Buy to Let Mortgages

hollyblue

SloppySaver wrote: »

Anyone who is still investing in BTL is an idiot. Pure and simple.

You missed the boat over 2 years ago, you morons!

I think if you're into a long-term investment you've not much too worry about - prices may crash but they'll come back again in the longrun, in the meantime hopefully the rent pays the mortgage.

But hey what do I know, just my opinion or maybe I'm just an optimist

JoeK_3

MortgageMamma wrote: »

This is not necessarily my own thoughts on the matter but you may find this interesting....

http://www.mortgageintroducer.com/story.asp?storycode=20550&sectioncode=4&navcode=44

Does the article not imply that more and more landlords will get their fingers burnt?

Come on, let me have your opinions!

JoeK

Jonesya

There's a number of houses in my area advertised both for sale or for rent, on the advertised prices the yield is less than 5% which is less than the cost of capital - I think B2L was a cracking investment for those who got in early but it clearly no longer stacks up.

If demand for housing was really as strong as is reported and prices were sustainable then you'd expect B2L returns to have held up but strangely they haven't!

master_ian

I'm looking at B2L in East London...and have researched on a govt/council scheme guaranteeing to rent out your property for up to 5 years which includes full management (at no cost) and guaranteed rent even during void periods. The catch is the scheme is council run to house the homeless and disabled on DSS.

This will be my first purchase and in this case if my calculations are right and I buy at the right price the figures will just about add up for the first 5 years as there will be no mgmt fees and void periods to cover.

I can then re-assess and possibily extend in summer 2012.

JoeK_3

hollyblue wrote: »

I think if you're into a long-term investment you've not much too worry about - prices may crash but they'll come back again in the longrun, in the meantime hopefully the rent pays the mortgage.

But hey what do I know, just my opinion or maybe I'm just an optimist

How long is "a long term investor."

I agree that a small BTL investor can ride the storms better than a larger one in a downward spiral. Think about the portfolio investor that receives an ever decreasing smaller annual yield, as demand for rented properties decrease and a 'property crash' and unable to sell.

A classic re-run of the 1988-89 negative equity property slump.

JoeK

bon_3

Maybe you can help
Please refer to post at forum:'House buying, Renting,Selling and Property Prices'Today 10:26 AM by bon.
I think I have an idea but is it viable.
I know nothing about buy to let mortgages so this idea is based on certain assumptions:
PROPERTY A is original property
PROPERTY B is new build
PROPERTY C Is a flat that I do not own
1) I find PROPERTY C
2) I arrange buy to let mortgage for PROPERTY C at sale of PROPERTY A
3) Proceeds from sale of PROPERTY A pay of all debts except £58,000 mortgage.
4) £58,000 is paid for with buy to let mortgage.
5) Sale of PROPERTY A leaves renainder £18,000. This serves as deposit on buy to let mortgage.
6)We move in to PROPERTY B
7) Shouldn't have to pay capital gains tax?
8) Still have only one mortgage as debt?
PLEASE CONSIDER THIS IDEA AND IMPART ANY WISDOM YOU HAVE ON FLEXIBILITY IF APPROACHING BUY TO LET MORTGAGE, CAPITAL GAINS ETC.

Jonesya

JoeK wrote: »

How long is "a long term investor."

I agree that a small BTL investor can ride the storms better than a larger one in a downward spiral. Think about the portfolio investor that receives an ever decreasing smaller annual yield, as demand for rented properties decrease and a 'property crash' and unable to sell.

A classic re-run of the 1988-89 negative equity property slump.

JoeK

It's hard to draw an accurate conclusion - the larger investor is likely to have bought properties over a number of years so will have some paying an above average yield, offsetting possible losses on more recent purchases. Plus in the event of a price fall there will be more equity to cushion any fall.

Contrast that with a small B2L investor who's bought in the last year or two - potentially facing negative yield and negative equity.

It strikes me that it's not a question of the size of the portfolio but rather when you bought, hence how much you paid.

JoeK_3

bon wrote: »

Maybe you can help
Please refer to post at forum:'House buying, Renting,Selling and Property Prices'Today 10:26 AM by bon.
I think I have an idea but is it viable.
I know nothing about buy to let mortgages so this idea is based on certain assumptions:
PROPERTY A is original property

Is it your own domestic property or a buy to let?

bon wrote: »

PROPERTY B is new build

Is this a buy to let?

bon wrote: »

PROPERTY C Is a flat that I do not own
1) I find PROPERTY C

2) I arrange buy to let mortgage for PROPERTY C at sale of PROPERTY A
3) Proceeds from sale of PROPERTY A pay of all debts except £58,000 mortgage.
4) £58,000 is paid for with buy to let mortgage.
5) Sale of PROPERTY A leaves renainder £18,000. This serves as deposit on buy to let mortgage.
6)We move in to PROPERTY C
7) Shouldn't have to pay capital gains tax?
8) Still have only one mortgage as debt?
PLEASE CONSIDER THIS IDEA AND IMPART ANY WISDOM YOU HAVE ON FLEXIBILITY IF APPROACHING BUY TO LET MORTGAGE, CAPITAL GAINS ETC.

Assuming property A is a buy to let, there will be a potential capital gains tax liability, depending on how it is owned.

What happened to property B?

Other than a capital gains tax liability question, what else is the question?

JoeK

JoeK_3

Jonesya wrote: »

It's hard to draw an accurate conclusion - the larger investor is likely to have bought properties over a number of years so will have some paying an above average yield, offsetting possible losses on more recent purchases. Plus in the event of a price fall there will be more equity to cushion any fall.

Contrast that with a small B2L investor who's bought in the last year or two - potentially facing negative yield and negative equity.

It strikes me that it's not a question of the size of the portfolio but rather when you bought, hence how much you paid.

Some nice point's brought out here but as most BTL landlords have stripped out the equity from the properties to finance other purchases, the equity is not now there.

For those with larger BTL portfolio's that have maintained the equity holding, they would be safe.

JoeK

SloppySaver

master_ian wrote: »

I'm looking at B2L in East London...and have researched on a govt/council scheme guaranteeing to rent out your property for up to 5 years which includes full management (at no cost) and guaranteed rent even during void periods. The catch is the scheme is council run to house the homeless and disabled on DSS.

This will be my first purchase and in this case if my calculations are right and I buy at the right price the figures will just about add up for the first 5 years as there will be no mgmt fees and void periods to cover.

I can then re-assess and possibily extend in summer 2012.

I'm sure this would be a great opportunity for the local council - housing stock with little outward investment. However let us look at YOUR opportunity...

You buy a property and the coucil sticks some homeless wino/crack head in there who may or may not pay his rent but that doesn't matter as the council pays you (I assume). He becomes a problem in the area and the nice families move out and crap ones move in, bringing their own problems. Eventually after your 5 years is up the area looks like beirut and your house has depreciated in value. You can't get the scumbag out of your house without a court battle and he is entitled to legal aid. Nope, I think you should save your money and invest elsewhere pal.