Tenant Deposit Schemes - What are alternatives?

MattOsprey

What is wrong with the above posters!!!

Are we supposed to feel sorry for you? If you can't afford to be a landlord, then sell. You said yourself this is a huge risk and a huge investment - one I hope pays off for you. I'm sure it will over time, but whinging about it now suggests it's a burden.

Where was I whinging about being a landlord? I said we are not all the same!

Where did I say I can't afford to be a landlord? I said at the moment it was cost5ing me money, and I am not making money of a poor tennant. The trend here seems to be that only the tennant has any financial burdens.

The reason I am not selling is because it is a long term investment. Which is what I said.

Then that can be regarded by some as a poor business decision which is your decision to make.

As to it being a bad business decision. I am not the one renting from someone else. I am trying to invest in my future. What do you have as provision for your future?

With such an astute mind for business have you considered sub-prime lending - this time next year Rodney, we'll be millionaires.

The hope is that in ten to 15 years it will increase in value by about £300,000. But I don't know. I am just trying my best. Sarcasm helps no-one.

However making that decision as you highlighted doesn't mean you have to steal the tenant's money.

What are you talking about when you say I am stealing someones money? I find that comment disgusting. You don't know me, but you accuse me of being a thief. I hope a moderator takes you to task for that!

beingjdc

MattOsprey wrote: »

As to it being a bad business decision. I am not the one renting from someone else. I am trying to invest in my future. What do you have as provision for your future?

The hope is that in ten to 15 years it will increase in value by about £300,000. But I don't know. I am just trying my best. Sarcasm helps no-one.

So, just to be clear, you're holding on to a loss-making business in the hope that you can sell it to someone for more money at a later date? Interesting investment model.

sooz

He's answered that already.

He has bought a property with the hope of future capital growth, not to provide a current income.

What however, I'd like to know, is who lent you the money on this venture?

MattOsprey

beingjdc wrote: »

So, just to be clear, you're holding on to a loss-making business in the hope that you can sell it to someone for more money at a later date? Interesting investment model.

Are you being deliberately obtuse?

It is only loss making if you look short term. As you obviously do.

Are you going to sell your property at a loss? I don't think so. Do you have a pension scheme? If so what is it invested in? Possibly property. Or another commodity that you hope will make a profit.

If you can't see that a possible £40,000 outlay over 10 years is worth it if the return is £300,000, then I worry for your future, and that of anyone who relies on you for finantial support.

The money it costs me, I treat as my savings scheme. I am taking responsibility for my futurre. What do you have in mind?

beingjdc

MattOsprey wrote: »

Are you going to sell your property at a loss? I don't think so.

Depends what people are prepared to pay for it when I don't want it any more, doesn't it?

Do you have a pension scheme? If so what is it invested in? Possibly property. Or another commodity that you hope will make a profit.

I'll tell you where it isn't invested, and that's loss-making businesses!

If you can't see that a possible £40,000 outlay over 10 years is worth it if the return is £300,000, then I worry for your future, and that of anyone who relies on you for finantial support.

Oh I can see that it's worth it if the return is £300,000. What I can't see is why the value of a loss-making business would rise by £300,000. It's worth betting on Russia in tonight's football if they win, but it's hardly a pension scheme.

The money it costs me, I treat as my savings scheme.

Right. The thing with my savings account is that when I put money in it, the money's still there next month...

MattOsprey

beingjdc wrote: »

Right. The thing with my savings account is that when I put money in it, the money's still there next month...

I hope you enjoy your 1% interest.

beingjdc

MattOsprey wrote: »

I hope you enjoy your 1% interest.

6.3% just at the moment.

You invest £3,300 a year, you end up with £0.
I invest £3,300 a year, I end up with £3,500.

Now, you have an asset, matched by a debt. The cost of the debt is being paid by the yield on the asset and an additional contribution from you. Presumably looking at the size of your mortgage the asset is worth about £220,000.

So yes, if house prices go up 5%, you have £11,000 when I have £3,500.
If they don't go up at all, you have £0 and I have £3,500.
If they go down by 5%, you have -£11,000 and I have £3,500.

It's a gamble on the price of an asset - there's nothing wrong with doing it in principe, it's what hedge funds do. But an asset that yields less than a risk-free investment, done in a way where the costs of the money you've borrowed to do it are greater than that yield, makes me wonder where the buyers are meant to be coming from at more than double the price.

MattOsprey

beingjdc wrote: »

6.3% just at the moment.

You invest £3,300 a year, you end up with £0.
I invest £3,300 a year, I end up with £3,500.

Now, you have an asset, matched by a debt. The cost of the debt is being paid by the yield on the asset and an additional contribution from you. Presumably looking at the size of your mortgage the asset is worth about £220,000.

So yes, if house prices go up 5%, you have £11,000 when I have £3,500.
If they don't go up at all, you have £0 and I have £3,500.
If they go down by 5%, you have -£11,000 and I have £3,500.

It's a gamble on the price of an asset - there's nothing wrong with doing it in principe, it's what hedge funds do. But an asset that yields less than a risk-free investment, done in a way where the costs of the money you've borrowed to do it are greater than that yield, makes me wonder where the buyers are meant to be coming from at more than double the price.

You are right that the mortgage is about £220,000. However the value is £290,000.

This is not going to be sold as a business. It will be sold as an executive home. 70% of the tennants are owner occupier. This gives it a higher possibility of future growth. The property is larger than most in the area by a long way. In a great area. And it is of a very high standard.

As to the possibility of the value going down, this is a spurious agruement. As I have said the investment is long term. I will only sell when there is profit.

At an increase of 5% per year. In 12 years my property will be worth £520,798.

That looks to me like a profit of £300,798 if you deduct my £40,000 total costs for the period. It stlii looks pretty good to me.

I can't quite see where you get your £11,000 from.

beingjdc

MattOsprey wrote: »

I can't quite see where you get your £11,000 from.

It's 5% of 220,000.

OK, you rate the current value at £290,000, which makes your increase in value a bit more plausible - however it does mean you have to include on top of the £3,300 you're paying to subsidise your tenant the £4,200 a year the £70,000 you have locked away could be making you, invested in a secure asset.

So that changes the maths a bit. Essentially, your business model is more rather than less profitable than cash investment in the event of house price inflation of 2.6% or more (assuming you find a way of not paying capital gains tax at the end of the process).

I imagine you have a sensible cash cushion, and in the long run you can probably expect that level of gain to happen (though over the next couple of years I consider it unlikely), but there are a lot of people going into buy to let at the moment thinking they can do that, then realising as interest rates go up that they don't actually have £3,500 a year spare, and have to sell in a hurry.

MattOsprey

beingjdc wrote: »

It's 5% of 220,000.

OK, you rate the current value at £290,000, which makes your increase in value a bit more plausible - however it does mean you have to include on top of the £3,300 you're paying to subsidise your tenant the £4,200 a year the £70,000 you have locked away could be making you, invested in a secure asset.

So that changes the maths a bit. Essentially, your business model is more rather than less profitable than cash investment in the event of house price inflation of 2.6% or more (assuming you find a way of not paying capital gains tax at the end of the process).

I imagine you have a sensible cash cushion, and in the long run you can probably expect that level of gain to happen (though over the next couple of years I consider it unlikely), but there are a lot of people going into buy to let at the moment thinking they can do that, then realising as interest rates go up that they don't actually have £3,500 a year spare, and have to sell in a hurry.

Even with another £50,000 taken off. I think you will agree that Over £200,000 profin in 12 years is ging to be better than any bank or government scheme.

We have taken this completely off the point.

All I was saying is that saying landlords are all money grabbing thieves is like saying all people of a particular faith are terrorists. Completely unfounded.

As to my business accumen, I will have to wait and see. But I do hope that taking responsibility for my own future, will pay dividends.