BTLs, are you planning to sell?

Thrugelmir

gallygirl wrote: »

You are not supposed to work out yield on that. You are supposed to work it out on current value. So, 2 years ago your 250k flat yielded say 5%. Now it's 'worth' 175k, on same rent, so yield is over 7%. It's a better investment . There's lies, damn lies & BTL analysis.

I sold 2 BTL's in Oct 06 & Feb 07. Seriously thinking of going back in with a yield in excess of 4% but which would clear a repayment mortgage with £80 pcm to spare, or IO with £130 spare (we're talking bottom end, 3 bed (with conservatory ), ok area, asking price 59k).

I think I may see a green shoot (better get the slug pellets out pronto )

So do you declare the rental incomre to the tax authorities? As 4 % gross doesn't seem very high.

julieq

You're splitting hairs Thrugelmir, and (incidentally) you're also talking rubbish about blackjack - if you "know your odds", you know that you can't win at blackjack in a fair game because of the house edge.

No casino would let a professional player play AT ALL if they thought he was card counting, still less advance a credit line or let him play on his own, he would be shown the door with extreme prejudice because he would be changing a 2% or so edge in favour of the casino into a similar or greater margin in favour of himself; rather like lending a bank robber money to buy a facemask and a sawn off shotgun and giving him a fasttrack pass in the queue for the teller. So your story about watching a professional blackjack player is a fabrication from start to finish.

I'm not a BTL investor.

You can get into a lot of cause and effect arguments on interest rates, but you're putting words into my mouth. I never said that interest rates track inflation, I said that the availability of cheap money tends to drive inflation up, which therefore tends to drive BOE rates up as a control mechanism.

[EDIT on rereading my original post: the comment on the relationship between interest rates and currency values wasn't really developed in my arguments, but that was hooking back into a discussion by DD on 15% interest rates, which was a peak rate for a very short period of time at a time of high and rising inflation when sterling was being shoehorned into the ERM. As I deleted the original comments I didn't develop the argument and it wasn't central to what I was saying anyway].

Interest rates are adjusted to control inflation up or down: as we near deflation BOE interest rates go down. What causes inflation is excessive demand in the economy (i.e. spending), what causes deflation is insufficient demand (i.e. lack of spending) therefore reduction in interest rates is explicitly to stimulate spending. Unless I've missed something?

gallygirl

Thrugelmir wrote: »

So do you declare the rental incomre to the tax authorities? As 4 % gross doesn't seem very high.

Yes I do declare it. 4% isn't much but better than is on offer elsewhere. If it ticks along nicely in the background it would be fine, wouldn't be happy if I was on call every ten minutes to !!!!less tenants who couldn't work out how to tighten a loose sink outlet . If I feel the market has bottomed I may well go for it. On top of small yield I'd be counting on some capital growth at some stage long term.

There is a 1 bed flat for sale for 35k, dg, ch & garden if anyone interested.......

mewbie_2

gallygirl wrote: »

There is a 1 bed flat for sale for 35k, dg, ch & garden if anyone interested.......

What do you think it might fetch at auction?

ds1980

Speak to any croupier and they all either don't play the house or will only play baccarat. Definately not BlackJack!

Julieq's analogy is a good one however all "professional" gamblers have gone bust at one time or another it's as simple as that.

The most famous would probably be Harry Findlay but there are dozens of them. I probably know at least a dozen but they always come back for more. Ultimately they are just the same as people who invest in shares, btl, wine, art, antiques....whatever's your poison. As said they make calculated risks but it is still down to luck whether they win or lose. There are certainly more skint "professional" gamblers than there are ones that make a living.

BTL is just the same. If you do your sums and read the form, you may get a winner, and it may stay the trip but you don't know whether it may fall at the first, get no luck in running or have an off day, all you can do is guess.

There are some people that are better at guessing things than others.

gallygirl

mewbie wrote: »

What do you think it might fetch at auction?

Dk, would need a big bargepole before I'd go near it.

mewbie_2

ds1980 wrote: »

BTL is just the same.

One interesting difference with BTL investing / gambling is the gearing. Your original money is a percentage of the total invested. Deposit 20k, borrow 80k for example. This enables potentially greater profits when times are good.

But there can be a down side to geared borrowing...

chucknorris

macaque wrote: »

The evidence says you are wrong. The market is awash with BTLs trapped with property portfolios in a market with falling rents and falling capital values. Anyone with even the most rudimentary analytical skills could have seen this coming.

Having read these forums for several years, it has been evident that the professional landlords have already severely pruned their portfolios and are waiting in the wings with cash piles.

As I said headline stories like the one you drew attention to and which I had just watched moments earlier on the BBC news attract a lot of attention, whereas someone quietly making reasonable returns is hardly going to appear on the BBC news or featured on either the NLA's website.

As for seeing this downturn coming, yes of course BUT I don't think it would have been worth me selling my properies, for a start off you cannot assume you would be lucky enough to sell right at the top of the market and to start selling in a falling market is bad, so that means selling before the top of the market and also paying 40% CGT tax (now 18%), losing my tracker mortgages which are only 0.5% above base rate (can't see these being offered again for a very long time), paying estate agent's fees (2%), foregoing short term super normal profits (my rents are stable yet mortgage rates down 83%) and suffering low interest rates on the capital released, then paying 3% stamp duty buying back into the market. Not forgetting that rental voids are also likely whilst selling. If you add that up:

18% CGT (only pay tax on the profit not the value, approx18% not 22% saved)
2% estate agents fees
5% high NET rental yields versus low interest rates and voids whilst selling
3% stamp duty
10% for getting out before the top of the market
1% losing great mortgage deals
1% for time and effort both selling and buying back into the market

40% total! I don't buy into your 70% club ( http://forums.moneysavingexpert.com/showthread.html?t=1284853 )
I now think at worst AVERAGE (NOT NEW BUILD FLATS) prices will fall no further than 35% from the top of the market.

I will however be investing further, it's just that I didn't sell any.

The above of course does not apply if you are nearing a time you want to sell up and retire as you miss the window and have to stay in the market for at least another 10-12 years from 2007 (probably longer).

julieq

ds1980 wrote: »

Speak to any croupier and they all either don't play the house or will only play baccarat. Definately not BlackJack!

Julieq's analogy is a good one however all "professional" gamblers have gone bust at one time or another it's as simple as that.

The most famous would probably be Harry Findlay but there are dozens of them. I probably know at least a dozen but they always come back for more. Ultimately they are just the same as people who invest in shares, btl, wine, art, antiques....whatever's your poison. As said they make calculated risks but it is still down to luck whether they win or lose. There are certainly more skint "professional" gamblers than there are ones that make a living.

BTL is just the same. If you do your sums and read the form, you may get a winner, and it may stay the trip but you don't know whether it may fall at the first, get no luck in running or have an off day, all you can do is guess.

There are some people that are better at guessing things than others.

Professional gambling is nothing at all to do with guessing or trying to choose winning bets, and it certainly isn't about luck. It's about looking for a potential return that's bigger than the probability of something happening would suggest. It's a pure numbers game and it works on marginal profits.

William Hill is a professional gambler. Ladbrokes is a professional gambler. Camelot is a professional gambler. Dave Nevison - an ex city trader who turned to horse racing - is a professional gambler. They don't go bust. With proper risk management - spreading risk and managing levels of commitment according to risk - it's perfectly possible to build a business or make a very good living from gambling without going bust.

This is in a nutshell what the problem is with amateur investing in this country. We've been brought up by share !!!!!! in the 1990s and property !!!!!! more recently to believe it's possible without much effort to pick only winning bets in very narrow sectors, and we're shown shiny smiling people winning these bets endlessly so we think one or two winning bets are the be all and end all. No-one really understands the process, they just want some of the action.

You can see here how people wrap their entire egos around what are in essence ludicrously precise predictions of what will happen which are really just based in gut feel.

At various points in the cycle, when shares are ramping or when house prices are shooting up, or indeed when an obvious bubble is forming and the widows and orphans phase is starting, it's very difficult to lose these bets, so people get a sense of infallibility. When it tips they end up losing what looked like very safe bets.

Professionals don't look for "dead certs". They look for value. They don't care if they lose bets, they know that providing they operate the fundamentals properly they will make money overall.

ds1980

All the people that you state have one thing in common. They all have shed loads of money. The one thing that will always be true is money makes money. People with it (cash money) will generally keep it. Most people don't have this sort of capital. The people that do well out of buy to let are those that didn't MEW all their equity. The people that did are now the ones in the [EMAIL="S@!t"]S@!t[/EMAIL].

Put his addage into shares and most people at the minute are looking at companies that have good capital reserves and little gearing. It's all the same thing.