The Moral of a BTL.....?

chucknorris

l_wr wrote: »

Some things to be mindful of when considering entering the BTL market for the first time.
1. It is becoming a heavily saturated market.

The number of homes hasn't significantly increased so the demand for rentals is still there.

2. Interest rates are at their lowest for 300 years and could (will) rise from here, causing costs to rise for many homeowners including BTL's.

Yes interest rates are very low but when they return to normal, interest rates will not be high, I will go from high profits to normal profits. Yes I have owned for some time and that is why they are very profitable but it is a long term investment and others who stay in the market for a long time will profit too.

3. House prices in the UK are one of the most expensive in the world compared to incomes. At 6.5X (£168K divided by average salary £26K) it is 3X above the 100 year average of 3.5X.
You could see a large fall in your capital value in coming years, once the governments loan support scheme peters out.

House prices are in the early stages of recovery, they are about to rise.

4. Student numbers are falling due to the heavy increase in fees.

Non students rent too (I don't actually rent to students).


5. Inflation is rising faster than peoples wages, meaning there is less disposable income amongst the working population.

Inflation is good for property investment. It not only increases capital value but also reduces the real cost of mortgage interest.


6. Housing benefit is unaffordable for this government and it is unlikely to continue at it's current level. It's a well known fact that many BTL's rely on housing benefit to support their ever increasing rent - once this crutch has been removed, rents will have to fall and asset prices (house prices) will fall with the lower rents - they are intrinsically interlinked.

As I said above (my responses in red) house prices are in the early stages of recovery and are about to rise.

ukcarper

l_wr wrote: »

3. House prices in the UK are one of the most expensive in the world compared to incomes. At 6.5X (£168K divided by average salary £26K) it is 3X above the 100 year average of 3.5X.

Not sure I've see any figure for 100 year average but the figure that has been used for earnings is not the straight average earnings you quote, but male full time and the figures are 5.2x now compared to long term average of 4.2x.

Pobby

Interesting debate. I also have a bit of a dilemma. Buying an interest into a relatives property and will be living there. Have a hous now with no mortgage. Firstly I need to think about what to do with it.

Looked and looked for a return. The old " low " of 5% would have been OK. Yet if I sell it the money is going to erode as I feel too old, having had shocks in the past, to go into any funds.

Now BTL is not for me. Don`t want the hassle. In principal the council has offered to lease it off me for emergency housing. Smaller return than the open market but the rent is safe, let or not, all checks are their responsibility as is the condition of the place. The income is certainly satisfactory.

It can be said that I am providing a useful service yet somehow still does not quite fit in with my comfort zone.

Mind you a total plonker. Didn`t buy FILs 3 bed council house near London for £12k early 80`s. I didn`t believe in selling off council houses.

atush

Here's what I think.

Landlords provide a service/commodity. A place to live. Students need (after first year when they are cast by most universities out onto the streets) a place to live. If the govt was housing people (and how much more tax would you have to pay if they did house every person who didn't want to own) then there would be no need for private landlords.

There are 2 kinds of landlords. Those who care their tenants have a good place to live that is well kept up, and those that don't. Who only care about how much they can get and don't care if the tenants live in squalor.

So, be the first kind, earn a decent amt for your money, and sleep easy.

grizzly1911

l_wr wrote: »

You could see a large fall in your capital value in coming years, once the governments loan support scheme peters out.
4. Student numbers are falling due to the heavy increase in fees.

I thought the highest number ever will be starting this year?

Prothet_of_Doom

Interestingly I showed my sister in law the details of the terrace we are in the process of buying, and she said "I wish we could do something like that. It's a really good idea."

Not like her to have one opinion one week, and another 2 years later.

chucknorris

chucknorris wrote: »

As I said above (my responses in red) house prices are in the early stages of recovery and are about to rise.

and wow, they certainly did rise in London!

Generali

wotsthat wrote: »

That's twice you've said that.

http://www.bbc.co.uk/news/education-23080323





i.e. 48% in graduate roles, 24% in non-graduate roles, 15% still studying and 9% unemployed. Don't know what the missing 4% are doing.

Of course you know someone with a degree that works at John Lewis so a whole generation of graduates must work there.

So a third of graduates that are working are in non-gradute jobs rising to 41% if you include the unemployed (IME you don't need a degree to sign on but perhaps things have changed).

That's quite a lot people with a lot of debt and nothing to show for it.

A love of learning is a good thing but a degree isn't and shouldn't be for everyone.

Prothet_of_Doom

Eventually 2 years and 4 months from the start of this thread, my wife and I completed on a 3 bed semi, about 5 miles from home. Ex-council, it was purchased in 1988 under thatchers right to buy for £9K when similar none council houses further up the road were about £45K.
Ironically, we are now looking for the sort of tenant that would have rented this type of house. Hardworking, moderately paid family types who want to live in a nice area with good schools, on a bus route.

cells

ILW wrote: »

Is buying up scarce but essential resources for the overall good?

it is if you can make good use of them

eg if one bakery was able to turn 10kg of flour into 20 loafs of bread while the other could only achieve 15 loafs (due to waste) then its a good thing

The private rental sector homes people at a higher density utilising a higher portion of bedrooms.