BTL dreams go up in smoke

Thrugelmir

michaels wrote: »

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.

Remember that your pension contributions have been grossed up for basic tax relief and if you are higher rate payer saved even more. So investing in shares through a pension scheme hasn't been so bad.

geoffky

stevetodd wrote: »

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?

steve. yes i could afford it but whether i could sleep at night with so much risk in one asset is another thing... .every time i go near the snakeskin salesmen in their burton suits this is what they suggest and i always get wound up about it..last time in sept last year one even said to me that now was a very good time to invest in the stock market.. i blew my top on that one...i was only near them because i was changing all my fixed bonds and unit trusts via my banks..

michaels

Thrugelmir wrote: »

Remember that your pension contributions have been grossed up for basic tax relief and if you are higher rate payer saved even more. So investing in shares through a pension scheme hasn't been so bad.

But of course the taxation is only deferred and the pension funds are committed to buying an annuity.

stevetodd

geoffky wrote: »

steve. yes i could afford it but whether i could sleep at night with so much risk in one asset is another thing... .every time i go near the snakeskin salesmen in their burton suits this is what they suggest and i always get wound up about it..last time in sept last year one even said to me that now was a very good time to invest in the stock market.. i blew my top on that one...i was only near them because i was changing all my fixed bonds and unit trusts via my banks..

One of my fixed rate bonds matures in March and I am probably going to re-invest but I first bought in 1991 so I have been involved for a long time. I would never recommend anyone to do anything other than buy one BTL and see if it is for you. It's not a hands off investment (or it shouldn't be), I don't use agents as their fees are not insignificant and the shrewder of tenants realise that they get a better deal direct from a landlord. So it is an investment that does require time and effort.

Obviously I don't share your 10 year view, my personal opinion is that prices will fall for another year or two then stagnate for 2-3 years and then start to recover

IveSeenTheLight

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..

I'll admit I tried BTL and have found that is is worth the effort.

geoffky wrote: »

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...

If house prices stagnate for 10 years, its not a problem. The BTL's do not require capital appreciation.
I've bought BTL on a long term investment plan.
At present my tenants are rapidly repaying my mortgage debt to approx £1500 per month above the interest charges and will pay off the mortgages inside 8 years.

So in 10 years time, even with no capital appreciation, I will have two properties paid for by my tenants

geoffky wrote: »

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...

If you find the right properties at the right price and can rent them out in a strong rental market area, then you could easily be achieving a return of 5-10% as opposed to the very low interest rates currently given by banks.

Even better if you don't buy outright for cash and the tenants pay that mortgage debt for you, building capital for you along the years

geoffky

The thing with me is that if i do not do anything i will still be able to have a comfortable life until i snuff it...so would the risk outweigh the gain as i will only be leaving the money?

lostinrates

geoffky wrote: »

The thing with me is that if i do not do anything i will still be able to have a comfortable life until i snuff it...so would the risk outweigh the gain as i will only be leaving the money?

Only you know. Whether or not you have children might also colour your opinion on investments.

Thrugelmir

michaels wrote: »

But of course the taxation is only deferred and the pension funds are committed to buying an annuity.

Though up to 25% can be taken as a lump sum tax free.

And rental income from a property is taxable and the capital gain on disposal is taxable as well.

My reply was initially made in response to capital losses incurred in falling markets. Not as advocating any one particular investment route.

Thrugelmir

IveSeenTheLight wrote: »

Even better if you don't buy outright for cash and the tenants pay that mortgage debt for you, building capital for you along the years

But that's the issue more recently. BTL investors have piled into the market with no capital only mortgaged equity, and only have interest only mortgages. Many less well financially educated people have geared up on the basis of ever increasing property values. Capital appreciation was the name of the game.

Take a look at Northern Rocks current mortgage offering to the BTL market.

http://www.northernrock.co.uk/mortgages/current-rates/buy-to-let/

Hard to see people borrowing at these rates making make sufficent profit in the medium term to offset the downside risk.

IveSeenTheLight

Thrugelmir wrote: »

But that's the issue more recently. BTL investors have piled into the market with no capital only mortgaged equity, and only have interest only mortgages. Many less well financially educated people have geared up on the basis of ever increasing property values. Capital appreciation was the name of the game.

Take a look at Northern Rocks current mortgage offering to the BTL market.

http://www.northernrock.co.uk/mortgages/current-rates/buy-to-let/

Hard to see people borrowing at these rates making make sufficent profit in the medium term to offset the downside risk.

I can't talk about other investors, however I am a fairly recent BTL investor (Jan 2007) who went with a repayment BTL mortgage.
Capital appreciation is not the name of my game although will be a bonus when I do decide to sell the investment.
This is why I and I'm sure most other BTL's would not be concerned with a short term drop in house prices.

In the long term they will increase and beyond the 2007 peak.
In the meantime, every month my tenants get closer to paying off my mortgages for me.