One million homes face Interest-only remortgage threat

DervProf

IveSeenTheLight wrote: »

It's quite a quiet battle is it.
I've found no resistance from you

Sorry, I`ve been too busy trying to decipher chucky`s posts.

I`ll get onto it.........

DervProf

IveSeenTheLight wrote: »

Not really, property investment is shown to be a better vehicle than simply putting your money in a savings account, even without HPI

HPI is only a bonus.

OK, I say "not in all cases".

I`m sure I have read about quite a few people that have lost money through property investment, even with HPI. I spoke to someone the other day who had done just that, as a matter of fact.

If HPI was 0% through someone`s lifetime, and they bought a property early in their life (with cash), they could rent it out. This would provide an income, let`s say a yield of 5%. Meanwhile, another person with the same amount of cash, sticks it in a savings account. May I suggest that they earn 3% ? OK, the landlord earns and extra 2% on his £££, but is that enough to cover maintenance costs on his property ?

Really2

DervProf wrote: »

let`s say a yield of 5%.

Yield should increase with inflation, (ask emy's mom and dad ). Savings are eroded by them.

(PS I don't do BTL )

chucky

DervProf wrote: »

Sorry, I`ve been too busy trying to decipher chucky`s posts.

well you do struggle with the basics... it's understandable...

let me explain

DervProf wrote: »

If HPI was 0% through someone`s lifetime, and they bought a property early in their life (with cash), they could rent it out. This would provide an income, let`s say a yield of 5%. Meanwhile, another person with the same amount of cash, sticks it in a savings account. May I suggest that they earn 3% ? OK, the landlord earns and extra 2% on his £££, but is that enough to cover maintenance costs on his property ?

rents would rise with inflation... savings get eroded by inflation...

DervProf wrote: »

OK, I say "not in all cases".

that's fine... you backtrack all that you want...

IveSeenTheLight

DervProf wrote: »

OK, I say "not in all cases".

I`m sure I have read about quite a few people that have lost money through property investment, even with HPI. I spoke to someone the other day who had done just that, as a matter of fact.

If HPI was 0% through someone`s lifetime, and they bought a property early in their life (with cash), they could rent it out. This would provide an income, let`s say a yield of 5%. Meanwhile, another person with the same amount of cash, sticks it in a savings account. May I suggest that they earn 3% ? OK, the landlord earns and extra 2% on his £££, but is that enough to cover maintenance costs on his property ?

"not in all cases"
"I have read about quite a few people that have lost money through property investment"

Then they have made poor investment choices

I would never have bought the properties I lease out if the rental income did not cover all expenses.
The rent I receive covers a repayment morgage, factor fees, insurance, maintenance, tenant finder fees etc etc etc and I still make a yearly profit.

This year on one of my properties, I will make a loss as I am installing new windows, but guess what, it's tax deductable.
The property is being improved through repair and any losses I make can be carried forward to profit years, meaning I am not taxed on future years profits until the loss is paid off.

In summary then it seems that the simple example I have posted you are in agreement that it is better to invest in property if the right property is secured than simply putting the money into a savings account.

JimmyTheWig

Given that the house purchase is a long term investment, would it not be fairer to compare it to a stock market linked investment?
E.g. if you bought a house for £30,000 25 years ago and rented it out vs. putting £30,000 into, say, the FTSE all share index 25 years ago what would have acheived better results?

I don't know the answer and am on neither side of the fence. I'm just interested.

IveSeenTheLight

JimmyTheWig wrote: »

Given that the house purchase is a long term investment, would it not be fairer to compare it to a stock market linked investment?
E.g. if you bought a house for £30,000 25 years ago and rented it out vs. putting £30,000 into, say, the FTSE all share index 25 years ago what would have acheived better results?

I don't know the answer and am on neither side of the fence. I'm just interested.

It may do. I have tried investing in shares and have lost money.
Maybe the long term return on shares may be higher but I think it is a much larger risk and therefore I have chosen what I think is a safer investment.

How many peoples shares / pensions etc have been hit recently because of the shares market?

There are many people who have had to accept a far lower return than they had expected.

My statement and example still stands as I see it.
Property investment beats putting money into savings even without taking HPI and rent increases into consideration.

IveSeenTheLight

DervProf wrote: »

This would provide an income, let`s say a yield of 5%...............but is that enough to cover maintenance costs on his property ?

The short answer is that any investment property should ensure that the rent receives covers all costs.
If it doesn't, it's not worth investing in.

Let's start by looking at how you look at yield.
Technically, Rental Yield is Yearly Rent / Property Valuation.
However I believe this is only worth using when deciding if an investment is worth it or not.
I prefer to work on (Yearly Rental Yield - Costs) / Invested amount.

The example I gave is very close to one of the properties I bought a few years ago. I paid a slightly higher deposit (£35k) for a property slightly lower in value (£140k).
The rent received on that property is £850 per month (Although it was £800 when I bought) and I have had a total of 16 days void on two properties in the last 3 1/2 years.

£800 * 12 / £140k = This meant the RY was 6.85%
I believe the valuation is now higher and so is the rent
£850 * 12 / £170k = 6.00%.
The RY has gone down as the property increased in value.

I however consider that my initial investment and loan has remained the same while the rent received (income) has increased and is likely to do so over they years (I have a policy that I have never so far increased the rent of a sitting tenant).

I have a profit of approx £2,400 per year (note when filling out my tax return the profit is actually higher as I can only claim the interest on the mortgage and not the whole lot and split between my wife and I ) on this property, which has more than covers the maintenance, fees, insurance, tax, etc.

Any extra actually goes into reducing the mortgage (I know this is not the best BTL model I should be following, but one I am happy that reduces the risk and increses the equity), meaning the property will be paid off years before the standard 25 year period

My other property takes in £1200 per month with a C&I mortgage of £395, although that was bought a number of years ago, so a much larger profit.
In short my C&I mortgage payments on the two properties is just over £1000, while the rent received is almost £2000

This is why I find it so easy to know that BTL properties I have found far outwiegh any other investments and certainly better than simply putting the money in the bank.

The properties are being paid off by my tenants which I am grateful for and in return I give them a good service and good properties

DervProf

IveSeenTheLight wrote: »

Property investment beats putting money into savings even without taking HPI and rent increases into consideration.

In your experience, and in most cases, yes.

However, it can go wrong. There is an element of risk, surely ?

RenovationMan

Is it still the case that HPI will outstrip the stockmarket? I cant see the same HPI levels occurring over the next 15 years that we have seen in the last 15 years.