BTL dreams go up in smoke

michaels

I have a proper job. My pension capital invested in shares and stuff has lost a lot more in value than the average property despite not being geared with a mortgage and the yields are also much worse and likely to fall much faster than rents given current corporate profitability - and I wouldn't say long term capital growth prospects are any better either. Wish I didn't have a proper job.

But lets not let the facts get in the way of a popular crusade.

macaque wrote: »

To all those idiots who thought they could have a free lunch by borrowing upto the eyeballs; my advice is to now go and get a proper job.


http://www.guardian.co.uk/business/2009/feb/25/rents-fall-amid-glut-in-lettings-market

Thrugelmir

RomansProperties wrote: »

I am not sugguesting buying property at these returns.
I think for it to work and provide an income you need about 10% returns.
I would forget capital appreciation thats a bonus

Sorry if you misread my post. I merely looked to see what was happening in my local area. I would be the first to agree that property prices are very diverse area to area.

geoffky

Is there one person out there who will admit that they tried btl and found it just not worth the time and effort for the small rewards.. what happens if as i believe will happen that house prices stagnate for at least a decade and there is no real return but just keeping your head above water... i could go out and buy 15 btl tomorrow but i just can not see where the return is going to come from and the risks too great even if i paid for all 15 cash.....educate me and tell me what i could expect from these 15 btl if i did it...

stevetodd

geoffky wrote: »

Is there one person out there who will admit that they tried btl and found it just not worth the time and effort for the small rewards.. what happens if as i believe will happen that house prices stagnate for at least a decade and there is no real return but just keeping your head above water... i could go out and buy 15 btl tomorrow but i just can not see where the return is going to come from and the risks too great even if i paid for all 15 cash.....educate me and tell me what i could expect from these 15 btl if i did it...

Well first of all have you really the cash to buy 15 properties to get reasonable mortage deals? I am expecting to deposit around 35%. So that means you will need a deposit equivelant to 5.25 times the average vlaue of the properties you are talking about. In the areas I am looking that would be over £1.3M

stephen163

IveSeenTheLight wrote: »

If a property was bought for £50k and increased to £200k and is now at £150k, then they have not lost the £50k.
Sure, they could have made more is sold atthe peak but they have not lost that £50k

We were talking about the situation where you buy for £200k and it depreciates to £150k. You said if this happens, yield increases. I said even if yield increases, it is meaningless because nobody would sell at a loss unless they were desparate.
You got around the problem here by pretending the buyer bought at £50k, not £200k

Seriously though, it is the purchase price that should be used to calculate yield simply because, if current price is used, the yield would tend to infinity as house prices go to zero, and to zero as house prices increase to infinity. So the concept of yield is only valid as a snapshot to make the initial investment really. After that point, the strength of your BTL is dependent on your cashflow status and the house price, combined.

In other words, a yield based on current price is only useful to a prospective buyer and if it becomes more desirable because of house price falls, the seller is unlikely to sell a house at a capital loss, the said way of calculating yield is useless really. Maybe you can explain further your reasoning for using this variant of yield.

mr.broderick

geoffky wrote: »

Is there one person out there who will admit that they tried btl and found it just not worth the time and effort for the small rewards.. what happens if as i believe will happen that house prices stagnate for at least a decade and there is no real return but just keeping your head above water... i could go out and buy 15 btl tomorrow but i just can not see where the return is going to come from and the risks too great even if i paid for all 15 cash.....educate me and tell me what i could expect from these 15 btl if i did it...

Dreaming, who is going to fund them?

geoffky

mr.broderick wrote: »

Dreaming, who is going to fund them?

erm how about me? or put 70% deposits?

mrs.b the btl near here are going on ave for 70k

mr.broderick

geoffky wrote: »

erm how about me?

mrs.b the btl near here are going on ave for 70k

I thanked this post to get you to 2000 thanks geoff even though you don't deserve any of them

stevetodd

geoffky wrote: »

erm how about me? or put 70% deposits?

mrs.b the btl near here are going on ave for 70k

Gosh 70k thats cheap! But that still means you need over £800k with 70% deposits, legal fees, other fees and expenses. Have you thought this out correctly?

Thrugelmir

geoffky wrote: »

Is there one person out there who will admit that they tried btl and found it just not worth the time and effort for the small rewards.. what happens if as i believe will happen that house prices stagnate for at least a decade and there is no real return but just keeping your head above water... i could go out and buy 15 btl tomorrow but i just can not see where the return is going to come from and the risks too great even if i paid for all 15 cash.....educate me and tell me what i could expect from these 15 btl if i did it...

As Stevetodd has pointed out you would require an enormous amount of capital available. Investing at this level and with cash is a totally different ball game to amateur BTL investors. Many of whom have interest only mortgages and the deposits they used to fund the purchase was obtained by remortgaging and releasing equity from another property.

Property investment is no different to any other. In that should know what you are doing in context of the risks involved. Some people are lucky, but the majority of successful ones find the right formula for them and stick to it. Unfortunately too many novices have got sucked in and will get their fingers burnt as the market unwinds.