BTL ..... who should pay?

Thrugelmir

penguine wrote: »

I think this was discussed on this board a year or so ago, and the conclusion was that everyone in the country should own a BTL and also rent a home to live in, thus ensuring the system could survive in perpetuity.

A year is a long time. So much has changed much without people realising. And the changes haven't finished.

chucky

Thrugelmir wrote: »

A house is only worth what somebody else can raise ( in cash and credit) to pay for it. The UK's housing stock is worth around £3,400 billion. So thats only £2,200 billion of equity.

The mortgage debt is borrowed money on future earnings, by no means guaranteed.

currently house prices are supporting 2009 house prices.
house prices also seem to be have an increasing trend.

JonnyBravo

Thrugelmir wrote: »

So once we all own a BTL to generate an income to live on, then what happens?

Who's suggesting that?
Don't join the "I'm going to be a muppet to make a point" clan.
If 75% of the country owned a cleaning business do you think the other 25% would be trying to start up doing the same too?

Thrugelmir wrote: »

A house is only worth what somebody else can raise ( in cash and credit) to pay for it. The UK's housing stock is worth around £3,400 billion. So thats only £2,200 billion of equity.

The mortgage debt is borrowed money on future earnings, by no means guaranteed.

And this differs from the value of a business how?
I really do hope you don't think businesses are worth more than anyone is prepared and able to pay for them?

chucky

penguine wrote: »

I think this was discussed on this board a year or so ago, and the conclusion was that everyone in the country should own a BTL and also rent a home to live in, thus ensuring the system could survive in perpetuity.

extremely easy - set it up within a Ltd Co

this is the major problem that Bradford & Bingley had and they caught too late.
the individual behind the Ltd Co was not liable for the losses or the reposession incurred. they started requesting personal guarantess to the directors of these Ltd Co for new lending.

JonnyBravo

Thrugelmir wrote: »

A year is a long time. So much has changed much without people realising. And the changes haven't finished.

Oh yeah.... it's passed most people by :rolleyes:

mewbie_2

chucky wrote: »

have a look at the Housing and Renting board to see the increasing number of questions about people wanting to invest in BTL.

I wonder if the answers have any simple costs involved. Like...

100k house. 5% year = £5,000 out
Likely rent - 500/m = £5,000 in (allow ten months only for voids)

Profit = zero.

That's before costs.

What's the next question?

kennyboy66_2

Thrugelmir wrote: »

And as we know BTL aren't making significant reductions in the capital balance owing on their mortgages despite low interest rates. Majority of BTL investors borrowed on interest only terms. So with falling equity increasing LTV the best lending rates are unavailable to them.

Ultimately they are putting their own homes at risk as thats the price they pay for clearing debt owed.

I'm no fan of BTL but there is a clear "business" reason that landlords choose interest only mortgages - they can offset the interest against the rent.

They behaved no different than many real businesses that geared up and made their balance sheet "more efficient" over the last decade.

I think there is a clear difference between BTL investors who built up a decent portfolio of houses before 2000 and those that bought 1 or 2 city centre flats in the last 5 years.

The former group are laughing their c*cks off as their investment has well outperformed almost any other asset class - and they had the benefit of their chosen gearing.

The second group are not so happy.

chucky

mewbie wrote: »

I wonder if the answers have any simple costs involved. Like...

100k house. 5% year = £5,000 out
Likely rent - 500/m = £5,000 in (allow ten months only for voids)

Profit = zero.

That's before costs.

What's the next question?

are you making up figures again?
trying to make an invalid point

how about these

100k house 5% year = £5,000 out
Likely rent 2000/m = £20,0000 in (allow ten months only for voids)

Profit = £15k

off you go mewbie - your lunch time is nearly over...
jog on back to work...

JonnyBravo

kennyboy66 wrote: »

The former group are laughing their c*cks off as their investment has well outperformed almost any other asset class - and they had the benefit of their chosen gearing.

OK so whilst I'm in that group and have laughed long and hard (once or twice at a few of the regulars on here) my manhood is firmly attached. If this really is likely to happen then it will indeed be the deathknell of BTL.

kennyboy66_2

mewbie wrote: »

I wonder if the answers have any simple costs involved. Like...

100k house. 5% year = £5,000 out
Likely rent - 500/m = £5,000 in (allow ten months only for voids)

Profit = zero.

That's before costs.

What's the next question?

The attraction (as ever) is the potential for capital growth. In your example £20k deposit, sit on house for 5 years and hope you can sell it for £130k.

Profit = 150%

and you pay less tax than if you were working for a living.

It's not for me, but you can see the logic is seductive for those whose experience of property since 1970 is an inflationary march upwards with really only in this crash that nominal values fall to a significant amount.