Buying Cheaper Than Renting Everywhere except London

IveSeenTheLight

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.

Do you have any facts to back this up? or is it an assumption you are making?
Certainly I am not aware of any released figures showing such.
We could look at the amount of BTL's in arrears which according to the CML is reducing
http://www.cml.org.uk/cml/media/press/2358

Buy-to-let arrears showed considerable improvement in all measures. There were 29,400 mortgages in arrears of three months or more (2.49% of all buy-to-let mortgages), down 17% from 35,600 (3.06%) in the previous quarter. And the number of mortgages in arrears of more than 1.5% of the balance outstanding fell 20% from 28,800 (2.47%) at the end of April to 22,900 (1.94%).

2.49% of all BTL mortgages more than three months in arreas, indicates that there are 97.53% of BTL mortgages that are not in such arrears.

What is not clear as well is what the BTL LL's in arreas financial situation is.
It is quite probable that they are making a loss, which is allowed to be carried forward to future tax returns or indeed they can get a tax refund from their other taxes paid.
It's possible they can be making losses as they have withdrawn equity from the property to keep the interest part of the mortgage high. what have they done with the withdrawn money.
the actual picture is certainly is not clear to their actual financial position.

Certainly when I applied for BTL mortgages, there was a requirement for the rent to be 125% of the mortgage interest, something I still see when I look for BTL products, therefore it would seem that while some may be subsidising their BTL, I personally think that this is the minority, by a long way.

chucknorris

IveSeenTheLight wrote: »

I realise you are only refering to the interest of a loan, but remember additionally they also pay for other associated business costs i.e. advertising fees, factor fees, insurance, maintenance etc.

Yes I realise that but it was specific point I was answering that someone else made:

Bzzzt! Wrong answer. BTL investors are usually leveraged to "invest" in BTL - don't know many investors at that level that would borrow to invest in stocks and shares. That's why BTL can go badly wrong compared to stocks and shares.

and therefore pointing out what the difference would be between borowing to buy shares, ie looking at the loan in islotaion.

IveSeenTheLight

chucknorris wrote: »

Yes I realise that but it was specific point I was answering that someone else made:

Bzzzt! Wrong answer. BTL investors are usually leveraged to "invest" in BTL - don't know many investors at that level that would borrow to invest in stocks and shares. That's why BTL can go badly wrong compared to stocks and shares.

and therefore pointing out what the difference would be between borowing to buy shares, ie looking at the loan in islotaion.

I know, I know, hence why I said I realised your point.

I was merely adding a further point on top of yours that they also pay for other business expenses

seraphina

chucknorris wrote: »

Bzzzt! Wrong answer because the tenants pay the interest on the loan for the BTL, please explain how you can borrow to buy shares and get someone else to pay the interest on the loan?

*sigh*

For most common-or-garden types of investing in shares/stocks, the worst that can happen is you lose your original stake/savings.

If you're leveraged on BTL and run into payment problems, they'll come after the house. And if you're in NE or there's a shortfall, they'll come after you. And your house. You can't limit your losses in the same way you can with stocks and shares - you can't even put a stop on because housing is such an illiquid asset.

It's not really so difficult to understand, is it??

Out,_Vile_Jelly

I rent in London, so this is good news right?

chucknorris

seraphina wrote: »

*sigh*

For most common-or-garden types of investing in shares/stocks, the worst that can happen is you lose your original stake/savings.

If you're leveraged on BTL and run into payment problems, they'll come after the house. And if you're in NE or there's a shortfall, they'll come after you. And your house. You can't limit your losses in the same way you can with stocks and shares - you can't even put a stop on because housing is such an illiquid asset.

It's not really so difficult to understand, is it??

*sigh*
No it isn't difficult to understand property investment is a business and of course it's different to simply buying some shares.

As with any business if you fail, you lose and possibly quite badly. That is not an arguement for not going into business, it is merely an arguement for making sure that you get it right when you do.

Entertainer

IveSeenTheLight wrote: »

I don't think you understand the point of the original post.
It was referring to buying being cheaper than rent everywhere except London.
Why do you want to keep referring to London and the rental yield there?

Here's the original link again to refresh your memory
http://uk.news.yahoo.com/21/20091009/tuk-most-renters-better-off-buying-home-6323e80.html

I'm referring to it because that graph you put up there said rental yields in London were 8% which they aren't.

At the risk of repeating myself, I'll say it one more time- rental yields are below 6% outside of London in many parts of the country.

IveSeenTheLight

Entertainer wrote: »

I'm referring to it because that graph you put up there said rental yields in London were 8% which they aren't.

At the risk of repeating myself, I'll say it one more time- rental yields are below 6% outside of London in many parts of the country.

So the original post and link is wrong and you are right (yet to see your links prooving so)

I've been looking at this property
http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274569?ID=FGJKNHFO#picture

2 bed, valued at £110k.
Rental for a 2 bed city centre property in this area goes for £800 pcm.
That is an 8.72% rental yield.

£900 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274293?ID=FGJKNHFO#picture

£800 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274919?ID=FGJKNHFO#picture

£800 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274854?ID=FGJKNHFO#picture

£875 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274847?ID=FGJKNHFO#picture

£850 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274731?ID=FGJKNHFO#picture

£800 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274653?ID=FGJKNHFO#picture

£800 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274346?ID=FGJKNHFO#picture

£850 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274281?ID=FGJKNHFO#picture


To purchase this with only a 10% deposit and on a 5.95% mortgage would mean the C&I mortgage is £590 per month and the rent is 35% more expensive at £800 per month.

Comparably, the interest is £490 per month or 63% cheaper than the rent

At the risk or repeating myself, there are many places outside of London that do achieve better than 6% rental yield and where buying is cheaper than renting :rolleyes:

Thrugelmir

IveSeenTheLight wrote: »

So the original post and link is wrong and you are right (yet to see your links prooving so)

I've been looking at this property
http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274569?ID=FGJKNHFO#picture

2 bed, valued at £110k.
Rental for a 2 bed city centre property in this area goes for £800 pcm.
That is an 8.72% rental yield.

£900 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274293?ID=FGJKNHFO#picture

£800 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274919?ID=FGJKNHFO#picture

£800 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274854?ID=FGJKNHFO#picture

£875 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274847?ID=FGJKNHFO#picture

£850 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274731?ID=FGJKNHFO#picture

£800 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274653?ID=FGJKNHFO#picture

£800 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274346?ID=FGJKNHFO#picture

£850 pcm http://www-n.aspc.co.uk/cgi-bin/public/LiveProperty/274281?ID=FGJKNHFO#picture


To purchase this with only a 10% deposit and on a 5.95% mortgage would mean the C&I mortgage is £590 per month and the rent is 35% more expensive at £800 per month.

Comparably, the interest is £490 per month or 63% cheaper than the rent

At the risk or repeating myself, there are many places outside of London that do achieve better than 6% rental yield and where buying is cheaper than renting :rolleyes:

Yes but if you are paying £800 pcm rent how do you raise the deposit?

If you are buying the property as BTL who has £30,000 upwards sitting around to buy it? And is willing to bet their money in the current market?

IveSeenTheLight

Thrugelmir wrote: »

Yes but if you are paying £800 pcm rent how do you raise the deposit?

If you are buying the property as BTL who has £30,000 upwards sitting around to buy it? And is willing to bet their money in the current market?

If you were buying as a renter, you only need £11,000 for a 10% deposit , not a huge significant sum

As for who has £30,000 to purchase as a BTL, I do, hence why I am looking at it There are always investors out there with this sort of cash.