FSA Warns of Dangers of BTL

Pobby

chucky wrote: »

i'd add that their critical time is when they need to re-mortgage.
many BTL mortgage products are no longer freely available and if they are they have big fees - anything between 1.5% and 2.5% of the loan.
that's not as attractive as it was beforehand.

so it's not that they're forced to sell but could be in a position that it doesn't make sense to continue letting their previous flat for example. unless they can afford to hold on and run it with a lower profit or a small loss.

Just to mention that a small loss can be also a large loss. A friend of mine in Ireland appears to cheerfully subsidise his tenant to the tune of 700 euro a month. I saw the madness of prices in Dublin when I was there last 3 years ago. Think he bought in 2007. Imo, property in the Dublin region even out paced some of the better parts of London.

chucky

Pobby wrote: »

Just to mention that a small loss can be also a large loss. A friend of mine in Ireland appears to cheerfully subsidise his tenant to the tune of 700 euro a month. I saw the madness of prices in Dublin when I was there last 3 years ago. Think he bought in 2007. Imo, property in the Dublin region even out paced some of the better parts of London.

that's a decent loss!

i carry a small loss on one of my BTL's - about £50 a month.
i would not be comfortable with 800 euro

Pobby

chucky wrote: »

that's a decent loss!

i carry a small loss on one of my BTL's - about £50 a month.
i would not be comfortable with 800 euro

Talking to him recently he doesn`t seem bothered. Mind you, he is one of the most up beat fellows I know.

chucky

Pobby wrote: »

Talking to him recently he doesn`t seem bothered. Mind you, he is one of the most up beat fellows I know.

it all depends on how your business model works - many people do not repay capital to their loans reducing the LTV to avoid making a profit. these funds have the added benefit of being used for contingncy or other future investments.

to me it's pretty simple if you have a sound business model it's all good.
if you've gone into BTL without this - this is where your problems will arise.

IveSeenTheLight

fatpig wrote: »

Buy to Letters = Greedy boogers borrowing other people's money to gamble with. Despicable sorts.

Do you own property or rent?

IveSeenTheLight

chucky wrote: »

that's a decent loss!

i carry a small loss on one of my BTL's - about £50 a month.
i would not be comfortable with 800 euro

Is your loss on an interest only mortgage or a capital and repayment?

Even at only £50, I would be concerned making a loss on an Interest only mortgage product, however if it is capital and repayment, you are probably still okay if the tenants are paying off more than the £50 in capital repayments.

chucky

IveSeenTheLight wrote: »

Is your loss on an interest only mortgage or a capital and repayment?

Even at only £50, I would be concerned making a loss on an Interest only mortgage product, however if it is capital and repayment, you are probably still okay if the tenants are paying off more than the £50 in capital repayments.

loss is on interest only. pushed up the LTV so as to make the loss using a remortgage to release equity from HPI for that property. there is capital there to repay from the equity release if ever needed but want to keep it 'free' in the event a good investment property appears.

Wookster

IveSeenTheLight wrote: »

Your assuming they want to sell.
As prices drop, rental yields are increasing.

Rentals are decreasing as well.

It is not a given that yields are increasing by any means.

IveSeenTheLight

Wookster wrote: »

Rentals are decreasing as well.

It is not a given that yields are increasing by any means.

Not in my VI area.
Rentals prices are up.

As for yield, if the house value decreases and rental prices remain the same or increase, then the yield goes up

Rental Yield = (monthly rental x 12) / Value x 100%

e.g. (800 x 12) / £160k x 100% = 6% Rental Yield
if the price goes down £10k then
(800 x 12) / £150k x 100% = 6.4% Rental Yield

MJS996

My last BTL was purchased in 2002, since then I have consolidated and worked to reduce my payments as best I can. My game plan has always been for the long term. Most of my mortgages are on term deals which I'm quite happy with

Falling rents is my biggest concern. I have a worst case scenario which really would be bad news for me which includes losing my job and having empty properties. Other than that, provided I stay in work, I will ride it out and see no reason to try to sell in this market.