want to buy and then rent out

wecanhelpu

Out of interest, I'd just like to tell you that this thread is currently being discussed on HPC.co.uk.

The thread is called "MSE BtL fun"

bipolar_bear

Woody123, ignore the lousy 'go for it' so called 'advice' on here (except the tongue in cheek take on it as posted by PropertyGuru).

The level of naivety on this site is jaw dropping.

Google "house price news and information" and do your own research. Oh yeah, and save up too. Patience is a virtue remember.

Prices are already falling left, right and centre (www.propertysnake.co.uk) and this is just the 'froth on the top', there's a lot further to go.

There's no substitute for your own research but always try and get a BALANCED view at least, not just the view of other people who've recently done the same and are slowly waking up to the suprises that were always going to be in store for them.

Good luck and sit tight.

wecanhelpu

bipolar_bear wrote: »

........The level of naivety on this site is jaw dropping........

Couldn't agree more

A_Fool_&_His_Borrowed_Mon

sikejsudjek wrote: »

Herd economics.................
The BTL market is like watching herd of sheep running off a cliff, and the first few are already falling off the edge.

I've posted this before, but i'll give it a re-run, as a picture can say a thousand words....
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V

Stabilo

Yes you will get bad tenants.

Yes house prices do go down.

Yes interest rates do go up.

However the following is also true:

You get excellent tenants

House prices for the last THIRTY FIVE YEARS have seen an ANNUAL growth of more than 11%.

Interest rates go down.

Rents go up.

BTL property has the benefit of gearing so on average in the last 35 years the 11% growth gives a 73% return on your investment (based on 85% LTV).

The 73% growth is not subject to tax.

Those that suggest BTL is a waste of money please let us all know where we can consistently get 73% tax free returns each year. Also what other investments can you buy at 30% below market value?

Those that want details of the 'forum' please send PM.

Stabilo

Doozergirl wrote: »

It was a blatant bit of Spam, Hugo.

Did you read all the posts on the PIN forum?

I have been an MSE forum member for years. Made far more money in the last few months with property, thanks.

Please explain what you can offer at 30% below market value i.e £35K SAVING achieved on purchase price. Not 3 pence on a tin of beans.

Paul

Stabilo

realwildone wrote: »

I cannot believe this thread. But most important I cannot believe there are people out there telling this poster to 'go for it'.

IR are going up at least another twice if not more. Can the poster stand any voids. Doesn't sound to me like they could stand a round at the bar.

Do yourself a BIG favour. Stay where you are and save. Remember that old word 'SAVE'. People used to do this once upon a time.

It is most likely now IR will go up, house prices will stay static or go down. Savings rates are going up. It can only take an MSE poster to come to the conclusion that this means buy a house to rent out.

Absolute insane stupidity.

Yes put your money in the bank and receive 5% interest and just hope prices fall. Or buy several BTL properties at 30% below market value and use the cash generated to buy your own place.

Stabilo

HugoSP wrote: »

How do you know this? I'm intreagued, as we are not losing at the moment. we are breaking even/ generating a small surplus on the property that has a mortgage secured on it. Over the next 10 years we will enjoy a reasonable increase in capital and the rent we get will increase as well. In the meantime the loan we have will not increase with inflation so in real terms this will cost us less. The house in question was bought in 2005 and a recent valuation put it at between 15 to 20% more than its initial valuation when purchased.

The other properties that don't have loans secured on them are generating a good profit. The capital increases that we're getting year on year, has beaten what we can get in most other mainstream investments. Plus they are generating an income.



The interest only mortgage is what is used to work out profitability. Any repayment or endowment is over and above this and actually goes towards paying the loan off, rather than simply maintaining it.

At the end of a mortgage term, say 25 years if none of the loan is paid off the landlord is still likely to be quids in. Conservatively the property could triple in value over that time - look back over the last 15 years!

Hence if I borrowed £40k and could only maintain the loan over the last 25 years by making the asset work for itself sold the assett and got £120k for it, and had to give back the original £40k I would consider it a success. I now have £80k that I would not otherwise have had.

Commercial enterprises operate in a similar way. Manufacturing organisation take on a piece of expensive plant that they pay for on a loan, maybe for the duration of its life. But if they can get more back for it that it costs them then it is a good investment. The loan and depreciation maybe 8% but the yield could be 10% At the end of its service life the capital equipment is sold, the loan paid off unless this has been achieved during its service. Even if the capital has not been repaid the business proposal would allow for capital and interest repayment from the proceeds of its deployment, and have profit to spare.

Admittedly there is no capital appreciation and the yield comes almost purely from its deployment, there maybe a little from its residual or scrap value at the end of its service. However with property a large chunk of its yield will come from its resale at the end of its 'service'. There is no depreciation, only appreciation, so you add that to your megre rental returns that you get in the first few years, which will only go up over the long term. The chances are that after a few years the rental income will outstrip the loan payments. The chances of the property being worth less than the LL paid for it after 5 or 10 years are slim.

The trick is to stay solvent though the bad times

Because we are in the minority we are considered wrong. And the earth is flat.

In 20 years time we will compare our 'pensions' with what they have achieved.

Stabilo

tomstickland wrote: »

Now that every pub in the land has a resident property expert I just know that it's not a good idea. I've yet to find a money making idea that doesn't break the law of energy conversion. ie: put time, effort and money in and make money.

Yes you have you just mentioned it (no time, no money and no effort required).

It goes like this:

Investor - 'your property is worth 148K but as you want a quick sale I will buy it for 112K'

Vendor - 'ok sir that's a deal'

Investor needs no capital for the purchase. How much effort did that take?

If you SERIOULSY believe this NEVER happens then keep searching for the golden egg. Good luck to you.

Stabilo

If you are interested housepricecrash.co.uk (been running for many years now:rotfl: ) have a table of archived house price predictions at http://www.housepricecrash.co.uk/predictions-archive.php. As you will see the doom & gloom merchants were wrong AGAIN.

The economists having consistently made poor predictions are now forecasting 1% to 15% growth for 2007 http://www.housepricecrash.co.uk/index.php#predictions

Of course there will be a price correction at some point but property investment is a mdeium to long term investment. They have predicted a price crash for 5 years whereas in actual fact prices doubled.

2002 price 100K - 'don't buy now as the prices are about to crash'
2007 price 200K - 'sorry we meant buy in 2002 as prices are about to double, too late now though, really sorry'.

If you think properties are about to fall by 30% just buy them at 30% below market value.

If you think properties are about to fall by 50% kiss goodbye to a decent pension.