Tighter lending rules mean 10-year wait for first-time buyers

Exocet

tbh I am not very interested in when was the best time to get into BTL. Hardly makes any difference to my own investment considerations. More important, to me, is what happens now.

Is it worth doing now? I can't make the sums add up. As for eventual ownership, that doesn't apply for interest only mortgages of course.

I think those that are honest about it, will acknowledge that the BTL boom was based on this simple sum. Borrow interest only, buy BTL property, rent covers interest. Profit comes from HPI. Large gains in short space of time, for a few years up to 2006/7.

Now. Looking at the same investment plan today with expected capital gains of not very much I can't see the attraction. A large exposure to debt, with a gain (rent - interest payments) of less than zero.

Idiophreak

Raggs wrote: »

You have a very good interest rate, and a very good LTV (so you had a good deposit at least). On a house of 200,000 (roughly what yours is worth) on a reasonable interest rate of 5% (10% deposit), over 35 years, that's monthly payments of over 950 a month. On a more common 25 years, it's over 1100.

I only had 5% deposit. I took the house on shared equity so that I could get a better rate and better save for a larger deposit on the next place. A good example, actually, of how buying a place can make saving easier than renting.

Anyway, I think we'll agree to disagree. I don't feel people who find it difficult to save should be prohibited from buying, you do. We'll leave it there.

Harry_Powell

Exocet wrote: »

tbh I am not very interested in when was the best time to get into BTL. Hardly makes any difference to my own investment considerations. More important, to me, is what happens now.

Is it worth doing now? I can't make the sums add up. As for eventual ownership, that doesn't apply for interest only mortgages of course.

I think those that are honest about it, will acknowledge that the BTL boom was based on this simple sum. Borrow interest only, buy BTL property, rent covers interest. Profit comes from HPI. Large gains in short space of time, for a few years up to 2006/7.

Now. Looking at the same investment plan today with expected capital gains of not very much I can't see the attraction. A large exposure to debt, with a gain (rent - interest payments) of less than zero.

Once again, this just reveals the "I want it now!" generation that I'm ashamed to be associated with. As with most decent investments, you expect to make very little, if anything in the first few years of owning it, with the gains coming over the long-term. Investing in property is no different to investing in shares, it should not be seen as a quick buck and you should be looking to invest for the medium to long-term. Many people are investing in BTL to fund their retirement. Taken over a 25 year or more period, are you really going to tell us that properties will not gain in value and that the rental over that period will not cover the mortgage several times over? Really?

Do you also believe that the current capital gains tax laws will still be in place in 10/20/30 years time when some BTLers look to cash in for retirement? Really?

Exocet

Harry_Powell wrote: »

Once again, this just reveals the "I want it now!" generation that I'm ashamed to be associated with.?

You have a lot of cheek.

Harry_Powell wrote: »

As with most decent investments, you expect to make very little, if anything in the first few years of owning it, with the gains coming over the long-term. Investing in property is no different to investing in shares, it should not be seen as a quick buck and you should be looking to invest for the medium to long-term. Many people are investing in BTL to fund their retirement.

Not sure about that. I want an investment that begins to pay back from day 1 - such as buying shares with dividends. I don't have the financial or time luxury of taking on a debt, and responsibility for letting / tenants / maintenance over a 25 year period. What if I lost my job next month and needed to cash in for example? What if the tenants didn't pay up, or trashed the place?

Harry_Powell wrote: »

Taken over a 25 year or more period, are you really going to tell us that properties will not gain in value and that the rental over that period will not cover the mortgage several times over? Really?

I can't possibly estimate what might happen over a 25 year period. It might prove to be a good investment. It might be a millstone of drudgery and worry. I fully expect every asset class to be worth a lot more in 25 years.

Harry_Powell wrote: »

ADo you also believe that the current capital gains tax laws will still be in place in 10/20/30 years time when some BTLers look to cash in for retirement? Really?

Hadn't got that far in my thinking.

What you need to understand Mr. Powell is that not everyone on here who is a bear, is a rabid non thinking one. I own most of a house, I am a grown up. I am interested in the market, and of course I think about my pension or lack of it, and the future. If I thought it was right for me, I would do it.

Harry_Powell

it doesn't sound like BTL is right for you then, does it?

It doesn't follow that it's not right for other people though, does it?

Taking up your share dividend idea... If you buy shares in a company and they pay a good dividend per quarter, but the share price falls 10% from when you bought it, would you be concerned or happy that you're getting an income and think that the share price will probably come back at some point?

Is this any different from BTL, where the income (aka dividend) comes from rent and the actual asset value may rise or fall, but the dividend continues?

Exocet

Harry_Powell wrote: »

it doesn't sound like BTL is right for you then, does it?

It doesn't follow that it's not right for other people though, does it?

True. Therefore we are both entitled to express an opinion.

Harry_Powell wrote: »

Taking up your share dividend idea... If you buy shares in a company and they pay a good dividend per quarter, but the share price falls 10% from when you bought it, would you be concerned or happy that you're getting an income and think that the share price will probably come back at some point?

As I am currently investing, and reinvesting dividends, I am curiously relaxed when the price drops. Long term I expect them to recover that ground. But it's really mainly about dividends, building them up to provide an income in retirement.

Harry_Powell wrote: »

Is this any different from BTL, where the income (aka dividend) comes from rent and the actual asset value may rise or fall, but the dividend continues?

No. So the calculation is about yield, rather than capital gains. When I see a yield that is more attractive than shares, because I prefer shares they are easier to live with, then I will look again at BTL. And probably still reject it. Changing light bulbs is not for me.

Edit: Of course one can always invest in property companies which is arguably a cleaner, easier way to get into property as part of a diversified savings plan.