Buying Cheaper Than Renting Everywhere except London

carolt

You're making the same mistake you accuse me of, of taking 1 atypical case as typical. Most BTL landlords don't have a yield of 10% (I think Iread the average was 5 ish %?) and interest rates are hardly 10% of rental income for most landlords. Certainly not those who entered the market recetly. Nor likely to be, going forward.

For a typical landlord, particularly one entering the 'business' now, the amount of 'profit' left after interest on the money borrowed is paid and other expenses covered, is negligible - or negative.

chucknorris

carolt wrote: »

You're making the same mistake you accuse me of, of taking 1 atypical case as typical. Most BTL landlords don't have a yield of 10% (I think Iread the average was 5 ish %?) and interest rates are hardly 10% of rental income for most landlords. Certainly not those who entered the market recetly. Nor likely to be, going forward.

For a typical landlord, particularly one entering the 'business' now, the amount of 'profit' left after interest on the money borrowed is paid and other expenses covered, is negligible - or negative.

The point I made about existing LL's getting the tenants to pay off the loan (even if just substantially if not fully in the first year) is valid. The point you are missing is that you are focusing on the INITIAL yield and yes the initial yield may only bring a small profit in the early years however property investment is (yes you can guess what's coming) a long term investment.

The first investment property I bought in 1991 also didn't make much profit in the first year (this is the nature of the business) the rent then was only £750 per month but that gradually grew to reach £1,650 per month. Bears tend to latch onto the 'I'm in it for long run' as if it's some sort of cliche joke, but investment property is a long term investment, it would never stack up as a viable investment if year 1 was as good as it gets.

I personally have recently decided not to invest further, not because I think there is no future in BTL but because I intend to get out in about 10 years (ish) and I do not think it's worth investing with such a short timeframe in mind, especially given that the next few years will still be tough. However I wouldn't put someone off who was looking at the next 25 years, but I personally don't want the responsibility much after I have turned 60 (in 9 years time).

carolt

Sorry, I thought we were talking about BTL but apparently we were talking about you.

Do excuse me - no interest in that subject at all.

Thrugelmir

chucknorris wrote: »

Thanks, I'll look at it but generally speaking I have an aversion to 'funds' as I tend to think I am paying for guys to drive around in porches in the city. But I know I can be too cynical at times, so like I say I will have a look at it thanks.

I know some IFA is likley to pop up and say funds can outperform trackers and easily pay for the additional commission but I really like Fidelity's transparent 0.5% total annual fee for their 'all share FTSE tracker' as it's easy to understand and see exactly what I am buying into. However I will genuinely look at your suggestion tomorrow, thanks.

Why invest in a tracker? You are paying merely to mirror the market.

You could progressively buy shares in the larger quoted capitised stocks directly and just hold them. To reflect the market just weight them accordingly.

If you buy a FTSE tracker this contains Investment Trusts in any case. F&C's Foreign & Colonial Investment Trust being one. A steady long term favourite of main if you just want a good spread of risk not restricted to Uk quoted stocks.

Thrugelmir

chucknorris wrote: »

With gearing at only about 33% my rental income easily pays the interest. IMO there is no chance at all of interest relief being restricted, in fact that report (which I forget the name of) recommended that relief be extended to improvements in addition to maintenance.

Also I believe that rents won't fall much longer, and interest rates are only going to SLOWLY go back to approx where they were. If you are talking about new rather than existing BTL business (where good tracker mortgages are not available, then maybe so but then I have no interest in investing further)

I merely comment in general. Rather like getting inside information on one particular Company. There are profits to be made.

However markets move for a multitude of factors. Expecting BTL to be exempt from any change in taxation regulation is very presumptious. If nothing else that would win more votes than it would lose! :rolleyes:

Rents will be determined in the main by what people can afford and are willing to pay for a given locality/property. Not by what LL's need to achieve to cover their mortgage repayments.

Without doubt there will be a squeeze on after tax income from next year onwards. Which can only put pressure on LL's. Some LL's can afford to reduce their rents. Others will have little option other than to liquidate property in order to stay solvent and may have to exit the market entirely.

So yes rents will come back up in the longer term. But there will be carnage when the market correction impacts. The level of debt being the key.

chucknorris

carolt wrote: »

Sorry, I thought we were talking about BTL but apparently we were talking about you.

Do excuse me - no interest in that subject at all.

We are not talking about me we are talking about BTL however obviously I can't speak for everyone or defend every LL who made bad decisions (as there are some loonys out there who seemed determined to lose their money)

chucknorris

Thrugelmir wrote: »

Why invest in a tracker? You are paying merely to mirror the market.

You could progressively buy shares in the larger quoted capitised stocks directly and just hold them. To reflect the market just weight them accordingly.

If you buy a FTSE tracker this contains Investment Trusts in any case. F&C's Foreign & Colonial Investment Trust being one. A steady long term favourite of main if you just want a good spread of risk not restricted to Uk quoted stocks.

Well I like trackers because of their simplicity, I am not an experienced or seasoned investor in stocks. But perhaps I should explain that I merely want to divert a small proportion of my cash savings into stocks for a bit more diversity thats all, rather than make a significant investment. So rather than trying to perhaps max out on the potential of stocks I am merely trying to outperform the safer savings option which pays just over 3% net.

It's probably a reasonable criticism to point out that trackers are too simple and not the best products but I am content to stick with something simple (at least for the moment). I did get my fingers burned with individual stocks a few years ago, only small amounts luckily but enough to realise I have no talent in stock picking (yes I did try spread into different aspects of the market).

chucknorris

Thrugelmir wrote: »

I merely comment in general. Rather like getting inside information on one particular Company. There are profits to be made.

However markets move for a multitude of factors. Expecting BTL to be exempt from any change in taxation regulation is very presumptious. If nothing else that would win more votes than it would lose! :rolleyes:

Nevertheless I would be prepared to place a reasonable sized bet with you that they do not alter the fact that you can claim the mortgage interest as an expense. Of course there is always a risk of being wrong, but I would be very happy indeed to take on this risk, as I see it as a minimal risk. The gov NEEDS a healthy private rental sector.

Rents will be determined in the main by what people can afford and are willing to pay for a given locality/property. Not by what LL's need to achieve to cover their mortgage repayments.

Of course the market will always determine rents, it is up to the landlord to invest wisely and not to place himself in a position where the rents do not cover his payments. Don't forget rents generally rise, the recent fall in rents is temporary and will not seriously effect a landlord who invested a few years ago. Additionally investors should allow eneough flexibility in their finances to cover future unforseen contingencies.

Without doubt there will be a squeeze on after tax income from next year onwards. Which can only put pressure on LL's. Some LL's can afford to reduce their rents. Others will have little option other than to liquidate property in order to stay solvent and may have to exit the market entirely.

Obviously there will always be some that didn't invest wisely and will falter, it's the law of the jungle that when things turn bad the weak will perish. It's the way of the world.

So yes rents will come back up in the longer term. But there will be carnage when the market correction impacts. The level of debt being the key.

I'm not sure if you are saying there will be future falls or whether the existing falls have not yet impacted on those who are venerable? I am not convinced there will be further SUBSTANTIAL falls. We are all guessing at the moment, personally I am not exposed so can afford to be relaxed about it, it probably is quite worrying for some who are more exposed, but they will be a lot less worried than they were a year ago (and if they weren't very worried a year ago they should have been).

carolt

chucknorris wrote: »

We are not talking about me we are talking about BTL however obviously I can't speak for everyone or defend every LL who made bad decisions (as there are some loonys out there who seemed determined to lose their money)

Sorry, I'll leave the conversation as every comment I make you attempt to disprove by talking about yourself, despite the fact that you are clearly very atypical of the sector.

I am clearly on to a loser attempting to argue with you about yourself, and, as I stated, it is of little interest to me.

If we are only allowed to talk about BTL landlords who have portfolios exactly like yours, rather than typical landlords, the conversation - to me at least - becomes pointless.

chucknorris

carolt wrote: »

Sorry, I'll leave the conversation as every comment I make you attempt to disprove by talking about yourself, despite the fact that you are clearly very atypical of the sector.

I am clearly on to a loser attempting to argue with you about yourself, and, as I stated, it is of little interest to me.

If we are only allowed to talk about BTL landlords who have portfolios exactly like yours, rather than typical landlords, the conversation - to me at least - becomes pointless.

The point is carol you are fixated with the INITIAL yield, as I said above my first investment property also made very little profit in year one. That is the nature of the business,. If you concontrate only on the year one profitability it will never look good. The nature of the business is that decent rental profits come later and continue to improve, but you should not look to subsidise in the early years, you should try and at least break even in the first year, preferably make a profit (which is what I seek to do otherwise I wouldn't invest). That's why you hear a lot of landlords say (all together now lol) I'M IN IT FOR THE LONG TERM its because it would not be worth investing if things stayed as they were in year one. It is without doubt a long term investment which is why a lot of silly short term property speculators became unstuck when things went wrong (these are the landlords that I say I can't speak for, because they are/were goons)

You might argue that rents have recently fallen, quite true but that is unusual and temporary and any investor should not invest if has not allowed for contingencies.