The Moral of a BTL.....?

Prothet_of_Doom

wotsthat wrote: »

The worst thing would be losing money and hearing the line 'I told you so - just wait until I tell my sister'.

Is it worth the risk?

So here's the deal : I put in £50K and buy a student type house near liverpool universitie(s). I take out no loan.
Worst case is that I fail to rent it out and so am paying insurance on it for a year ?
Worst case is that it all fails apart, and I have to sell it at a loss. Wasn't planning on buying without a survey. :rotfl:

ILW

Possibly the word "landlord" is a bit of the problem. Sounds rather feudal.

Prothet_of_Doom

ILW wrote: »

Possibly the word "landlord" is a bit of the problem. Sounds rather feudal.

Residential Homes Provider ?
Home Rental Facilitator ?

ILW

Prothet_of_Doom wrote: »

Residential Homes Provider ?
Home Rental Facilitator ?

Even Lessor.

DavidJonas

Surely the best way to examine this in a moral context is to examine the consequences of your actions?

In the short term the supply of housing is fixed.

By entering the market for a house you don't need you are increasing the overall demand for housing. The effect of this is to increase house prices. Although the use of the housing will not change you are putting additional money into the market and inflation, in its simplest form, is too much money chasing too few goods. When bidding for a house you are competing with everyone else who might consider living there. This naturally includes your future tenants. You might convince yourself that such people do not want to buy anyway and are not in the market but an economist would suggest such decisions ultimately boil down to price.

For some people that price might have to be very low indeed. Students and other people with transient lifestyles are natural renters. Others are on the edge of the curve and a small drop in house prices will turn these people into budding owner occupiers.

Because the supply is inelastic in the short term, and in Britain currently frankly in the long term too, small increases in demand can mean big increases in price.

Investment can mean a lot of different things. Its association with improvement lends the term a sparkle it often does not merit. As if moving money from one persons bank account to another achieves anything in itself. What matters are the consequences. Repairing potholes in a road may be a good investment by society. Unless the road is never used. Buying the only road between two towns and erecting a tollbooth may be a good investment for you but it will probably have negative consequences for the residents of the towns.

As for morals, how many businesses are run on strictly moral lines?

The thing that BTL reminds me of most is an old movie. Its a Wonderful Life. Often on at Christmas.

In which Jimmy Stewarts Buildings and Loan takes local peoples money on deposit and lends it to other locals so they can buy their own home and move out of Potters slums.

Except in the BTL version Jimmy lends the money to Potter who outbids the local people for all the nice homes, thereby ensuring they have to keep on renting from him.

But business is business. And the age of the first time buyer is now what? 37? About 13 years more than it was half a century ago.

Or as Jimmy Stewart might have said.

"You... you said... what'd you say a minute ago? They had to wait and save their money before they even ought to think of a decent home. Wait? Wait for what? Until their children grow up and leave them? Until they're so old and broken down that they... Do you know how long it takes a working man to save $5,000? Just remember this, Mr. Potter, that this rabble you're talking about... they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath? Anyway, my father didn't think so. People were human beings to him."

Buying a house as an investment is like buying any other asset. It's no sure thing. While there are enough voting home owners bordering green belts nimbyism will probably keep the belts green and house prices high. But renters and people living in their parents spare room care rather less about that and there are more of them than ever. When the baby boomers begin to exit the population the grey vote will matter less. Who knows what will happen then? In 10 years a new Government could sweep away green belts to enable a building boom. As the baby boom thins out the population may decline. And just as rising demand coupled with inelastic supply can make house prices shoot up, falling demand coupled with increasing supply can make them collapse.

There is risk in every investment. Including housing. Unless you know for sure what is going to happen in the future.

IveSeenTheLight

ruggedtoast wrote: »

And that pretty much sums up the attitude of the typical British landlord.

Pretty much sums up some attitudes of some who don't read the whole post.

DavidJonas

Prothet_of_Doom wrote: »

So here's the deal : I put in £50K and buy a student type house near liverpool universitie(s). I take out no loan.
Worst case is that I fail to rent it out and so am paying insurance on it for a year ?
Worst case is that it all fails apart, and I have to sell it at a loss. Wasn't planning on buying without a survey. :rotfl:

Even if you fail to rent it out, you presumably pay

insurance
council tax
has to be connected to water gas etc or it is not viable for renting, so water bill
gas bill (minimal, prevent freezing in winter etc)
electric (same)
boiler maintenance/inspection

and this is on top of solicitors fees, survey costs, etc.

JencParker

Prothet_of_Doom wrote: »

I want to explore the morals of becoming a land lord.

Over the past 4 years, by drawing a moderate salary, and taking only a small dividend my Ltd company, has gradually built up a buffer a surplus if you like.

This surplus to put in context is basically worth an hour a day of " overtime ", given that my Ltd company is paid an hourly rate, by it's clients.

If I'd done a 38 hour week rather than a 45 hour week it would NOT exist.

Now if I keep some of the surplus as a buffer, in case of no work, this leaves me with enough for a 50% deposit on a decent flat in the city centre or a student house.

Now I'm struggling to persuade my wife that the long term investment outweighs the risks and should be seen as a way of supporting ourselves in our old age.

This is not helped by my sister in laws belief which she feeds to my wife, which basically says "nobody should own more than one house, nobody should make a profit out of other people's need for a roof over thier head"

Now I see this as the politics of envy. I'm not looking to make massive profits, but I do want to use any profit to fund another deposit, and another, and another, before using any profit to pay off all the mortgages as I see 4 propoerties providing enough to comfortably live on in retirement. I have some pensions, but quite frankly I'll be uncomfortable.

If people like me, are investing, that means that we compete in the housing market, with people like my kids who might struggle when they reach the age that they want to stop renting, and there is the option of helping them onto the ladder, but and this is both realistic and selfish, I need to turn the cash I'm making now, into something that will pay for my old age. And in any case I'll be handing it to them on my death. Unlike a pension which dies with you. :mad:


So, am I morally corrupt like my sil thinks, or am I just finding a way of making my money work.

Those who only think of themselves and what they can gain tend to think of it as envy or jealousy. It is typical of the attitude that Maggie encouraged - think only of yourself. There who think beyond themselves and look at the effects on society as a whole - they are not envious or jealous, they just see selfishness and injustice to fellow humans. Somewhere in the middle is the right balance, but we will not achieve it through the current capitalist attitude that money and profit is a priority.

I suspect you will find a lot of reassurance on this board as it is frequented by those who do have money and self interest high on their list of priorities .

JencParker

ILW wrote: »

German landlords tend to be corporation who actually build the properties and rent out as a long term business. They tend not to just buy up what is already a limited supply of property.

German tenants have a much more secure tenancy, and can make their rented home their own - much like those in LA housing can here. The main problem with our current rental market is that it offers no security of tenancy (apart from the meagre 6/12 month contract). That may be fine for the young or those who come to an area to work for a short term contract (particularly applicable to London), but the lack of security when settled or raising a family is unacceptable in a so called civilised society.

wotsthat

JencParker wrote: »

I suspect you will find a lot of reassurance on this board as it is frequented by those who do have money and self interest high on their list of priorities .

It's also frequented by those who think that they are well placed to act as moral guardians for reasons unknown.