Happened to stumble upon this....

shortchanged_2

Exposure to risk is relative though. Yes the more you invest the more you have to lose.

However if BTL businesses are making losses in the current economic climate, which is heavily favouring them at the moment with very low interest rates and a lack of FTBers then surely that does not bode well in the future.

Is that why many of the LL's on here are so keen on ramping up property prices and trying to get the FTBers into the market so they can sell up and get shot of their fantastic investments?

Lewis1967

VfM4meplse wrote: »

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.

What if we have not yet touched bottom in this property bear market?

It is very dangerous all these BTLers hoping that property will start a new bull market. It certainly looks like further falls on the way.

Lewis1967

"the biggest rise in the number of portfolio landlords making a loss " How can so many be making a loss already when IRs have not yet gone up and rents havent yet fallen after the 480wk benefit caps can no longer be put off.

MrRee_2

Depends on when portfolios were bought .... I was buying BTL's a long time before they were fashionable.

Way, way, back in the 70's 80's 90's - there is no way I can lose, no way at all.

shortchanged_2

MrRee wrote: »

Depends on when portfolios were bought .... I was buying BTL's a long time before they were fashionable.

Way, way, back in the 70's 80's 90's - there is no way I can lose, no way at all.

So are you suggesting BTL is currently not a very good option MrRee?

Thrugelmir

UrWntr wrote: »

- Landlord puts down a deposit of £50k giving a 75% LTV

Average BTL does not have this level of capital at their disposal.

More than likely they've released equity from another property to fund the purchase. So true interest cost is a lot higher.

LL's fail to put aside funds for longer term expenditure on items such as bathroom and kitchen replacement, boilers, double glazing etc.

If money is not reinvested in the property then its resale value will obviously be lower.

myhouse_2

UrWntr wrote: »

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.

There are a bunch of things people tend to forget when they are thinking of BTL:
- capital gains
- income tax
- maintenance costs (which are always higher than expected) including gas/electric checks, roof replacement, kitchen and bathroom replacement (e.g. every 15 years)
- bank charges (e.g. for permission to BTL)
- general redecorating and wear and tear
- tenant damage repair including the odd thing that gets nicked
- the fact that your deposit of £25,000 could be earning interest in another investment instead of stuck in an illiquid asset.

Not to mention the time you need to spend doing these things.

julieq

Well I think I'd take 7% average yield and a 92% chance of making a profit in a quarter, which is what the article is actually explaining is happening to portfolio landlords. That's not a bad return. And it's better than the 5.9% which is the average across all landlords, so it's proportionately better to be a portfolio landlord than any other kind.

Remember, a quarter is only 3 months. One lumpy piece of maintenance expenditure or a few voids can easily create a quarterly loss. That doesn't mean there's a 12 month loss and since the average yield is 7% it's actually pretty unlikely any portfolio landlord will be "feeling the pinch" over longer periods. Looks like good business to me.

Classic case of confirmation bias really from a carefully spun press release feeding the bear idea that landlords are all overleveraged and on the edge of collapse. Bears of course lap it up without really understanding what the numbers are saying, and then go off in a frothy frenzy around the idea that people are be making a loss despite low rates, high rents and all the rest. Over a short period, transient effects are causing a cashflow issue in a small number of cases. That's all the article is saying.

The sample size is only 550 too across the entire market, so the small number of portfolio landlords in relation to the overall total means that the noise impact of single cases is disproportionate.

shortchanged_2

Bit of a shock for you was it julieq?

julieq

Shortchanged, it doesn't mean what you think it means. You're just too thick to understand that.

92% chance of a profit over 3 months, 7% yield over a year. Good business.