How many bulls are buying?

Thrugelmir

chucky wrote: »

out of interest what do you call cheap?

In relation to recent property yields. As the majority of amateur BTL investors are leveraged up , quite possibly on i/o mortgages. I keep hearing the comment " as long as the rent covers the mortgage". So there must a squeeze on profitability at some point. As only interest is offsetable against rental income for tax purposes. Capital repayments will have to be made from taxed income.

Thrugelmir

bluey890 wrote: »

Commercial property is a very different 'kettle of fish'.

Apologies. Meant to say Commercial loan for property purchase. In good ol' days rates these were normally 3.5% over base compared to 2% for residential mortgage. Which was why BTL was not was it is currently.

chucky

Thrugelmir wrote: »

In relation to recent property yields. As the majority of amateur BTL investors are leveraged up , quite possibly on i/o mortgages. I keep hearing the comment " as long as the rent covers the mortgage". So there must a squeeze on profitability at some point. As only interest is offsetable against rental income for tax purposes. Capital repayments will have to be made from taxed income.

you're right - there is a balance there where the LTV has to be at a level where you are not making a big taxable profit from rent - your mortgage interest should be as much of this as possible.

i understand what you're saying that you should also be able to pay back capital at some point - however the plan for most is to sell at some point in the future not making a capital loss and repaying the loan. i don't think that this is unrealistic.

bluey890

Thrugelmir wrote: »

If you know where this cheap money can borrowed let us know. As the number of property loans has reduced dramatically in recent months.

If taking out mortgages on current terms, you're right it is difficult in the current climate. The point I was making was those with existing tracker deals in place (that follow base rate rather than libor) are doing o.k.

Thrugelmir

chucky wrote: »

you're right - there is a balance there where the LTV has to be at a level where you are not making a big taxable profit from rent - your mortgage interest should be as much of this as possible.

i understand what you're saying that you should also be able to pay back capital at some point - however the plan for most is to sell at some point in the future not making a capital loss and repaying the loan. i don't think that this is unrealistic.

Capital growth was the engine of BTL during 2003/07. With falling property values refinancing BTL mortgages will become progressively difficult over the next few years. Compounding the problem. We need a shake out of the "amateur" investors who clearly have no understanding of what they are doing. As sitting on a capital loss while interest rates rise so possibly making a trading loss doesn't add up.

Once property prices adjust to a more realistic level. Which won't happen until we know the point at which BOE base rates will settle at. I believe that we'll see property rental yields return to a more commercial 10% - 15% on base cost.

Thrugelmir

bluey890 wrote: »

If taking out mortgages on current terms, you're right it is difficult in the current climate. The point I was making was those with existing tracker deals in place (that follow base rate rather than libor) are doing o.k.

Whilst what you say is correct. Its a fluid situation that day by day is unwinding as exiting deals end. The % arrears on BTL mortgages are higher than normal ones. Which suggests that there is a problem evolving .
This could be a spark to cause the next lurch downwards in property prices.

IveSeenTheLight

nearlynew wrote: »

I would suggest that the reasons the BTL brigade are not buying is because they cannot afford to.

Without HPI and the ability to MEW deposits they do not actually have any "money".

I can afford to, I have enough of a deposit for another property, but don't want to extend my risk at the moment.
I even said I would look closer at this at the end of the year.

nearlynew wrote: »

I remember about a year or so back , when they finally acknowledged the possibility of a house price crash, they were saying it would be an opportunity to buy more.

You joined in May 2009
You are correct though, there are oppertunities out there

chucky

Thrugelmir wrote: »

Capital growth was the engine of BTL during 2003/07. With falling property values refinancing BTL mortgages will become progressively difficult over the next few years. Compounding the problem. We need a shake out of the "amateur" investors who clearly have no understanding of what they are doing. As sitting on a capital loss while interest rates rise so possibly making a trading loss doesn't add up.

Once property prices adjust to a more realistic level. Which won't happen until we know the point at which BOE base rates will settle at. I believe that we'll see property rental yields return to a more commercial 10% - 15% on base cost.

it's just like buying a high yield equity - you're not expecting to get a massive capital appreciation but you will get a good dividend.

why would you sell until you are receiving the nice dividend?
also, if you buy well - yield is higher in 2009 than it would be in 2007 due to property prices. buy well and your yield is higher.

Really2

Why do the people who predict 70% falls call the people who say 20-30% bulls?

I only want one house!

I would love some proof that i have acualy said house prices are going to go up in the short to medium term.

Thrugelmir

chucky wrote: »

it's just like buying a high yield equity - you're not expecting to get a massive capital appreciation but you will get a good dividend.

why would you sell until you are receiving the nice dividend?
also, if you buy well - yield is higher in 2009 than it would be in 2007 due to property prices. buy well and your yield is higher.

Investing in shares and a BTL residential property ( or a few) is not comparable. For a number of reasons.

Yes with falling prices gross rental yields will increase on one measurement .Also where have you taken account of lost capital?