Misery of the BTLers and property developers...

Kenny4315

Graham_Devon wrote: »

Could you explain further how this is good?

If you insist Devon. :rolleyes:

Say a BTLer has 4 properties valued at the peak at £200k a piece. That's £800k, the market falls 35% each are now £130k, or a combined total of £520k. So in paper dollar terms a loss of £280k.

However, given the market is down the serious BTLer with 4 strong BTL's now wishes to buy another 4 properties that are a forced sale from a BTL who is in trouble, or a person who is trying to keep there house buy temporarily renting it out.

These were £200k but are now £130k, buys these for £520k. So at that point he has saved the £280k from his paper dollar loss which he would have had to spend if he'd bought at peak. This is a real cash outlay, and is not a paper dollar loss. He now 4 properties plus an additional 4 with a combined value of £1,040,000.

At the same time he has eliminated 4 potential competitors and thus in the long term will be in better control of the rental market in the area, as he is not competing with people who in desperation are keeping rents artificially low. Let's say this occurs in a large scale, ie bigger BTL taking over properties from novices, result smaller numbers of BTLers cotnrolling the market rental.

Now he waits till say 2015 to release the cash once the market has gone past the 2007 point, and jobs sorted.

Dan:_4

mp2 wrote: »

your argument therefore is "but things are different this time". it isnt.

I have no idea how you came to the conclusion that my argument is "but things are different this time" but I ensure you, it isn't

mp2 wrote: »

an individual can make ends meet with an expensive mortgage, a million individuals cant. individual cases are irrelevant, when the market it this big you need to take the market as a whole and look at it as a statistic.

Individual cases are not irrelevant, it is sensible lending.

mp2 wrote: »

e.g at 3.5 times earnings, the mortagage payment makes up about 35% of take home pay
at 4.5 times earnings it make up 45% of take home pay. (both based on around 5% interest rate)

the question isnt can people afford to pay 45% of take home pay on their mortgage, but should be what percentage of people will default at 3.5 times earnings, what percentage of people will default at 4.5 times earnings.

also, you dont get to decide how much you can afford to borrow. the banks do. that rate is 3.5 times earnings. risky borrowing is gone forever now.

Using your examples - 3.5 x earnings and the mortgage payment is about 35% take home pay, but maybe there are other outgoings, personal loans, credit cards, CSA payments, car payments. What if the total commitments end up around the 60% - 70% mark?

And Someone who borrows 4.5 x earnings and uses around 45% of take home pay and has no other outgoings. What is less risky?

mp2 wrote: »

i would seriously think hard about where you think people will be getting the money from to buy houses.

Banks are still businesses, they still need to make a profit and as a tax payer it's in your interest they do so. There is plenty of money to be lent to those that meet the criteria.

Graham_Devon

Kenny4315 wrote: »

If you insist Devon. :rolleyes:

Say a BTLer has 4 properties valued at the peak at £200k a piece. That's £800k, the market falls 35% each are now £130k, or a combined total of £520k. So in paper dollar terms a loss of £280k.

However, given the market is down the serious BTLer with 4 strong BTL's now wishes to buy another 4 properties that are a forced sale from a BTL who is in trouble, or a person who is trying to keep there house buy temporarily renting it out.

These were £200k but are now £130k, buys these for £520k. So at that point he has saved the £280k from his paper dollar loss which he would have had to spend if he'd bought at peak. This is a real cash outlay, and is not a paper dollar loss. He now 4 properties plus an additional 4 with a combined value of £1,040,000.

At the same time he has eliminated 4 potential competitors and thus in the long term will be in better control of the rental market in the area, as he is not competing with people who in desperation are keeping rents artificially low. Let's say this occurs in a large scale, ie bigger BTL taking over properties from novices, result smaller numbers of BTLers cotnrolling the market rental.

Now he waits till say 2015 to release the cash once the market has gone past the 2007 point, and jobs sorted.

:rotfl::rotfl::rotfl::rotfl::rotfl:

Is all I have to say to that.

It should have started with "one day" and finished with "and they all lived happily ever after".

How can you pretend to be such a shrewd business person when you don't even consider the fact that your assets are deprciating, so is RPI, therefore, so will your rental yield.

This is completely ignored time and time again.

You will be getting MUCH less rent than you are now in 2 years time, and guess what will also be happening in 2 years time....yer, interest rates.

It's not such a fairy tale anymore is it! Come on, get real at least!

You do realise you just described the Wilsons cunning plan?! Would you like ot take a look at the Wilsons?!

Conrad

The fundamenmtal question to ask here is;

What percentage of the population is becomming worse off compared to better off?

My answer would be something like 20% are becomming worse off through redundancy and debt implosions, but a lot more are becomming better off through hugely reducing mortgage payments - and that figure grows as more and more of us come off fixed rates.

I don't include property capital values because there is a self adjustment effect in that those moving home lose on thesale and gain on the purchase.

Conrad

Graham_Devon wrote: »

:rotfl::rotfl::rotfl::rotfl::rotfl:

Is all I have to say to that.

It should have started with "one day" and finished with "and they all lived happily ever after".

How can you pretend to be such a shrewd business person when you don't even consider the fact that your assets are deprciating, so is RPI, therefore, so will your rental yield.

This is completely ignored time and time again.

I think Kenny had a fair point there.

Also, at some point there will be a wave of capital growth. Those without the assets will never benefit. Those with, need merely bide thier time to then benefit.

If you are pessimistic by nature, which I am btw, we tend to abstain from market participation during the best years, which by thier very nature will be the most gloomy - the worst years.

Kenny4315

Graham_Devon wrote: »

:rotfl::rotfl::rotfl::rotfl:

Is all I have to say to that......

Devon open your cloth ears :money: ....... my mortgage is currently £520pm my total expenses are £600pm, my rental income is £1800pm, net profit £1200pm, and due to the fact that they have been there for 3 years they are getting a discount, in the open market I'd get £2000+ pm. My house is worth, around £200k more than I bought it for. If your not totally insane then I'll be getting more rent once this correction period occurs, as the BTL market shrinks, and those left command a stronger market position .... while renters increase because they need to save more, and house building declines as margins shrink.

The prime location of my house (3 flats) and the type of house it is means :

1. New builds ain't in the same quality ball park, as an 1887 townhouse, with the cornicing, fireplaces, ceiling roses, etc all intact.
2. My location is bang in the centre, and extremely good for renting and selling.
3. Both of the above command a price premium.
4. When I sell I'm going to get further benefit by re-converting it back to a single house, which again commands further premium in my location.

I don't work with houses on a 2 year plan or 5 year plan, the entrance and exit costs are too high. I'll be waiting till the next crest to off-load, or maybe the one after that. So apart from maybe not allowing me to release cash it makes no difference as my exit point is ages away. In fact a falling market means that I need less deposit to buy.

Graham_Devon

Kenny4315 wrote: »

Devon open your cloth ears :money: ....... my mortgage is currently £520pm my total expenses are £600pm, my rental income is £1800pm, net profit £1200pm, and due to the fact that they have been there for 3 years they are getting a discount, in the open market I'd get £2000+ pm. My house is worth, around £200k more than I bought it for. If your not totally insane then I'll be getting more rent once this correction period occurs, as the BTL market shrinks, and those left command a stronger market position .... while renters increase because they need to save more, and house building declines as margins shrink.

Open yours!

You say it's CURRENTLY £520pm, this is at the lowest interest rates ever in this country.

What will they be at just 5% BOE base rate?

What will they be at 8%?

Will you still be making £1200pm proft? I VERY highly doubt it, as your rent will have to go down, otherwise your tennants will simply move to a cheaper rental (why wouldnt they?).

No one is open to the question of higher rates. Everyone simply states current, at the lowest rates we have ever seen.

Before the crash, this was fine, you could break even on the rent, as the asset price was the "profit machine".

Now, it's all turned around, and the profit machine is the rent, and thats only because of the low rates.

Where is the profit machine when your costs are the same as the rent (probably more give it 2 years) and your asset has plummeted in price?

Please do me, and anyone else a favour, and answer the questions instead of reverting back to the low interest rates. You say this is all long term, infact all the BTL making their point does. BUT, not one of you will answer any questions I have posed about the interest rates going up.

Kenny4315

Graham_Devon wrote: »

Open yours!

You say it's CURRENTLY £520pm, this is at the lowest interest rates ever in this country.

What will they be at just 5% BOE base rate?

What will they be at 8%?

I can guarantee that interest rates won't be at 8% in the short to medium term, say in the next 5 years, so that's a pointless debate, given my current circumstances (if anything they remain historically low for quite a time given the state of the country), I can get a fixed at below 5% for 5 years. I don't see my rents going down, as it is now virtually essential for anyone entering the BTL market (with a mortgage) to already have a proven BTL portfolio. Result those buying BTL's will already have them. Why would these guys undermine their own rents once the 100% plus brigade are dead and buried, it isn't going to happen. Competition will go down, demand will go up, rents will go up or at worst remain at a similar level.

Graham_Devon

Kenny4315 wrote: »

I can guarantee that interest rates won't be at 8% in the short to medium term, say in the next 5 years, so that's a pointless debate, given my current circumstances (if anything they remain historically low for quite a time given the state of the country), I can get a fixed a below 5% for 5 years. I don't see my rents going down, as it is now virtually essential for anyone entering the BTL market (with a mortgage) to already have a proven BTL portfolio. Result those buying BTL's will already have them. Why would these guys undermine their own rents once the 100% plus brigade are dead and buried, it isn't going to happen. Competition will go down, demand will go up, rents will go up or at worst remain at a similar level.

You haven't answered the question on a 5% interest rate again. And I'll hold you to your 8% interest rate guarantee

Are you kidding me about the rents? You seriously think that in a falling market, you can continue to charge the same rent as now, and you will have no competition?! Seriously?! So in an upwards market, you can continue to charge higher and higher rents, but in a falling market you can just keep the rents static at 2007 levels?

Pretty optimistic, on the verge of delusional I would think.

Even that FT article said this is already happening right now with more people leaving high rents to strike a better deal, I linked to it earlier. Another property article in a property jounral today has said average rents have fallen £225 from £950 to £725 a month.

Yet you think you can sidestep what is happening elsewhere?

You say demand will go up. I can pretty much tell you categorically this isn't happening even now, why would it when house prices have dropped another 20%?

Kenny4315

When are you predicting a 5% Base Rate ..... I can't see this happening in the next 2 years ??

Are these the same FT experts who predicted a smooth decline or the banking crisis. I predicted a significant correction a few years ago, ie 2006. Rents may take a short hit while the repo brigade are forced out but once this is done it'll be business as usual. It's simply demand versuses supply. BTL's down demand increases ... rents movement up.

Incidentally rents never kept pace with the HPI either .... or they'd be double what they currently are.

For example, the house I rented in 1994 was proably worth about £40k now around £120k, the guy got £420pm from the 3 of us, these are now renting at around £550, not £1260.