Happened to stumble upon this....

shortchanged_2

while reading another thread by another poster.

http://www.telegraph.co.uk/finance/personalfinance/investing/9086860/Rising-number-of-landlords-making-a-loss-on-their-buy-to-let-property.html

So what do all the resident LL's on this site make of this report?

I have to admit it was a bit unexpected seeing as how BTL seems to be the best thing since sliced bread on here.

VfM4meplse

I have only just started to turn a small profit on my BTL - but have had years of accrued losses to offset.

The sooner house prices rise, and I can write off a bad job, I shall sell. I wouldn't recommend it to anyone, but then I never really took it that seriously - was supposed to be a nest etc but tbh I would rather take my capital out sooner rather than later.

IronWolf

It will only get worse as interest rates rise over the years. As with any investment, if you don't do your research then you stand to lose out. That's probably what happened to these landlords, jumping on the bandwagon without properly sitting down and doing the sums.

One thing in that article struck me

"This may be because the number of landlords reporting a recent void period in their property fell five percentage points – from 41pc in the third quarter of 2011 to 36pc in the fourth quarter"

I never knew 36% of landlords reported a recent void, thats astonishingly high!

BigAunty

According to the benefit and housing board, too, landlords earn easy money but seemingly fail to remember void periods, letting agent fees, repairs, tax on rental income, capital gains tax, etc.

Out of two friends who let their former residential properties out for a few years, one barely made any profit after costs but got some equity out of the property price bubble while the other one had theirs pretty much trashed by their tenants after they leased it for three years to Brighton council for their homeless tenants and didn't enjoy much in terms of property inflation.

Not proper buy to let properties with a long term investment objectives but certainly not the riches that tenants on MSE grumble about who see landlords as swindlers.

Mr._Pricklepants

This article is about portfolio landlords (>20 properties).

homelessskilledworker

Mr._Pricklepants wrote: »

This article is about portfolio landlords (>20 properties).

and.........

shortchanged_2

Mr._Pricklepants wrote: »

This article is about portfolio landlords (>20 properties).

Are the returns not the same if you own 1 or 2 properties or more than 20 then?

UrWntr

Noob question from me: how is the loss calculated?

Let's create a fake scenario:

- Landlord buys a house worth £200k
- Landlord puts down a deposit of £50k giving a 75% LTV
- Finds a BTL mortgage at 4%
- Mortage repayments (capital and interest) are approx £800pm
- Landlord is able to collect rent of ~£800pm (could be slightly more or slightly less)
- Landlord has 12 months of void over a 60 month period.

This means that the Landlord has collected £38,400 in rent but has paid out £48,000 in mortgage repayments. However, 19.5k of the 48k is capital repayment so can be realised in the form of equity, rather than losses. Therefore the LL has only paid £28.5k in interest payments.

This means that even with a whole year of voids over a 5 year period, the LL has made a gross profit of 10k.

Is the equity ignored by The Telegraph when reporting these "losses"? What am I missing? Thanks.

shortchanged_2

UrWntr wrote: »

Is the equity ignored by The Telegraph when reporting these "losses"? What am I missing? Thanks.

Don't most BTL'ers have IO mortgages?

Mr._Pricklepants

shortchanged wrote: »

Are the returns not the same if you own 1 or 2 properties or more than 20 then?

Probably not because the article says

a larger portfolio of property brings greater exposure to risk

It's not the average BTL

UrWntr

shortchanged wrote: »

Don't most BTL'ers have IO mortgages?

I don't know. Maybe that's what I'm missing?

In that case though their repayments would be much lower (e.g. £600pm on a 200k house in my example). They should be able to charge much more than £600pm rent on a 200k property.