Buying Cheaper Than Renting Everywhere except London

HAMISH_MCTAVISH

mewbie wrote: »

What a pity you weren't available to advise Grant Bovey.

Gorgeous_George

Grant Bovey and many other idiots gave BTL a bad name.

They relied on increasing property values and cheap money without considering the risks of what might happen if these key elements turned against them. Investing for rising prices is not BTL. BTL is Buy to Let - the clue is in the name.

I wouldn't buy a property if the mortgage interest was not covered by the rental payments. However, I know that it can make sense in some circumstances.

It is good that some people do not understand BTL.

GG

chucky

Cleaver wrote: »

Can I run some figures past you? Let me know if I have any of this wrong. You said a mortgage rate of 5% and I'm assuming you must have had a deposit of something like 40% to get that type of rate on a BTL mortgage.

So the money you would have needed to set this up:
Deposit: £176,000
Stamp Duty: £4,400
Buying Costs: £1,500

So a total of £181,900 invested.

You said you get around £24,000 a month in rent and your mortgage would be around £13,200 on an interest only 5% jobby.

Let's assume you have a month void each year, your maintenance costs are £1,000 a year (which is low) and you get away with paying 10% tax a year.

That leaves you with a profit of around £6,000 on your investment of £181,900. Which is a return of around 3.5%.

As I say, I'm no expert on this so do correct me if I have any of my figures wrong. But just a small drop in property prices, one or two more months void or a couple of boilers breaking down and you're running at no profit or even a loss. Is it really worth all the effort for the same return you could get from a savings account?

you wouldn't calculate your yield on the gross amount but on the amount you've actually invested so the deposit amount so his yield would be much more.

companies would calculate their yield on this gearing.

chucky

carolt wrote: »

Agree, I used to live in Ealing. I'd be interested to know where that was. The same flats we rented in Ealing in 2003 for £900 still rent for...£900. But the price to buy has gone up way over £220K.

Nollag's lying again. He's a compulsive liar.

the area has obviously gone up in the world since you left - the flat you rented must not have that great...
http://www.rightmove.co.uk/property-to-rent/find.html?searchType=RENT&locationIdentifier=REGION^87504&radius=0.0&displayPropertyType=&minBedrooms=1&maxBedrooms=1&minPrice=&maxPrice=&maxDaysSinceAdded=&retirement=&sortByPriceDescending=&_includeLetAgreed=on&primaryDisplayPropertyType=&secondaryDisplayPropertyType=&oldDisplayPropertyType=&oldPrimaryDisplayPropertyType=&oldSecondaryDisplayPropertyType=&letType=&letFurnishType=&houseFlatShare=false&x=54&y=6

carolt

Er..no.

I think you'll find this more helpful - large choice of 2 bed flats for £900/month, here:

http://www.rightmove.co.uk/property-to-rent/find.html?searchType=RENT&locationIdentifier=OUTCODE^2765&radius=0.0&displayPropertyType=flats&minBedrooms=2&maxBedrooms=&minPrice=&maxPrice=&maxDaysSinceAdded=&retirement=&sortByPriceDescending=false&includeLetAgreed=true&_includeLetAgreed=on&primaryDisplayPropertyType=&secondaryDisplayPropertyType=&oldDisplayPropertyType=&oldPrimaryDisplayPropertyType=&oldSecondaryDisplayPropertyType=&letType=&letFurnishType=&houseFlatShare=false&x=24&y=10

Personally, I'd go for this 3 bed in the nicest part of Ealing, close to where I sed to live and in the catchment area for the best school in Ealing:

http://www.rightmove.co.uk/property-to-rent/property-22095919.html?locationIdentifier=OUTCODE^2765&sortByPriceDescending=false&minBedrooms=2&displayPropertyType=flats&oldDisplayPropertyType=flats&includeLetAgreed=true&_includeLetAgreed=on&pageNumber=2&fromSummary=true&backToListURL=/property-to-rent/find.html?locationIdentifier=OUTCODE%5E2765&sortByPriceDescending=false&minBedrooms=2&displayPropertyType=flats&oldDisplayPropertyType=flats&includeLetAgreed=true&_includeLetAgreed=on&index=10


A snip at £1000/month.

You'd have to be a right mug to pay £1100 for a 2 bed, frankly.

HAMISH_MCTAVISH

HAMISH_MCTAVISH wrote: »

Carol, just out of curiosity, if I offered you a 200K house for 20K would you buy it?

Because that's effectively the situation Nolag, or anyone else with tenants whose rent doesn't quite cover the mortgage is in.

And of course whilst they may be subsidisng it now, as time passes and rent increases they won't be...

And at the end of 25 years, they will have an asset which they have only paid 10% or 20% of the value for, even if it doesn't appreciate at all.

In fact, it could lose 30% of it's value, and they could subsidise it by 10%, and they would STILL end up ahead in the deal.

It's virtually impossible to lose money in BTL over 25 years. So subsidising tenants in the short term is hardly foolish.....

Carol??? Still no response?

Thrugelmir

Gorgeous_George wrote: »

Grant Bovey and many other idiots gave BTL a bad name.

They relied on increasing property values and cheap money without considering the risks of what might happen if these key elements turned against them. Investing for rising prices is not BTL. BTL is Buy to Let - the clue is in the name.

I wouldn't buy a property if the mortgage interest was not covered by the rental payments. However, I know that it can make sense in some circumstances.

It is good that some people do not understand BTL.

GG

So makes other BTL investors any different? BTL is potentially a high risk venture. High rewards but potentially financially life crippling. Any investment which depends on borrowing money to speculate with, should carry a health warning.

Thrugelmir

HAMISH_MCTAVISH wrote: »

It's virtually impossible to lose money in BTL over 25 years. So subsidising tenants in the short term is hardly foolish.....

Personally I hope that this statement doesn't come back to haunt you.

Remember hedge funds used rocket scientists to create investment formulas to eradicate risk. They thought they could always win.

Trouble was they didn't factor what would happen if all negative events simultaneously occured. And they did.......

They got wiped out. Literally.

Markets have no sentiment.

carolt

HAMISH_MCTAVISH wrote: »

Carol??? Still no response?

Sorry? You want me to spend my Saturday night responding to that?

Ask me tomorrow..or the day after....

Entertainer

IveSeenTheLight wrote: »

It's not cherry picking a few hotspots, it's backing up the thread title showing that buying is cheaper than renting.

Buying Cheaper Than Renting Everywhere except London

Note McTavish's use of the word "everywhere".

I'm not going to show you where you can get 10% rental yields in the South East as I do not do market research in that area.
I can show you a recent place outside of London that would give a 9% return (Actually, I would spend a little modernising before letting so would only get an 8% return)

It's good that you wont waste your time doing that because the answer is you wont be able to.

1. Take ten London postcodes.
2. Enter them into Rightmove.
3. Note the sale price and the rental price.
4. Divide one by the other.
5. Behold the sub 6% rental yield.

We even have a pioneering BTL entrepeneur in this thread who is proudly announcing his 5.45% (London) rental yield to the whole world, if you still don't believe.