak of the next cycle, but then again I dont know for sure either.
You asked "Will this 'investment' have left me bankrupt by then?" In my opinion, no, but then I only have a few facts from this post and as I said above, i dont know what the future holds
There is a lot of evidence out there
There is a lot of evidence in these forums.
The best thing you can do is do a lot of reading and make a decision for yourself.
Good Luck in whatever you decide.:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
Squirreler wrote: »My husband and I bought a house to let in October last year, with money left from the sale of my late Dad's house. The rent is £595 a month and the mortgage repayment is £412. I plan to sell it in about 20 years' time. Will this 'investment' have left me bankrupt by then?! We have a mortgage on our own home too but thought about it all carefully and I worked out the figures, and it seems like we can afford it. Am I wrong?
There is a distinct difference between a landlord with a single property and one with many. Its all down to risk.
Landlords with multi properties have oftern released equity gains in other properties to cover the deposits in other property purchases. This can finacially work if prices continue to rise, however there is always going to be a ceiling on prices depending on what the banks will lend.
Now we have reached that limit and it is being reduced due to over risky lending prices are falling. As prices are falling, equity disappears and the gearing system collapses. This is also a double sided sword because as banks return to more sustainable lending they are reduce the loan to value rates (LTVs) for remortgages.
Where typically banks had many 90% LTVs they have now gone to 75%. So you get landlords who equity is fast disapearing from prices falls and have used equity for other purchases unable to get 75% LTV remortgages. The end result is they are being forced on to the standard varible rate which roughly increases mortgage repayments at about typically £200 more a month per property.
This is what is killing multi property landlords at the moment especially those who have bought properties in the last few years. From a stage where the rents were covering the repayments they are now making a loss. To make the situation worse rents are falling especially in London (ARLA) so they can't really pass the extra costs to renters and if they did risk void periods as people move to cheaper properties in this era of rented oversupply caused by people renting their properties they can't sell.
Most buy to let mortgages have about a 2 year life, the more properties you have the more chance that you have properties comming up for remortgage. This is what is killing buy to let landlords and why increasing amounts of landlords leading to more auctioned properties bring prices further down. These further drops feed the cycle further.
That is why buy to let is now dead. The 75% LTV came in this month, so within 2 years there will be buy to let carnage.
If you don't believe me check out Landlord forums on this, they are starting to panic and know they can't sell. Repossession is the only option.:exclamatiScams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.
Save our Savers
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That is why buy to let is now dead. The 75% LTV came in this month, so within 2 years there will be buy to let carnage.
If you don't believe me check out Landlord forums on this, they are starting to panic and know they can't sell. Repossession is the only option.
Christ your right, i've just checked ! there will be hardly anywhere to rent in the UK :rolleyes:
brit, looking back you will regret the time you've wasted in your life posting such nonsense.0 -
Thanks for the replies.
I forgot to say it's interest only, although I said 'mortgage repayments' I mean what we pay each month to the mortgage provider, which was totally misleading, sorry.
Mortgage is about £110,000 I think. It's in a nice area of a popular town, near enough to the centre and railway station. I'd quite like to live there really! We have rented some dumps in this town, before we bought, and our little BTL house is really lovely.
I do wish we'd paid the money off this place though. I'm impulsive and just went for it. Glad it was only one house though.0
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