Bears, Buy to Lets landlords and House Prices.

mbga9pgf

Yeah, if you ignore your losses from capital depreciation. And until rates go back up, when you will have higher mortgage costs, a labour market on its !!!!, as well as capital depreciation. So hardly safe at at all bearing in mind a (typical) 6% yeild. Much better to earn 3%, wait for the crash to finish then vulture in with a 40% deposit.

No asset inflation without either
1 - high wage inflation (not a chance)
2 - return to reckless lending (even less of a chance).

Lots of risk on the downside though. How can government inflate when money velocity is through the floor?

Graham_Devon

bluey890 wrote: »

If the Bear's posts are true, why aren't the forums very own BTL landlords stressed and desperately selling their housing portfolios?

Sell now and they lose to much?

Hold on and hope someone rents, and they don't lose, only on paper? It's all about keeping a tennant in.

BTL's are selling up, or being reposessed though, a 3rd of the last reposession figures were made up of BTL investors.

Just you wouldn't get those people on here, and if you did, they wouldnt tell the truth. Who wants to come onto a forum and say they have failed?

julieq

No, that's complete and utter rubbish. It seems to be my role in life to explain this every two weeks, but here goes again.

It's hugely unlikely that capital values will depreciate for ever, in fact as things are they appear to be stagnating but even that doesn't need to be true to make a profit.

So the only question is at what point capital values get back to the same as they are NOW. If you're getting 7% of the paper value of the asset back in rental, and you think that prices will get back to where they are today in 7 years, then you have something that looks a lot like a 7 year 7% bond. I'd take one of those if it was offered by a bank, I'd certainly rather have one of those than dabble in the stock markets.

The one way that you make capital values actually matter is to take the loss. Any BTL investor who doesn't actually have to sell would need his or her bumps felt if they sold now, they might as well bank the profit from rental, have their mortgage paid for them, and wait for the inevitable upturn.

BTL is a decent long term play today (which is the only time you can make a forward investment decision on it, even if you bought at the top of the market). It's arguably the best investment around just at the moment if you discount a catastrophic slide in the market (which in itself is made more unlikely by the fact that BTL is a decent investment, values will tend to level off at a particular yield point).

Graham_Devon

julieq wrote: »

No, that's complete and utter rubbish. It seems to be my role in life to explain this every two weeks, but here goes again.

It's hugely unlikely that capital values will depreciate for ever, in fact as things are they appear to be stagnating but even that doesn't need to be true to make a profit.

So the only question is at what point capital values get back to the same as they are NOW. If you're getting 7% of the paper value of the asset back in rental, and you think that prices will get back to where they are today in 7 years, then you have something that looks a lot like a 7 year 7% bond. I'd take one of those if it was offered by a bank, I'd certainly rather have one of those than dabble in the stock markets.

The one way that you make capital values actually matter is to take the loss. Any BTL investor who doesn't actually have to sell would need his or her bumps felt if they sold now, they might as well bank the profit from rental, have their mortgage paid for them, and wait for the inevitable upturn.

BTL is a decent long term play today (which is the only time you can make a forward investment decision on it, even if you bought at the top of the market). It's arguably the best investment around just at the moment if you discount a catastrophic slide in the market (which in itself is made more unlikely by the fact that BTL is a decent investment, values will tend to level off at a particular yield point).

Load of bull, sorry

Especially the arguably the best investment claptrap! Keep convincing yourself, though you won't us!

pickles110564

Graham_Devon wrote: »

Sell now and they lose to much?

Hold on and hope someone rents, and they don't lose, only on paper? It's all about keeping a tennant in.

QUOTE]

Dear Graham, you are quite right, at the turn of the year if any properties went empty it took a few weeks not the usual days to get new tenants in.
Also the two properties that I had to re let also I had to take a hit on the rent return.
Come next spring i will look at how the market is performing and at that point I will decide whether to move one of them on.

Gorgeous_George

bluey890 wrote: »

If the Bear's posts are true, why aren't the forums very own BTL landlords stressed and desperately selling their housing portfolios?

The clue is in the name. A Buy to Let does not necessarily have a plan to sell. When I bought my BTL it cost less than a house because it needed a lot of work. Today, it is worth a house and I think it will still be worth a house in 10, 20, 30 years time.

Of course, those who bought for capital gains may have a different business plan. Meanwhile, those accidental landlords who are waiting for high prices to return have no plan at all.

My plan is to leave the house to my kids in my Will.

GG

pickles110564

Graham_Devon wrote: »

Load of bull, sorry

Especially the arguably the best investment claptrap! Keep convincing yourself, though you won't us!

Dear Graham, even you cant be so blind to the fact that houses are indeed selling again and LL's that have been in the game for a long time will no doubt be adding to their stock whilst the market is at the bottom.

Wookster

julieq wrote: »

No, that's complete and utter rubbish. It seems to be my role in life to explain this every two weeks, but here goes again.

Where would we be without these wonderful, life changing pearls of wisdom?

julieq wrote: »

Because yields on rented houses are better and safer than any other investment, it's really as simple as that.

Really? Wouldn't a FTSE 100 tracker have got you a 20+% return in the last 9 months. Perhaps rented houses aren't "better and safer than any other investment" after all.

Have you heard of portfolio theory & diversification of risks? Or liquidity?

julieq

Graham, with the greatest of respect, what part of my argument are you discounting as "bull"?

That there is a 7% relatively safe yield pa in the residential rented sector?

Or that houses will return to today's prices over a period of years?

Actually another way of putting this is that holding a BTL is a good decision if the rate of capital depreciation averages less than the yield. That is true whenever the initial investment was made, even if it was at the peak, because you are investing the money you have, not the money you had. The ONLY reason to bail out of BTL now would be cashflow.

To repeat, it doesn't matter whether the market is at the bottom, this is still a good investment opportunity. You may not like that because it piques your sense of what is right in terms of affordability, it may be counter intuitive to many, but that is why most people fail to see investment opportunities until the boat has sailed.

julieq

Wookster wrote: »

Where would we be without these wonderful, life changing pearls of wisdom?



Really? Wouldn't a FTSE 100 tracker have got you a 20+% return in the last 9 months. Perhaps rented houses aren't "better and safer than any other investment" after all.

Have you heard of portfolio theory & diversification of risks? Or liquidity?

If you had timed it right, yes, but that doesn't mean it's safe, it means its lucky and you're also choosing your bet after the result is known. Nice strategy if you can do it.

There has been a lot of sarcasm here, but no-one has told me which is wrong, that house prices will eventually get back to current levels or that there is a relatively safe return on investment (because people live in houses). So please, spare the invective and deal with the argument.