Is it still possible to make a profit on BTL???

Norroy

In answer to the original question, it is possible to get rental income which more than covers interest only payments on an 85% LTV mortgage.

Basically the smaller, and dare I say inferior stock, will produce the highest yields. A one bed flat in an ex-coucil block will in general produce a much higher yield than a 4 bed Victorian house in the best part of town. But of course this difference in income is likely to be more than offset by lower capital growth and extra 'hassle'.

Putting money towards a BTL mortgage is not the end of the world, a convential pension plan involved paying money each month for no immediate benefit.

IMO capital values in London and the South East will keep on rising. I am far less bullish about rents.My strong hunch is that yields will continue to fall towards the 2-3% level.

Generali

Norroy wrote: »

Putting money towards a BTL mortgage is not the end of the world, a convential pension plan involved paying money each month for no immediate benefit.

What you say is true I believe, however, it seems quite risky unless you have a lot of cash in savings - if you have to subsidise the rent each month and you don't have a decent cash cushion; lose your job and you're shafted. You have to sell at whatever price you can get.

Norroy wrote: »

IMO capital values in London and the South East will keep on rising. I am far less bullish about rents.My strong hunch is that yields will continue to fall towards the 2-3% level.

Assuming that you believe that the drop in yield will be caused by a rise in prices and if interest rates remain unchanged, a 2 bed flat in an ok part of London that would be worth at least £400k under this scenario. That implies a subsidy from the LL to tenant of about £1000 per month. Is that sustainable? Personally I doubt it but anything is possible.

BettiePage

pbradley936 wrote: »

Would I have had 270K if I put 30K in a bank account?

...




So any form of risk free investment wouldn't return anywhere near what you have, the big mistake many people make is assuming what has happened to you, will happen to them, no matter when they enter the market.

As with any investment, timing is everything.

So do you think you could do it again if you were buying in todays climate?

Generali

That is the joy of gearing in a rising market. Of course, if prices fall then the reverse applies - you can get wiped out very quickly.

Mrs_pbradley936

BettiePage wrote: »

So do you think you could do it again if you were buying in todays climate?

No, I could not do it today. The figures for buy v renting are as follows agin from another thread on the topic :-

Unlike others I have no idea what the housing market will do in terms of crashing, slowing, staying the same or rising. I have an interest because I own property so I just did a simple calculation to illustrate the costs between buying and renting. I am using my own property as an example. It is a two bed flat approx 12 years old within easy commuting distance to London, it would cost around £140K to buy.

It currently rents for £675 a month. It would cost £902 per month to buy.

(100 per cent mortgage and 6% interest rate over 25 years)

In addition to the mortgage the buyer would have to pay the service charges of £80 per month.

When I bought the flat it cost £60K (almost 12 years ago)

To borrow and buy at those prices would have cost £386.50 per month (conditions same as above for easy comparison).

Looking at the figures I do not think that property prices can continue to rise because most people are not happy about being strapped for cash each month to provide a roof over their head when renting is a cheaper alternative. Thoughts anyone?

dannyboycey

This article is on todays BBC website.

BTman

pbradley936 wrote: »

Looking at the figures I do not think that property prices can continue to rise because most people are not happy about being strapped for cash each month to provide a roof over their head when renting is a cheaper alternative. Thoughts anyone?

Couldn't agree more. I'm in that exact situation, rent is £550 a month, yet it would cost me almost a grand to buy where I'm living now (interest only, so still renting from the bank anyway). That's without the extra cost's such as stamp duty, building's insurance, life insurance, maintenance costs, and mortgage interest rates going up even more..
Also, if the neighbours are complete nutcase's I'm not stuck living next door to them for long..
If you own a house outright or have a small mortgage then BTL is still viable, but it amazes me how many people come onto this board looking to borrow hundred's of thousands to buy new build flats thinking there's still easy money in BTL...
And don't forget for every 100K borrowed you pay back nearly 200K..

They think because their friend's or someone down the pub has made a load of cash in the past 10 year's (and they like to brag about it) they will too...

Generali

dannyboycey wrote: »

This article is on todays BBC website.

It's dated August 2004! If investors were having trouble getting BTL numbers to add up then, with several interest rate rises since then as well as house prices rising things must be impossible now. Or are house prices not really rising in most areas? That's a claim I've heard.

dealornodeal_3

laurence2163 wrote: »

Does anyone else think that a fall in house prices is on the cards?

Given the number of BLT properties held at present. A couple more interest rate rises is bound to make it unsustainable, cashflow wise, for a number of investors. Sudden rush of properties on the market leading to a fall in prices?

Yes I very much think that there is going to be a Correction in Property Prices, and I believe its not far away. FTB cannot afford to get on the ladder, some are but placing themselves in danger of serious debt!

At present Im shying away from BTL and the Stock Market, And Stocks and Shares ISAs! I have no confidence in this economy!

RabbitMad

Generali wrote: »

Very interesting. 2 questions:

1. What do you deem a reasonable amount of capital appreciation? RPI? RPI+3%? RPI=7%? Or do you look at nominal gains, i.e. the nominal change in the value of the asset ignoring inflation?

2. Why do you think rents will rise faster than inflation over the next few years?

1. I 've read somewhere that houses have over the long term increase at AEI + 3% (3% faster than wages go up). For my LTB I wanted 2% capital increase each year plus the rent to cover a REPAYMENT mortgage. I've got that (just with the last 3 interest rate rises and the LA fees.) While this continues I'll be happy.

2. When I rented 6 years ago I was paying similar to rents that are being charged at the moment (in my area) and that amount was more than I paid on my 1st mortgage (when interest rates were at the heady heights of 6%). When I came to let my LA suggested we stick £30 on the monthly rent that similar properties were being marketed at. Our was snapped up on the 1st day. I think house prices have levelled off (in my area) and with the rise in interest rates and house prices I think many Private landlords will be profit taking (reducing the number of rental properties) or putting the rent up to cover these extra costs.

One thing I have noticed on here is nearly everybody seems to expect BTLs to be on a 75 to 80% mortgage. I think if your BTLing with this sort of mortgage your in very serious danger of coming a cropper.

I know of a case where one guy had 10 BTLs but his outgoings (excluding voids) was £500 a month more than his income. When he has to sell he'll have to sell cheap and some FTBs will get their own home.