Rents Continue Rising

IveSeenTheLight

Wee_Willy_Harris wrote: »

No. That would be putting the cart before the horse. I'll try and make it simple for you, as I can see comprehension isn't your strong point. Higher rents will never increase the ability to pay. In fact, they will do the opposite. Rent increases to not negate that statement. It's much easier to pay your rent if it is £20 a week than if it were £200. Is that simple enough for you? Or shall I get the crayons out?

No cartoons please

On your point though, what higher rents may do is eat into renters disposable income.
The current percentage of wages is actually quite low in historical terms.

Wee_Willy_Harris

IveSeenTheLight wrote: »

Are you forgetting about the rent from the BTL down the road?

Not at all. That's the madness of so many BTL schemes and "investments", The rent from the BTL down the road is used as income to fund the next BTL. We then get the BTL Landlord telling anyone stupid enough to listen that he has a property portfolio of £xxxxxxx (Insert your own large, made up number there). Eventually, even he will believe it. But what he actually has is a massive debt supported by rental income and ever increasing house prices. Reduce either by a very modest amount and, suddenly, the house of cards he has built looks a bit less stable. Just look at BTL guru Fergus Wilson.

chucknorris

Wee_Willy_Harris wrote: »

Not at all. That's the madness of so many BTL schemes and "investments", The rent from the BTL down the road is used as income to fund the next BTL. We then get the BTL Landlord telling anyone stupid enough to listen that he has a property portfolio of £xxxxxxx (Insert your own large, made up number there). Eventually, even he will believe it. But what he actually has is a massive debt supported by rental income and ever increasing house prices. Reduce either by a very modest amount and, suddenly, the house of cards he has built looks a bit less stable. Just look at BTL guru Fergus Wilson.

You seem to be assuming that everyone over extends themselves. We have 9 properties (including the house we live in and the house that my MIL lives in rent free).

Three of those properties are mortgage free and we have enough liquid assets (mainly cash) to pay off another 3 (but will not until the mortgage rate goes up past the net savings rate). The remaining three mortgages have an average gearing of around 60-65% and will either be paid off in 10 years or we will sell up (but that depends upon the market).

Wee_Willy_Harris

chucknorris wrote: »

You seem to be assuming that everyone over extends themselves. We have 9 properties (including the house we live in and the house that my MIL lives in rent free).

Three of those properties are mortgage free and we have enough liquid assets (mainly cash) to pay off another 3 (but will not until the mortgage rate goes up past the net savings rate). The remaining three have an average gearing of around 60-65%.

Bigger picture, Chuck, bigger picture. You may not be over-extended as an individual, but you may well feel the impact of the many others who are. Don't fall into the fools trap of assuming that all BTL landlords are in the same position as you. For many of the BTL brigade, it would take a very small adjustment of house prices and interest rates to have a significant impact on their ability to trade. I wouldn't dream of predicting house prices with any certainty, but I do know that interest rates are only going to head in one direction from their current level.

chucknorris

Wee_Willy_Harris wrote: »

Bigger picture, Chuck, bigger picture. You may not be over-extended as an individual, but you may well feel the impact of the many others who are. Don't fall into the fools trap of assuming that all BTL landlords are in the same position as you. For many of the BTL brigade, it would take a very small adjustment of house prices and interest rates to have a significant impact on their ability to trade. I wouldn't dream of predicting house prices with any certainty, but I do know that interest rates are only going to head in one direction from their current level.

I don't assume that, but you shouldn't also assume that I am a tiny minority (although I accept that I am in a better position than most, so definitely a minority).

Of course interest rates will eventually go back up, but hey this has been a huge bonus, 2 years 3 months of much higher profits and still counting. You can keep house prices rises, I would rather see the market stay depressed and rates low. But we both know that will not happen eventually things will get better and the base rate will return to a more normal level (where only normal profits were being achieved).

Wee_Willy_Harris

chucknorris wrote: »

I don't assume that, but you shouldn't also assume that I am a tiny minority (although I accept that I am in a better position than most, so definitely a minority).

Of course interest rates will eventually go back up, but hey this has been a huge bonus, 2 years 3 months of much higher profits and still counting. You can keep house prices rises, I would rather see the market stay depressed and rates low. But we both know that will not happen eventually things will get better and the base rate will return to a more normal level (where only normal profits were being achieved).

But those still active, in the expansion sense of the word, have not benefited from the lower interest rates you describe as they have had to suffer the higher initial investment costs of any new property purchase/expansion. They will further suffer as interest rates rise, as they surely will. As I said... bigger picture, Chuck, bigger picture. No BTL landlord is an island, entire of itself. Rather they are part of a housing sector and, if/when that sector comes crashing down... ask not for whom the bell tolls, Chuck.... It tolls for thee.

chucknorris

Wee_Willy_Harris wrote: »

But those still active, in the expansion sense of the word, have not benefited from the lower interest rates you describe as they have had to suffer the higher initial investment costs of any new property purchase/expansion. They will further suffer as interest rates rise, as they surely will. As I said... bigger picture, Chuck, bigger picture. No BTL landlord is an island, entire of itself. Rather they are part of a housing sector and, if/when that sector comes crashing down... ask not for whom the bell tolls, Chuck.... It tolls for thee.

LOL don't worry about me. I am as safe as houses (doh!), no but really we are very secure.

On the bigger picture I see stagnation for 3-4 years then a slow pick up.

Wee_Willy_Harris

chucknorris wrote: »

LOL don't worry about me. I am as safe as houses (doh!), no but really we are very secure.

And I'm sure the Wilsons felt the same way.

chucknorris wrote: »

On the bigger picture I see stagnation for 3-4 years then a slow pick up.

Still very "little picture" I see, Chuck. Factor in the downward pressure on rents the revised LHA rates will bring coupled with the inevitable easing of lending restrictions for FTBs and the picture (the bigger one) looks a lot less rosy. And remember, that LHA pressure will be year-on-year compounded.

chucknorris

Wee_Willy_Harris wrote: »

And I'm sure the Wilsons felt the same way.



Still very "little picture" I see, Chuck. Factor in the downward pressure on rents the revised LHA rates will bring coupled with the inevitable easing of lending restrictions for FTBs and the picture (the bigger one) looks a lot less rosy. And remember, that LHA pressure will be year-on-year compounded.

In terms of being safe we are in a much superior position than the Wilsons are. You really are a pessimist aren't you? I have been through recessions before it's actually in the next year or so that is the optinum time to invest.

However at my time of life it doesn't suit as I am gearing up for retirement in 10-15 years time so it isn't realistic to invest further when I plan to bail out so soon).

IveSeenTheLight

Wee_Willy_Harris wrote: »

Not at all. That's the madness of so many BTL schemes and "investments", The rent from the BTL down the road is used as income to fund the next BTL. We then get the BTL Landlord telling anyone stupid enough to listen that he has a property portfolio of £xxxxxxx (Insert your own large, made up number there). Eventually, even he will believe it. But what he actually has is a massive debt supported by rental income and ever increasing house prices. Reduce either by a very modest amount and, suddenly, the house of cards he has built looks a bit less stable. Just look at BTL guru Fergus Wilson.

I think the percentage of investors you refer to is minimal.

I have two BTL's. The rent from the cheaper property covers the mortgage interest on both properties.

Profit is such that I am considering investing the profit on a third BTL, but of course it would be self sustainable