Renting in your 40's and staring into the abyss

wotsthat

Crashy_Time wrote: »

A few years ago losing money on a new build was not something that the average punter would really have considered too much, they believed the "not enough" mantras, and a few years ago most BTL`ers were just loading up with as much debt and property as they could get hold of, now they have to pause and think about their bottom line (if they have any brain cells that is) and if they should really be there. As I said, sea change.

Nonsense really. Everyone knows new builds command a premium and, much like a car, lose value the next day. Combine that with a house price decline and it's likely a new house sold at peak won't have recovered to its sale price in most parts of the country. The only people surprised are the muppets collecting evidence of the bleeding obvious.

In the accommodation spreadsheet the owners just need to put the loss in the cost column and move on. They'll still be up compared to the average perma renter who despite these apparent falls are still too afraid to buy. In most cases it'll be no more than a blip when they look back.

Nothing to do with BTL landlords of course. You're just very excited about the tax changes and need to calm down. You have no idea how much debt or property the average BTL landlord owns other than a fantasy that it's 'as much as they can load up on'. One of the houses was not far from me - I wouldn't be surprised if it was picked up by a BTL - nearly new, low maintenance and a yield of 6 or 7 %.

dktreesea

wotsthat wrote: »

Graham used a similar argument. Just because some people don't have grandparents playing an active part in childcare doesn't mean we can dismiss the role of grandparents in childcare out of hand.



I posted my personal average but assumed it's a reasonably decent proxy for the average.

My average mortgage rate over 21 years is 5.14%. (Well down to 5.13% since I posted a few days ago). I don't know what the average long term mortgage rate is but 5% seems about right. The current average mortgage rate is about 3.5%.

IMO it's important to note that the low interest rate environment didn't arrive out of the blue just because of the GFC. My average mortgage rate has been falling every day for 17 of those 21 years. It's not a trend that started in 2009.

Whilst I'm wary of trying to predict the future I'd suggest the stress testing being applied to mortgage applications are rigorous. Anyone getting a mortgage now can be confident their finances are sufficiently robust to cope with whatever changes in interest rate can be reasonably be expected to come their way in the next five years.

Provided they manage to hang onto their job, or don't get "restructured" into a job, sometimes even the same job in all but title, that pays considerably less than what they get now.

dktreesea

Crashy_Time wrote: »

People in various parts of the country paid (borrowed) too much for houses that are now losing value, and they can`t avoid the facts any more, BTL`ers are now the enemy of the government and tax authorities, not their pal, it is a big sea change.

I wish I could agree with this, but sadly i think the government, at best, is ambiguous towards BTL landlords. It doesn't like propping them up with housing benefit and finds it politically expedient to say so. They even do something about it, like cutting the LHA to the 30% rather than 50% percentile for rents, and maxing out the benefit for non working families to £23k p.a. in London and £20k p.a. in the rest of the UK.


On the other hand though, the government themselves, well Westminster at least (apologies to the SNP who are actively involved in building new social housing) don't want to be in the business of providing social housing. Hence the current sell off of council homes to occupants down south. So they recognise that the BTLers provide a vital service that the government should be providing but won't.

dktreesea

Crashy_Time wrote: »

A few years ago losing money on a new build was not something that the average punter would really have considered too much, they believed the "not enough" mantras, and a few years ago most BTL`ers were just loading up with as much debt and property as they could get hold of, now they have to pause and think about their bottom line (if they have any brain cells that is) and if they should really be there. As I said, sea change.

There are quite a few people up our way, according to the local rag, who rented their properties while working, and have since had a reduced income, so have turned to housing benefit. Half the time the landlords don't even realise until the tenant has gone into arrears, presumably because the housing benefit doesn't meet the full cost of the rent. Landlords, imho, should be careful with taking on debt to buy houses. Even when they have good tenants, it doesn't follow that those same tenants will always be able to afford the property.

ukcarper

Crashy_Time wrote: »

No, no stats. What is your view on new builds dropping in price?

dktreesea wrote: »

I wish I could agree with this, but sadly i think the government, at best, is ambiguous towards BTL landlords. It doesn't like propping them up with housing benefit and finds it politically expedient to say so. They even do something about it, like cutting the LHA to the 30% rather than 50% percentile for rents, and maxing out the benefit for non working families to £23k p.a. in London and £20k p.a. in the rest of the UK.


On the other hand though, the government themselves, well Westminster at least (apologies to the SNP who are actively involved in building new social housing) don't want to be in the business of providing social housing. Hence the current sell off of council homes to occupants down south. So they recognise that the BTLers provide a vital service that the government should be providing but won't.

Your last point is what most anti BTLs seem to miss the government are not providing sufficient rental accommodation and even at the peak of home ownership 30% of people rented and with no one else willing to provided rental properties BTL is the only solution.

chucknorris

dktreesea wrote: »

There are quite a few people up our way, according to the local rag, who rented their properties while working, and have since had a reduced income, so have turned to housing benefit. Half the time the landlords don't even realise until the tenant has gone into arrears, presumably because the housing benefit doesn't meet the full cost of the rent. Landlords, imho, should be careful with taking on debt to buy houses. Even when they have good tenants, it doesn't follow that those same tenants will always be able to afford the property.

You have to be careful with any business venture. You can run it through an analysis spreadsheet as many times as you like, but in the end your attitude to risk will probably be the most pivotal thing as to whether to proceed or not with the investment.

Thrugelmir

chucknorris wrote: »

You have to be careful with any business venture. You can run it through an analysis spreadsheet as many times as you like, but in the end your attitude to risk will probably be the most pivotal thing as to whether to proceed or not with the investment.

How many individual property investors produce a "what if" analysis along with a fully costed plan? I suspect many rely on historic data along with an obsession for property. Rather than taking a detached full thought out view.

chucknorris

Thrugelmir wrote: »

How many individual property investors produce a "what if" analysis along with a fully costed plan? I suspect many rely on historic data along with an obsession for property. Rather than taking a detached full thought out view.

So you agree with me then, you have to be careful with any business venture. Idiots in business are not confined to property, you will find others that were doomed to failure in other ventures, that they didn't analyse enough, before leaping in.

If they don't know how they stand to a 'what if', they should stick to savings and simplier investments.

Cornucopia

Thrugelmir wrote: »

How many individual property investors produce a "what if" analysis along with a fully costed plan? I suspect many rely on historic data along with an obsession for property. Rather than taking a detached full thought out view.

Is this a genuine concern for LL's well-being or something else, though? I can't imagine it's pleasant for the Tenant if the Lender repossesses a LL's property, but I also can't imagine it happens that often.

I'm also not sure how detailed an analysis a LL could even make, given that many of the factors are intrinsically unpredictable.

FWIW, I would have thought that the figures ought to speak for themselves.

chucknorris

Cornucopia wrote: »

I'm also not sure how detailed an analysis a LL could even make, given that many of the factors are intrinsically unpredictable.

There aren't that many factors that are unpredictable, you can easily analyse your finances on a spreadsheet based upon potential various mortgage rate changes, the nightmare scenario of tenants not paying and it taking months to evict them (that is a stress test). The rest is fairly predictable, you know that you will redecorate about every 4-6 years, replace white good about every 2-4 years, and you also know that there will be general maintenance costs every so often. You also need some contingency to be able to cope with the unexpected.