Buy to let rents suffer a big drop

RomansProperties

stevetodd wrote: »

There are of course things you can do to increase the yield, like Romansproperties who subdivides, that however is much involved than simply buying somewhere and renting it out.

However there will be a point when prices fall low enough LL's will start to buy attracted by the higher yields created by falling prices.

We have been doing it now for about 3 nearly.
We are solely interested in properties which provide cash after the mortgage payments have been made.

This type of property used to be quite easy to value as it was valued at 10%.
Now valuers are looking to push returns for this type of property up to 12%.

In a recent auction in Leeds (www.eddisons.com) there was a few properties, normaly terrace houses pushing close to the 10% returns.

Landlords and Investors have got to start seriously thinking about this as previously these properties went for £70-£80k and would have had returns like 6% (not really worth the effort if you are borrowing at 5%)

chucky

brit1234 wrote: »

Just a little update on the rental market. :eek:

http://www.citywire.co.uk/personal/-/news/money-property-and-tax/content.aspx?ID=330562

with rate cuts it now means over £1,000 paid less in mortgage interest on the only property i have on a tracker - that's an extra 200% profit.

rental rates dropped max 8% for my properties.

longest time a property has been empty in the last 18 months has been 10 days.

so tell me which part of that is "Buy to let rents suffer a big drop".

i'm really confused why this is a bad thing for a BTLer

stevetodd

RomansProperties wrote: »

We have been doing it now for about 3 nearly.
We are solely interested in properties which provide cash after the mortgage payments have been made.

This type of property used to be quite easy to value as it was valued at 10%.
Now valuers are looking to push returns for this type of property up to 12%.

In a recent auction in Leeds (www.eddisons.com) there was a few properties, normaly terrace houses pushing close to the 10% returns.

Landlords and Investors have got to start seriously thinking about this as previously these properties went for £70-£80k and would have had returns like 6% (not really worth the effort if you are borrowing at 5%)

a 6% yield (although in this market I will hold out for higher) is fine because that is only the initial yield if (assuming normal times ie not in the wost recession for decades) then 10 years on assuming rental inflation of 3% means the yield would have increased to over 8%. Possibly I suspect that it may not be worth it for you as there is a huge student population in Leeds (I was a student there myself back in the 80's) and that may mean a few summer month voids. I personally have never had a void except self induced to refurbish, obviously voids reduce the headline yield.

RomansProperties

We dont deal with students as the voids and the hassle dont seem to make it worth the effort
My stratergy does not include rental inflation or house prices going up.
We are just working to keep all places full, everyone paying and the cash coming into the bank every month

If rents go up and property prices (in the distant future) go up then thats a bonus.

stevetodd

RomansProperties wrote: »

We dont deal with students as the voids and the hassle dont seem to make it worth the effort
My stratergy does not include rental inflation or house prices going up.
We are just working to keep all places full, everyone paying and the cash coming into the bank every month

If rents go up and property prices (in the distant future) go up then thats a bonus.

Yeah I certainly agree with not taking students on

samsuka

I have heard that the rental market has dropped, but just rented a 1-bed flat in North London for £250 a week, which is only slightly less than the £255 i got at the peak. They didn't even try and barter with me and flats are still getting the £250-£260 a week they were at the peak.

On the downside the flat that they are renting has dropped from £250k at the peak to under £200k, and apparently one went the other day for £165k, so even borrowing 100% of say 180k at 4% is only £600 a month, so in effect the renters are paying almost double to rent rather than buy.

Once the LTV drops there is going to be a large rise in demand surely as renters work out its cheaper to buy.

S

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samsuka wrote: »

Once the LTV drops there is going to be a large rise in demand surely as renters work out its cheaper to buy.

It's only cheaper to buy when you don't factor in the capital losses on such property, as you admit yourself, one has already lost 85k in a little over 12 months, so the 'renter' is still well up, and will continue to be 'well up' until the bottom, when he/she will flee and buy somewhere, leaving the LL with the rather expensive baby.

stonethrower

samsuka wrote: »

I have heard that the rental market has dropped, but just rented a 1-bed flat in North London for £250 a week, which is only slightly less than the £255 i got at the peak. They didn't even try and barter with me and flats are still getting the £250-£260 a week they were at the peak.

On the downside the flat that they are renting has dropped from £250k at the peak to under £200k, and apparently one went the other day for £165k, so even borrowing 100% of say 180k at 4% is only £600 a month, so in effect the renters are paying almost double to rent rather than buy.

Once the LTV drops there is going to be a large rise in demand surely as renters work out its cheaper to buy.

S

Could you please tell me what part of London you can get a flat for 180.000 and rent for 1000

socrates

samsuka wrote: »

I have heard that the rental market has dropped, but just rented a 1-bed flat in North London for £250 a week, which is only slightly less than the £255 i got at the peak. They didn't even try and barter with me and flats are still getting the £250-£260 a week they were at the peak.

On the downside the flat that they are renting has dropped from £250k at the peak to under £200k, and apparently one went the other day for £165k, so even borrowing 100% of say 180k at 4% is only £600 a month, so in effect the renters are paying almost double to rent rather than buy.

Once the LTV drops there is going to be a large rise in demand surely as renters work out its cheaper to buy.

S

You are forgetting that in order to get a 4% deal you need to put down a sizeable deposit and how long will rates stay at 4%.

If there are bargains around in North London believe me - there is a queue of cash buyers - just look at the auction websites.

Better still go to one and watch the seats empty when the north/east London properties are sold.

There will always be a market for renters/buyers and BTL LL's

Even banks sell their freeholds and lease back off the new owner.

samsuka

stonethrower wrote: »

Could you please tell me what part of London you can get a flat for 180.000 and rent for 1000

A development near Crouch End / Hornsey called New River Village. I think £180k is for some of the earlier flats on the ground floors without balcony, which would probably only get £230 odd, the better flats on the upper floors with balconys are still going for £250. (165k was for a reposession)

I thought the bottom had fallen out of the rental market as i put my flat on with Gumtree and Discount Lettings as usual but didn't get much response, but put it with a few agents and it went for the top price within 3 days.

As i said, its only when LTV's drop that they will get hoovered up, but the point is that prices and interest rates are getting to a level that buying a house now, is cheaper than renting, providing you can get that deposit. So as soon as the 10% deposit deals come back it is going to pick up quite quickly.