Many Upsizers gaining nothing from crash....

Thrugelmir

nearlynew wrote: »

I love the way the spin has changed recently and now yield is everything.

If over the last few years, these "canny investors" had thought about yield instead of capital gains (which most BTL was sold on), prices would never have risen as much and we would now not be in such a mess.

Greed and stupidity is a wonderful combination.

Ah but BTL investors are better off! On a purchase price of £145,000 with a rental income of £9,000 the gross yield is 6.2%. If the property price has now fallen 15%, the gross yield is now 7.3%.

So must have made a good investment.


Simple really.

chucky

Thrugelmir wrote: »

Ah but BTL investors are better off! On a purchase price of £145,000 with a rental income of £9,000 the gross yield is 6.2%. If the property price has now fallen 15%, the gross yield is now 7.3%.

So must have made a good investment.


Simple really.

you've just blown Graham Devon's argument out of the water completely.
he seems to think the opposite...

for BTL, calculating the yield on assumed market price is very dangerous. it actually doesn't make sense.

Thrugelmir

chucky wrote: »

you've just blown Graham Devon's argument out of the water completely.
he seems to think the opposite...

for BTL, calculating the yield on assumed market price is very dangerous. it actually doesn't make sense.

You have to account for the capital loss somewhere. Though I've heard that GB's latest wheeze is to offer to take toxic debt from BTL investors to support the property market.

Being a closet fan of HUTH the majority of new BTL investors seemed to leave their sense at home. Viewing a property or seeking professional building advice before purchasing at auction being consistant actions.

chucky

Thrugelmir wrote: »

You have to account for the capital loss somewhere. Though I've heard that GB's latest wheeze is to offer to take toxic debt from BTL investors to support the property market.

Being a closet fan of HUTH the majority of new BTL investors seemed to leave their sense at home. Viewing a property or seeking professional building advice before purchasing at auction being consistant actions.

i'm not dismissing market value to calculate yield, i'm also not looking to dismiss capital loss. BTL can be similar to CFD's when calculating yield due to the size of your mortgage vs investment.

if you look at your yield by looking at market value there are way to many variable to account for. for example - EA costs, legal fees etc

on the other side you have AST's that lock you into your contract and you market value is only real when the AST ends. don't forget EA commissions vary here too.

there are way too many variables to look at yield in this way.
for equities it's easy - you check the price and work out the yield from the dividend. you can factor in fees if you like too as they're pretty standard.

Thrugelmir

chucky wrote: »

i'm not dismissing market value to calculate yield, i'm also not looking to dismiss capital loss. BTL can be similar to CFD's when calculating yield due to the size of your mortgage vs investment.

if you look at your yield by looking at market value there are way to many variable to account for. for example - EA costs, legal fees etc

on the other side you have AST's that lock you into your contract and you market value is only real when the AST ends. don't forget EA commissions vary here too.

there are way too many variables to look at yield in this way.
for equities it's easy - you check the price and work out the yield from the dividend. you can factor in fees if you like too as they're pretty standard.

The problem was that new BTL investors saw investment in property as being the same as putting money on deposit in the banks. Taking no account of potential capital loss.

When BTL investors in Cardiff were buying property in 2007 on a 5% - 7% gross yield. It showed how out of line the market had moved with what any professional investor would be looking for. It was all about capital gain.

System

As a potential upsizer myself, a crash isn't the best path for me. HPI means I don't have to save a deposit or pay myself out of negative equity should it arise.

House price falls means my debt will be less and payments lower, but I'm not sure I could realistically save the 15-20k needed to make the move anyway.

nearlynew

Joeskeppi wrote: »

HPI means I don't have to save a deposit or pay myself out of negative equity should it arise.

And there, my friends, in one sentence is the warped thinking that has characterised the unsustainable debt-fuelled frenzy of recent years that has led us to this crisis.

People don't have money anymore, all they have is "equity"

Sad and pathetic in equal measure.

System

"Sad and pathetic".

Get some perspective.

Inflation based HPI makes upsizing a lot easier.

Thrugelmir

Joeskeppi wrote: »

"Sad and pathetic".

Get some perspective.

Inflation based HPI makes upsizing a lot easier.

Providing your income is also also increasing. Which diminishes the value of your existing debt. In previous recessions this what pulled the property market up.

Different scenario this time for many with zero or negative wage inflation.

Harry_Powell

Sorry, no matter what spin you put on it, if a house falls 20% then it's cheaper to buy for a FTB. If someone is moving from a £200k house to a £300k house, it's still going to be cheaper when the market has dropped 20% and you're now moving from a £160k house to a £240k house.

Pre crash you would need an additional £100k to upscale, post crash you'd need an additional £80k to upscale. A saving of £20k.

Yep, I think I'd rather be buying post-crash than pre-crash. :rolleyes: