Generation Rent - The Winners

Graham_Devon

While I realise this is just business, I do find it somewhat wrong, and I'm not too sure why I feel it's wrong. Just get the feeling it is.

The story is about two brothers who have 120 houses, and are on their way to their target of 200 houses.

The general theme of the article seems to be that the brothers believe this is a great time, and rent their properties to young professionals in the main....those with debt who are unable to afford to buy housing.

They buy their houses in cash, and then as soon as they have the properties, refinance them to buy to let loans. This is so they make themselves more attractive to the seller, than the FTB who needs to spend longer sorting out a mortgage. So they are directly competing with FTB's. However, they say they don't come across FTBs as competition, it's usually other investors.

One of the brothers feels sorry for FTBs, but blames the government. He's also, obviously, disgusted at the capping of housing benefit - what landlord wouldnt be.

You may liken them to the wilsons. However, I think they are more savvy, and if what they say is true, do care a little more about their tenants and are looking into offering longer secure tenancies.

Pricedout states it's unfair for todays generation to be asked to pay for the brunt of the downturn.

They do have a good point. Absolutely nobody is looking at more security for renters. And nobody wants to.

Interesting article anyway.....just can't help but feel as if I don't particularly like their business. Dunno what that is really. Just the way some landlords are cheering on the misery as it means they can make the misery worse and take more from those priced out.

http://www.guardian.co.uk/money/2011/jun/04/generation-rent-the-winners

Turnbull2000

At least with the continental model of institutional investment the tenants have a stable, long term home and the returns are shared out amongst investment funds and pensions. Here though, tenants have no stability and the returns fall in the hands into a growing number of individuals who then snap up more and more properties. We're on our way to the two-tier rentier society IMO, and have been saying this for a few years now. Almost anything suitable for first-time buyers is going to investers in my area.

Pity there's not a prayer of revised tenancy laws in favour of security and protection. There's more chance that the campaign for swifter evictions achieving success, as those that make the rules would stand to benefit.

Kohoutek

What point are you trying to make? It doesn't sound like they are competing with FTBs to me.

"In general, we don't buy the sort of property a first-time buyer would be interested in. They're often semi-derelict and require a level of refurbishment that would be unmanageable for most people. They tend to need an investment of £20,000-£30,000 to bring them up to scratch. In any case, we don't tend to come across first-time buyers when we're buying – it's purely other investors."

macaque_2

Our borrowings have never exceeded 40%......... We start with six-month assured shorthold tenancies, and if it goes well we offer our a longer term, with a number on three and even five-year tenancies."

Professional landlords. Good luck to them.

ruggedtoast

The downside risk to the property market is that if things start to go pear shaped people like this will bail out in short order. Ultimately things like this dont benefit the country, btl is profitable because tenants have little security. Ultimately people wont buy into capitalism if they can see from the outset that it wont work out for them.

For example when I was in school it was all, "Study and go to university or you'll end up on the dole or working in Tesco."

Well, a lot of people I grew up with who went on the dole or worked in Tesco ended up doing really well out of it in the end due to council tenancies, right to buy, easy credit and unchecked HPI.

What would you say to school leavers now; work hard in school otherwise you wont get to uni so that you cant take on £50,000 of debt and then spend the rest of your life paying it off while renting from a btl slumlord on 6 month ASTs and working a succession of temp jobs hoping you wont be outsourced?

Not very inspiring is it.

geneer

According to JulieQ and a few others, people like those brothers will now buy up every single spare property in the UK thus keeping house prices rising when demand from owner occupiers falls.


Which is a bit strange, as the build up to the financial meltdown took place over less than a decade.

Last I checked, prior to that, there were plenty of properties avaliable to owner occupiers.

Cleaver

Graham_Devon wrote: »

While I realise this is just business, I do find it somewhat wrong, and I'm not too sure why I feel it's wrong. Just get the feeling it is.

What do housing, water, gas, electricity, food, education, health and the like all have in common?

I think they're all things that we all have a basic right to yet there is a capitalist layer above the basic provision. So for example, if you don't work then you get a basic house and then money so that you can buy water, gas, electricity, food etc. Education is a right for younger people and is paid for by society.

But above this basic level there are companies and organisations profiting out of all of the basic human needs. If you have lots and lots of money you can be educated at the best universities, get medical care privately, eat food from the best places, buy massive houses etc. etc. So whilst people have desires to do these things there will be companies providing products and services to meet these needs. It doesn't always sit comfortably, but that's the way of the world isn't it?

I guess that the government has switches and levels that it can use to tweak these areas and, to a certain extent, they do. But unless you have a completely socialist system, we'll always have companies and individuals making money out of basic human needs. Housing isn't, nor shouldn't be in my view, any different really. If these chaps have a business plan that works then good luck to 'em. If people don't like it, don't rent from them.

PasturesNew

These guys started out under the "old rules", before BTL. And they've not let greed muddy the waters of "a proper business".

Their leverage is low, their expectations not over-grabbing - and they're buying up sh1tholes and renovating them.

So I'd say they're that rare breed of 'professional landlords', the way things used to be done.

Some you see on HutH are teams of two working like headless chickens to snap up anything with a front door, before painting it magnolia and filling it as an HMO, as they bank the cash and drive off in their Bentleys/Ferraris.

These are just a couple of grounded blokes who happens to just plod along and who just happen to have picked up one a month along the way.

Compare their £16million, with £5million of borrowing to the Wilsons' pile-o-cr4p.

And, in most areas in the Midlands, it's still possible to afford many places, so 'not so bad' as those who own entire towns in the South East, say.

PasturesNew

I guess the real question is .... if a couple of blokes buy 1/month across a whole region isn't a problem.... just how many "couple of blokes" are out there doing it.

Le_Chuck

Kohoutek wrote: »

What point are you trying to make? It doesn't sound like they are competing with FTBs to me.

"In general, we don't buy the sort of property a first-time buyer would be interested in. They're often semi-derelict and require a level of refurbishment that would be unmanageable for most people. They tend to need an investment of £20,000-£30,000 to bring them up to scratch. In any case, we don't tend to come across first-time buyers when we're buying – it's purely other investors."



Thats exactly the sort of house that both I & my parents bought as FTB's. So would say they were competing with FTB

debtistheft

macaque wrote: »

Professional landlords. Good luck to them.

Exactly. If we had more landlords running a professional letting business rather than the fly by night BTL then the UK's mad obsession with houses would die off. Get yourself a lendlord like this and instead of languishing in debt all your life, invest your money in a balanced and diverse portfolio.

You can always buy a retirement home at the end, but you will have saved all the money from the constant buying and selling as you move up and then down the ladder, the constant mortgage arrangement and redemption fees and the never ending grasping of all those professionally connected to the property market.