Happened to stumble upon this....

shortchanged_2

wotsthat wrote: »

We can pretend all we like that all BTL's are on high LTV IO mortgages and that an interest rate rise or price fall is going to wipe them out and lead to a flood of cheap houses. It's a fantasy though.

I don't think anyone is saying that all BTL's are on high LTV IO mortgages, but I wouldn't be surprised if there is quite a large number that are. Particularly anyone that has got into it in the past 5 or 6 years.

Graham_Devon

wotsthat wrote: »

If there's a 92% chance of a profit in 3 months and 7% yield over a year that sounds like a good business. Certainly better than my pension has done.

If the yield is 7% and capital borrowed at 4% then there's plenty of cashflow to pay down some capital. No need to ingore capital depreciation either - at the end of the mortgage term the landlord has 100% equity, someone else has paid for it and the chances are high that there's plenty of profit ongoing.

I'm not a particular fan of BTL and would prefer to see owner occupiers increasing in number rather than falling but the business case for BTL is pretty compelling. The numbers clearly back this up.

I'm getting bored of saying this now but it's a BTL dream at the moment. Increasing rents, decreased competion from owner occupiers and lower prices - rich people are mopping up cheap houses and getting poorer people to pay for them.

We can pretend all we like that all BTL's are on high LTV IO mortgages and that an interest rate rise or price fall is going to wipe them out and lead to a flood of cheap houses. It's a fantasy though.

Firstly it's not a 92% chance of profit over a three month period.

Secondly, how many landlords have repayment mortgages? Especially portfolio landlords. Would be a stupid decision to take.

IronWolf

7% rental yield does not equal 7% profit, it doesn't account for costs. That's like using EBIDTA to value a company which only a fool would do.

Of course the likes of julieq like to make it seem as straightfoward as 7% rental yield is better than 3% in a bank account, but real investors understand the difference.

wotsthat

Graham_Devon wrote: »

Firstly it's not a 92% chance of profit over a three month period.

Secondly, how many landlords have repayment mortgages? Especially portfolio landlords. Would be a stupid decision to take.

Didn't know you were such a fan of IO mortgages.

I thinking running a BTL using a repayment mortgage system is actually quite sensible rather than stupid. When I've done the sums it seems that someone else improves the capital position month on month and provides a monthly yield too. At the end of the mortgage the BTL owns 100% of a property and somebody else has paid for it.

I'm quite a long way from being a fan of BTL but if anyone reads the article and concludes that BTL's are teetering on the edge of solvency then I'm afraid they are on another planet (probably the same one where all homeowners are going to sell up if there's a 0.5% increase in base rates).

shortchanged_2

wotsthat wrote: »

Didn't know you were such a fan of IO mortgages.

I thinking running a BTL using a repayment mortgage system is actually quite sensible rather than stupid. When I've done the sums it seems that someone else improves the capital position month on month and provides a monthly yield too. At the end of the mortgage the BTL owns 100% of a property and somebody else has paid for it.

I'm quite a long way from being a fan of BTL but if anyone reads the article and concludes that BTL's are teetering on the edge of solvency then I'm afraid they are on another planet (probably the same one where all homeowners are going to sell up if there's a 0.5% increase in base rates).

Which is probably the case for the BTL'ers who had the properties pre boom. They may well have repayment mortgages on those properties.

I think it is the people who got into BTL over the past 5 or 6 years are likely to be the highly leveraged ones with IO mortgages, but then again I could be wrong. But if my theory is correct then it is these people who could be in serious trouble, particularly as their 'assets' are depreciating.

property.advert

shortchanged wrote: »

Which is probably the case for the BTL'ers who had the properties pre boom. They may well have repayment mortgages on those properties.

I think it is the people who got into BTL over the past 5 or 6 years are likely to be the highly leveraged ones with IO mortgages, but then again I could be wrong. But if my theory is correct then it is these people who could be in serious trouble, particularly as their 'assets' are depreciating.

I don't know why you are so worried about price fluctuations. The mortgage is not dependent upon ongoing valuation except if remortgaging and not sorting that out more than short term is foolish.

As for interest only, I suspect most would take this option. Not necessarily because they could not afford to repay the loan month on month but because in essence, it does not have to be repaid. Inflation would eat away at it, there would be capital appreciation over time and with multiple properties, capital could be released by the sale of one after some time.

During ownership it would be sensible to have invested in a property which could cover its repayments after all expenses as a bare minimum at inception with rising rents bringing an income over time if not from the beginning. Of course this may require less gearing which is where many fall down I suspect.

shortchanged_2

property.advert wrote: »

I don't know why you are so worried about price fluctuations. The mortgage is not dependent upon ongoing valuation except if remortgaging and not sorting that out more than short term is foolish.

As for interest only, I suspect most would take this option. Not necessarily because they could not afford to repay the loan month on month but because in essence, it does not have to be repaid. Inflation would eat away at it, there would be capital appreciation over time and with multiple properties, capital could be released by the sale of one after some time.

During ownership it would be sensible to have invested in a property which could cover its repayments after all expenses as a bare minimum at inception with rising rents bringing an income over time if not from the beginning. Of course this may require less gearing which is where many fall down I suspect.

Is it easy to remortgage a depreciating asset?

Jimmy_31

shortchanged wrote: »

Which is probably the case for the BTL'ers who had the properties pre boom. They may well have repayment mortgages on those properties.

I think it is the people who got into BTL over the past 5 or 6 years are likely to be the highly leveraged ones with IO mortgages, but then again I could be wrong. But if my theory is correct then it is these people who could be in serious trouble, particularly as their 'assets' are depreciating.

Your theory is a reality in my neck of the woods.

Lots and lots of new build BTL apartments and houses are now on the market at a lot less than was paid for them.

Not many are selling and the repos started a while back.

Im starting to see a few "old build" BTL properties now coming onto the market and having 3 or 4 big price drops in the first 4 to 6 weeks of being for sale to try and shift them asap.

tartanterra

The original article uses data from an independent market research company.
There is data to support both sides of the debate, i.e.

BDRC Continental’s research reveals that landlord sentiment remains upbeat about the prospects for the private rental sector, with 80% saying that they feel positive about being a landlord.

or

This is the highest level we have seen of landlords with 20-plus properties making a loss, and the biggest increase between one quarter and another.

Whichever side of the argument people are on, they cherry pick various parts of the data to push their own viewpoint; fair enough, that's only to be expected.

What I don't get is this:

nearlynew wrote: »

Doin't forget that the majority of BTLers (particularly more recent entrants) haven't got a pot to p155 in.

I mean, it's just made up rubbish, isn't it? You're claiming the majority (80%, 90%?) of landlords are virtually bankrupt.
Where is the data to support this. It's just made up nonsense.
Can't you debate a point without reverting to fantasy?