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BTL, could we do it?

2456710

Comments

  • sortofok
    sortofok Posts: 515 Forumite
    You are indeed correct Rabbit.

    I would just add that the the stakes in this gamble are currently too high.
    Which is why in my opinion now is not the time to be entering this market.

    I think I may have mentioned this elswhere. ;)
    Whenthemusicstopsmakesureyou'renotleftstanding
  • catwoman
    catwoman Posts: 251 Forumite
    100 Posts
    Ok what if the situation didn't involve our daughter and we just bought somewhere to keep as an investment and to go towards our pensions.
  • catwoman wrote: »
    Ok what if the situation didn't involve our daughter and we just bought somewhere to keep as an investment and to go towards our pensions.

    The answer is still in the above posts. Taking your daughter out of the equation does not change any of the above situations.

    Can you see your way through all of the pitfalls in post 9?

    Only you can make that decision.
    Don't lie, thieve, cheat or steal. The Government do not like the competition.
    The Lord Giveth and the Government Taketh Away.
    I'm sorry, I don't apologise. That's just the way I am. Homer (Simpson)
  • sortofok
    sortofok Posts: 515 Forumite
    Do yourself a favour my feline friend. Look at your income. Do you honestly believe it enables you to own two houses?

    With all the unforseen expenses and hassle.

    Do not look upon your home as a cash machine. That is the road to ruin.
    Do not be seduced into a lifestyle that will take up valuable time and money better spent on your daughter.

    In 5, 10 whatever years time after you've saved up for a bit and maybe increased your income houses may once again be affordable.

    Now is not the time.
    Whenthemusicstopsmakesureyou'renotleftstanding
  • RabbitMad
    RabbitMad Posts: 2,069 Forumite
    not knowing how old you are its hard to say. You might have longer than 17 years to go to retirement in which case the sums might be more in your favour.

    Investing in property is the correct investment for some people but not for others.

    I think that at this moment the sums (in my area anyway) do not add up. a 10-15% dip in values or a cheeky offer on the correct property and then they would.

    Have you considered a holiday let somewhere you like. That way you get the benefit of it when its not being let out?
  • RabbitMad wrote: »

    Have you considered a holiday let somewhere you like. That way you get the benefit of it when its not being let out?

    :mad:
    Have you considered the effect that will have on the local community where you buy?
    :mad:
  • catwoman
    catwoman Posts: 251 Forumite
    100 Posts
    Thanks for the replies, I think it may be something we look at in the future, we are only 34 so I guess alot can happen in the years to come.
  • ds1980
    ds1980 Posts: 1,213 Forumite
    sortofok wrote: »
    ds1980 wrote: »
    In 17 years that flat will be worth far more tahn whatever you'd have paid for it.
    Not necassarily. I bought a flat in 1987 for 26k. I am currently in the process of selling it for..... 32k

    Thats pathetic im not buying in the doldrums so thats irrelevant.

    IN 17 years that yields will be more like 50% not 10% as you should have paid off the mortgage by then and any rent - fee's is profit.

    Not necassarily. Yields have been falling for years and an IO mortgage needs to have capital repaid
    Of course it will, this is only if your doing repayment of course but there are properties that you can still get the returns from even with repayment mortages at 6% and with only 5% deposits...trust me.

    You don't pay for the mortage in the first place as someone else is doing it for you.
    There is always someone to rent your place. fact there will never be enough houses in our liftinme to fulfil demand.
    Not necassarily. The flat could be empty. And don't forget most peoples deposit is actually a loan (MEW) which also needs paying back.

    Im just about to buy 2 more with far greater yields than 10%
    Im a hardened btl'er and yes the yields are above 10% or id be putting morre of my money into other inetersts sucha sart, investments, savings etc.

    Not necassarily. There are numerous hidden costs that you haven't even accounted for.

    QUOTE]

    I am speaking from experience. Beware of debts masquerading as investments.

    I appreciate that comment but we've got enough behind us now to be able to afford all of these. I havn't just kept all the one sive bought some have been sold and i never release equity from any of my houses....thats not to say that i might not have to but were doing fine
  • Guy_Montag
    Guy_Montag Posts: 2,291 Forumite
    1,000 Posts Combo Breaker
    I thought yield was return/value of investment

    Thus if you buy a flat at 20k & rent it for £2k, you get a yield of 10%
    If the flat doubles in value to 40k, the yield then drops to 5%

    perhaps one of our city boys could explain it to me.
    "Mrs. Pench, you've won the car contest, would you like a triumph spitfire or 3000 in cash?" He smiled.
    Mrs. Pench took the money. "What will you do with it all? Not that it's any of my business," he giggled.
    "I think I'll become an alcoholic," said Betty.
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    Yield = income generated by an asset each year / market value of that asset x 100%

    E.g. buy a house for £150k. Rent it out for £800pcm.

    Annual rent = 800x12 = 9600
    Gross yield = 9600/150,000x100%= 6.4%

    Value of house rises to £200k, rent rises to £820 pcm

    Annual rent = £9840
    Gross yield = 9840/200,000x100% = 4.92%

    The sums are usually a bit more complicated though in reality. Your investment in the flat is your deposit, not the full market price of the house although your risk is on the full value.

    You then have costs of ownership (e.g. mortgage interest, insurance, marketing) and risk (voids, roof falling in, tenant trashing the place or not paying rent).

    I think the correct way to look at BTL is to model it as a business: work out the cashflow on it (income-costs) and then stress test your business model in a realistic way.

    Check what happens if you get no rent for 6 months. Or if interest rates rise to 8% or 10%. Or if rents fall by 20%. Or house prices fall by 40%. Or insurance prices double. Or if you have to replace the kitchen, bathroom and heating system all in the same year.

    Those are probably all realistic 'worst case scenarios'. If you can't cope with most or all or these occuring (at least separately - you'd be pretty unlucky to see rents and house values plummet in the year that you replace all the high value items in the house!) you should think hard about whether it is the right investment for you.
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