I Don't Understand

RenovationMan

chewmylegoff wrote: »

That is oddly similar to andy.m's answer, have you been copying his homework again?

We must have somehow got the same answer, honest sir!

CLAPTON

why are there empty houses in good areas for years and years?

friend on mine lives in London commuter belt

detached house next door worth at least a million

empty for years (say at least 20) except for shortish periods when the owner moves in from his other (larger) house to stop the council ceasing the house.

Brallaqueen

I never find these bargains, I must be missing something

Out,_Vile_Jelly

If they all tarted the properties up and doubled/tripled the rent, would there actually be enough tenants who could afford that price? An economy can presumably only support so many luxury flats/sports car dealers/5 star hotels.

art_for_arts_sake

He's happy, you're happy. And you're questioning it? Not everyone's obsessed with making a fortune. I'd just be grateful that he took your offer of a reduced rent, or did the condition of the property influence that?

If you think the decor could do with being improved you could offer to do it at your own cost without taking a hit on rental costs.

FTBFun

Safeoutside wrote: »

Do you think property will have stopped falling in a year or so? If you think it will go lower still will you wait a little longer?

He's looking to buy in Australia, so the 450 pw benefit cap, end of the Olympics, and when all the repossessions are cleared up and interest rates go back to historical levels etc etc are all immaterial.

I can't comment on whether Australia has any silver deposits.

Loopgames

So he needs $20,000 to do it up plus the time in managing it. Isn't that the answer to your question as well?

"Why doesn't the landlord spend $20k doing his home up?" because he needs $20k to do it.

Next question please...:D

wotsthat

Generali wrote: »

So why do landlords do this? I can see the appeal of being a slumlord where you pack out a house with immigrants or students but I just don't understand why people don't spend a few bob and clean up.

I wonder if this is more prevalent in AUS than the UK for example.

In AUS they seem to still be in 'prices only go up' mode so extra rent to a landlord might seem like small change when compared to the riches they'll enjoy when they sell up. In the UK where prices are stagnating at best I'd expect landlords to be much more attentive to maximising yields.

Laziness is probably the correct answer though plus the inability, or simple lack of interest, to work out the breakeven point.

Generali

Safeoutside wrote: »

Do you think property will have stopped falling in a year or so? If you think it will go lower still will you wait a little longer?

I think that house prices have a long way to fall in Australia for a number of reasons: mostly because there isn't really a shortage of land or opportunities to build here but also because there is an absolutely outrageous treatment of loss making investments* here that will come to an end at some point which will make BTL a spectacularly unappealing investment everywhere except some FIFO** towns.

However, if you measure the losses over the period that I will own the property for, they will be negligible and also because I want to buy a home not an investment. Even in prices fall by 70% in real terms, I plan to own the next place for 40 years (I reckon 80 is a reasonable life expectancy for a fit non-smoker) and the fall is beggar all over that period. Also I have to pay to live somewhere: I might as well pay the bank as my landlord and I can't move in with my Mum as she lives over 10,000 miles away!

Mrs Generali and I have all the children that we want so we're not likely to have that drop to a single wage thing that people with a lot of debt must fear. Also, Mrs Generali has started a new career which is very likely to prove both lucrative and secure in almost all circumstances.

I could see prices in Sydney falling by 30% in real terms on average, after all that's what's happened in the UK so far and prices are still falling in real terms.

In the 'mortgage belt' in West and South West Sydney (for those that know the city think Blacktown, Campbeltown, Paramatta, Fairfield and Kellyville) prices could well fall by 50% in real terms. Those aren't nice areas and they have been bid up hugely by people that simply can't afford to buy elsewhere. Those places will end up like Streatham in the 1990s I reckon.

I suspect that places like Woolwich, Balmain and Rozelle in the Inner West/Northern Suburbs and the likes of Coogee in the East and Manly will see smaller falls but they will see falls nonetheless. These are places where people want to live because they are handy for the city or by the ocean. My mate lives in Coogee and was watching the whales migrating as he waited for his bus this am. People will pay for that stuff but ultimately they have to compete with the cheaper suburb down the road for buyers.




*If you borrow to invest in shares or housing (and many other things) and make a cash loss you can directly offset that loss against your income. E.g. if I borrow $10,000 @ 10% to buy shares that yield 4% I get to reduce my income on my tax return by my $600 loss. Capital gains tax is payable when I come to sell but at half my income tax rate! My last place was bought for almost $1,000,000 and I was renting it for about $20,000 a year. As mortgage rates are about 6.5-7% over here the landlord was making a loss of almost $50,000 a year gross but he was probably offsetting that against his income on which he was paying a top marginal rate of 45% so the hit to his back pocket was a little over $25,000.

**FIFO = Fly In, Fly Out. It's a town where miners' families live and the miners commute to and from the mines on a weekly basis by plane.

Generali

Brallaqueen wrote: »

I never find these bargains, I must be missing something

We put in a lot of low ball offers to get a bargain. We also target houses that have been empty for a few weeks as after a while it costs the LL less to have a cheap tenant than no tenant.

art_for_arts_sake wrote: »

He's happy, you're happy. And you're questioning it? Not everyone's obsessed with making a fortune. I'd just be grateful that he took your offer of a reduced rent, or did the condition of the property influence that?

If you think the decor could do with being improved you could offer to do it at your own cost without taking a hit on rental costs.

I'm questioning it because it seems to be a lousy business decision.

As you say, we're clearly both happy with the deal otherwise we wouldn't strike it.

TBH I'm not interested in doing up his house for him. If it was dirt cheap then I might but the house is perfectly livable so why bother?

wotsthat wrote: »

I wonder if this is more prevalent in AUS than the UK for example.

In AUS they seem to still be in 'prices only go up' mode so extra rent to a landlord might seem like small change when compared to the riches they'll enjoy when they sell up. In the UK where prices are stagnating at best I'd expect landlords to be much more attentive to maximising yields.

Laziness is probably the correct answer though plus the inability, or simple lack of interest, to work out the breakeven point.

As I said in the OP, I lived in a couple of places that were the same in the UK. The flat in the Barbican was a joke. Their yield was only slightly over 2% and they could have doubled that by spending maybe 10 grand, probably not even that.

I suspect that you are right and the problem is one of laziness.