Buy to let - advice please

clutton_2

""15% at one time"" - early 1980's !!!

i bought at 7% and within 2 years MIR had gone up to 15 % - darned nearly lost my house !!!

BobProperty

clutton wrote:

""15% at one time"" - early 1980's !!!

i bought at 7% and within 2 years MIR had gone up to 15 % - darned nearly lost my house !!!

15% at one time 1989-1999. I was paying at least 12% on my PPR in the early 80's too I think.

Tassotti

BobProperty wrote:

Can you point me in the direction of some £100k properties which rent for £550 a month without voids please?

I have several 100K properties that rent at 550-575/month. All 1 bed flats...maximum void 3 weeks

BobProperty

Tassotti wrote:

I have several 100K properties that rent at 550-575/month. All 1 bed flats...maximum void 3 weeks

You got £85k mortgages on them all, Tass?

Spikey_2

very interesting reading......

RoCas

Spikey wrote:

very interesting reading......

Hey Spikey, just noticed you're back - did you have a good hol?

Tassotti

BobProperty wrote:

You got £85k mortgages on them all, Tass?

Some of them. A percentage of them a little more due to remortgaging to current values.

I have changed my buying stategy at the moment as the normal process of BTL is too much hard work with little cash flow returns.

In the good old days (2000-2004), prices were increasing so rapidly, it was easy to release the deposit for the next one. Not so easy now. I am geared up to the eyeballs (so to speak)

Interest rates will not hit 12-15% mark again (on knees praying).

If they do start to get crazy, I may have to consider selling some of my portfolio when the fixed rates end.

However, the rate I am making money at the moment, I have a massive cushion anyway.

Fitzy29

BobProperty wrote:

This post is so full of holes it's hilarious. Have you been on some expensive "how to get rich through property" seminars?

No, I am a landlord myself and also work in this field with other landlords. Lots of people use this statargy and are doing very nicely from it, as am I.:D

dunstonh

Interesting thread with some good comments but also some wild inaccuracies.

There is nothing guaranteed about future returns on owning properties. Rental yields against current values are generally low and if the property values do rise then that will only likely get worse.

First time buyers already need 40 year joint mortgages to get on the property ladder. How much more scope is there for property values to rise before we exclude first time buyers? To expect growth in the future to be the same as the recent past would be foolish. Its not impossible as nothing is impossible but is it likely?

I have clients who have owned rental properties for 20 years who are now pulling out as the rental yields are so low and there is an increasing burden on the landlords which is only likely to get worse.

Investing isnt a case of choosing stockmarket or property. There is an awful lot of options in between. For example, if you do still fancy property as an area you can enter into it with far less risk by picking property investment funds. Investing should include diversification. Having some of your investments in property is not a bad thing. Having all your investments in property is. Just as having all your money on the stockmarket is.

oh and by the way, historically property gives far greater returns than the same amount invested in shares....

No it doesnt.

The stock market has returned an average of 11% per annum since 1918. Since 1973, the average UK house has returned an average 9% annually, according to the Nationwide House Price Index.

There are pockets of time when one does better than the other but long term, stockmarket has beaten property.

Over the past 15 years, the Halifax house price index in the UK has soared by 147%, while the FTSE All-Share has climbed by just 48%. Although anyone putting all their money into the FTSE All share would be equally foolish as there are other stockmarket sectors which have wiped the floor with that.

You also have to consider tax. Property value growth is liable to CGT. Whereas conventional investments have a range of tax wrappers which can be used to avoid CGT. So, lets assume that property does beat a portfolio investment in a given period. Property value gain is £200k but investment gain is £150k. Property value gain would have 40% CGT liability meaning the net gain is £120k. Investments would have none if invested in the correct tax wrappers.

Another thing to note (as I am on a bit of a run of misc points here ) is that there is a world of difference between a buy to let and a mortgage buy to let. A mortgage buy to let contains more risk and will have lower overall returns than a buy to let purchased with cash.

If you borrowed over 25 years, you would pay back around 1.5 times the purchase price in interest and nearly double if you were to repay the capital as well. So, if you assume just interest, you would need the property price to go up 50% over 25 years just to stand still. If you take CGT into account, it would need to be more than 50%.

Looking at it very very crudely. House purchase is £100,000, a gain of 200% means it is valued at £300,000 minus the interest only mortgage that cost you £141,000 minus a capital gains tax bill of £80,000 leaves you with an overall gain of £79,000 which is an annual equivalent return of 3.16% over 25 years.

edit to above: You also still owe £100,000 on the mortgage as you paid interest only.

I find that investments arranged just prior to the stockmarket crash in 2001/2 are averaging between 10-15% a year and that is considered a bad period of investing.

And finally (at least for this post), doing a buy to let could result in making money and if you find the right property and get the right tenants and the property market has a steady period of growth it could do very nicely for you. However, do not assume it is a one way street to big profits and do not assume that you cannot lose money. A mortgage buy to let is a high risk transaction. If you accept the risks (which can involve you losing your own house let alone the buy to let in a worse case scenario) then at least you have gone into it with your eyes open. Unlike many mortgage buy to lets who have borrowed upto the hilt and will find any mortgage interest rate hike a problem.

BobProperty

Fitzy29 wrote:

No, I am a landlord myself and also work in this field with other landlords. Lots of people use this statargy and are doing very nicely from it, as am I.:D

This week?

Tass - I would have guessed that you had "cover" elsewhere within your portfolio, and, like you say, you can't do it so easily now. Unlike Fitzy apparently.