Should I buy to let?

meester

Obviously I laughed heartily at the fools buying in the last few years, but having looked through auction results, you can now buy a 2-bed flat in South London for £75k (that would have sold for £180k last year), and rent out for £800/month. Gross yields are well over 10%.

I'm not sure what the downside risk is, but prices in these areas are at 1998 levels. I have about 10% of my wealth in equities, 15% in a FTSE-linked bond that will probably mature in 5 years time, and the rest is cash.

Once I get my money back from Icesave I'll have a lot of cash earning pathetic rates, and with the economy looking in horrible trouble, I'm not convinced about stockmarket investments. A South London flat at 60% off with a >10% yield seems to beat much of what else is out there - shares are obviously less work, but there is no guarantee that companies will always make profits, whereas a flat near a train station in South London seems rather safer. I'm not looking for capital appreciation, my expectations would be a good steady yield rising with inflation, and the same on the capital value.

Any thoughts - and don't mention BTL mortgage rates, because this would be a cash purchase, so the comparison has to be with other investment choices for cash.

BTW, I will continue to rent my 4-bed Surrey detached, because my requirements are far too specific to be satisified in the '50% off' auction market, whereas a flat is just a commodity.

ad44downey

Ethically speaking I'd say no. Why deprive someone else of owning their own home just so you can cash in?

domcastro

Go for it. I wouldn't want to be a landlord - too stressful. But if there are no mortgages available, then people will need to rent

Generali

meester wrote: »

Obviously I laughed heartily at the fools buying in the last few years, but having looked through auction results, you can now buy a 2-bed flat in South London for £75k (that would have sold for £180k last year), and rent out for £800/month. Gross yields are well over 10%.

I'm not sure what the downside risk is, but prices in these areas are at 1998 levels. I have about 10% of my wealth in equities, 15% in a FTSE-linked bond that will probably mature in 5 years time, and the rest is cash.

Once I get my money back from Icesave I'll have a lot of cash earning pathetic rates, and with the economy looking in horrible trouble, I'm not convinced about stockmarket investments. A South London flat at 60% off with a >10% yield seems to beat much of what else is out there - shares are obviously less work, but there is no guarantee that companies will always make profits, whereas a flat near a train station in South London seems rather safer. I'm not looking for capital appreciation, my expectations would be a good steady yield rising with inflation, and the same on the capital value.

Any thoughts - and don't mention BTL mortgage rates, because this would be a cash purchase, so the comparison has to be with other investment choices for cash.

BTW, I will continue to rent my 4-bed Surrey detached, because my requirements are far too specific to be satisified in the '50% off' auction market, whereas a flat is just a commodity.

If you can get 10%+ yield it's probably worth the risk IMO, especially if you're young enough that you're just looking to get cash from it and so don't care what happens to the capital value.

meester

ad44downey wrote: »

Ethically speaking I'd say no. Why deprive someone else of owning their own home just so you can cash in?

These are repossessions at auction. They only go to auction when they haven't sold to somebody else.

'Normal people' cannot buy them because they don't have the money, and you need a 25% deposit now even to buy from an EA. The kind of person with that kind of cash sitting around doesn't want to live in a low-grade flat.

stevetodd

meester wrote: »

These are repossessions at auction. They only go to auction when they haven't sold to somebody else.

'Normal people' cannot buy them because they don't have the money, and you need a 25% deposit now even to buy from an EA. The kind of person with that kind of cash sitting around doesn't want to live in a low-grade flat.

Would you buy for cash or with a mortgage. We are sort of musing over the possibility of buying at an auction but haven't done any research on auction mortgages yet. Although I strongly suspect remortgaging the house I live in would be a better solution. I don't want to pay cash because offsetting the interest is a good tax benefit and also it would prevent me from buying more.

wintersunshine

ad44downey wrote: »

Ethically speaking I'd say no. Why deprive someone else of owning their own home just so you can cash in?

Yup - This board is full of greedy hypocrites just waiting to cash in on other's misfortunes. Can't wait to get his hands on a repossession either. What a lovely gathering of human kind.

mewbie_2

wintersunshine wrote: »

Yup - This board is full of greedy hypocrites just waiting to cash in on other's misfortunes. Can't wait to get his hands on a repossession either. What a lovely gathering of human kind.

Oh come on. You can't keep describing people who are hoping to get a cheap house in those terms. Or if you do, then you cannot argue with those who previously criticised BTL's for greedily pricing FTB's out of being able to afford their own homes.

I guess we're all just lovely people aren't we WinterSunshine?

meester

stevetodd wrote: »

Would you buy for cash or with a mortgage.

Cash.

We are sort of musing over the possibility of buying at an auction but haven't done any research on auction mortgages yet. Although I strongly suspect remortgaging the house I live in would be a better solution. I don't want to pay cash because offsetting the interest is a good tax benefit and also it would prevent me from buying more.

I have plenty of cash, and don't own a house. I was pondering the mortgage thing last night.

C&G have a 5.99% BTL rate, with 25% deposit.

I really don't know how they value these things, if it sold for £160k last year, but sells for £75k at auction, would that be the price on the valution?

Anyway let's say for sake of argument that the price is £75k, the mortgage is £75k and the rent is £9k/year, then the figures look like this:

£4,500 interest on the mortgage of £75k @ 6%
£3,750 interest on my cash of £75k @ 5%
£9,000 income on my property
£1,000 annual costs on my property

Net annual profit from my property = £3,500, plus £3,750 interest on cash= £7,250 total annual return. Tax on that is then £2900 (at 40%), leaving £4,350 as my return on £75,000 - 5.8% net

versus, buying in cash:

£9,000 income on my property
£1,000 annual costs on my property
No mortgage, no interest on cash

Net annual profit is then £8,000. Tax is £3,200, leaving £4,800 of profit, or 6.4% net.

There really is no point at borrowing at 6% when you only earn at 5%! It would only make sense if you have ISA savings that you can utilise, and you need to borrow the cash to do so.

Obviously if you can access cheaper finance, it might make sense.

But for BTL, the best rate seems to be 6%.

I know that people like to indulge in tax fraud and mortgage fraud and use residential mortgages and pretend that they live there, but not for me thanks.

meester

mewbie wrote: »

Oh come on. You can't keep describing people who are hoping to get a cheap house in those terms. Or if you do, then you cannot argue with those who previously criticised BTL's for greedily pricing FTB's out of being able to afford their own homes.

I guess we're all just lovely people aren't we WinterSunshine?

Don't bother responding. WinterSunshine is an obvious multi-account troll.

Bonus points for working out previous/alternate accounts.

wintersunshine

mewbie wrote: »

Oh come on. You can't keep describing people who are hoping to get a cheap house in those terms. Or if you do, then you cannot argue with those who previously criticised BTL's for greedily pricing FTB's out of being able to afford their own homes.

I guess we're all just lovely people aren't we WinterSunshine?

The amount of bile that has been poured on BTLers, mortgage holders or anyone with a debt by the posters on this board means that it's no holds barred as far as I'm concerned. AND no-one ever contradicted any of these posts and they were "THANKED" profusely so I make no apology. One by one you are revealing yourselvs for what you are.