London property prices to fall 30%....

chappers

sebtomato wrote: »

I think the vast majority of BTL investors do this for an investment, as opposed to occupy their spare time. The examples people have mentioned are exceptions...

I would say that all BTL investors do it for investment however later on in life a fair few probably do keep some of their investments on as an interest rather than a necessity, whether that be conscious or out of habit.

I find myself in the fortunate position, where I could probably sell up now move all my money into other forms of investments pack in work and live a pretty comfortable life, but I'm not quite ready for retirement yet, so I am going to take some of my equity and put it into a lifestyle business and kick back a little bit, but still have something to work towards.

chucknorris

chappers wrote: »

I would say that all BTL investors do it for investment however later on in life a fair few probably do keep some of their investments on as an interest rather than a necessity, whether that be conscious or out of habit.

I find myself in the fortunate position, where I could probably sell up now move all my money into other forms of investments pack in work and live a pretty comfortable life, but I'm not quite ready for retirement yet, so I am going to take some of my equity and put it into a lifestyle business and kick back a little bit, but still have something to work towards.

I could sell up now, but as I mentioned above, to tread water financially I would need to gross 7.5% with the equity (ignoring any capital gains). So for the moment I am not selling, but I'm not that far away (in years) from doing so. It just seems daft to sell up and take about a 3.5% reduction (assuming about 4% achieved elsewhere, as I'm not going to invest in something too risky), so at the moment I am delaying the inevitable selling in the short term.

lisyloo

so at the moment I am delaying the inevitable selling in the short term

So just out of interest if it looked like the London market had peaked would you get out ASAP?
It's far more interesting to hear from people who really do put their money where their mouth is that armchair speculators.

chewmylegoff

ognum wrote: »

This is an incredibly sexist post. Most LL I know are female.

I am offended on behalf of lesbians everywhere by your discriminatory assumption that only men can have wives. Disgraceful in this day and age.

chucknorris

chewmylegoff wrote: »

I am offended on behalf of lesbians everywhere by your discriminatory assumption that only men can have wives. Disgraceful in this day and age.

I also posted that (same as your post) earlier, but later deleted it.

chappers

chucknorris wrote: »

I could sell up now, but as I mentioned above, to tread water financially I would need to gross 7.5% with the equity (ignoring any capital gains). So for the moment I am not selling, but I'm not that far away (in years) from doing so. It just seems daft to sell up and take about a 3.5% reduction (assuming about 4% achieved elsewhere, as I'm not going to invest in something too risky), so at the moment I am delaying the inevitable selling in the short term.

That's fair enough and most sensible if you don't need to sell to fund your upcoming retirement, why not hold on until your BTL investment performs to the level you want.
To be honest I haven't really analysed exactly how my BTLs have performed to that degree, but may do after reading this thread, but more out of curiosity. All I do know is that they have given me an ok yield over the years I have had them, especially when you consider that most of the money to buy them was borrowed and paid back by others, and I don't mean that glibly, just from an investment point of view. Also they have appreciated in value beyond my wildest expectations.
As I said I'm not ready for retirement and my overriding motivation is to liquidate some cash to fund buying a business in the country for a change of lifestyle.

As you hint at CGT is an issue, but I have always been mindful of that and consider the money I pay my tax accountant each year to hopefully be money well spent, so hopefully we have been as efficient on that as possible.
Still that's not my number one concern, whilst I have always tried to be as tax efficient as possible, I have always taken a pretty pragmatic view and been of the mind that you have to earn it to pay it.
Maybe the government will surprise me and spend my bit wisely :rotfl:

westernpromise

Generali wrote:

It's a very interesting premise. Do you have any evidence to support it?

It's what happened in 1989 - 1995.

Buying basically ate itself. Nobody wanted to buy in a falling market and nobody wanted to lend, either. So instead of a 10% deposit and 4x salary, lenders were looking at 30 to 40% deposits and 3x salary - stress-tested to see if you could afford them if rates doubled again (they'd gone from 7 to 15 and once back at 10 it was still seen as possible they could hit 18 or so, as had happened in the 70s).

So people piled into renting, the supply of which hadn't increased of course.

What got BTL started was that by 1996 - when the first BTL mortgage was launched - prices had fallen so low and rents risen so high (because of the demand not to be exposed to more house price falls) that you could buy a house and let it out right away for more than the mortgage.

In other words, the BTL boom that HPCers so hate was itself caused by the very crash they think they want repeated. I have never heard a crash troll admit that in such a crash their own buying power will be rapidly reduced by higher rent, higher deposits and lower salary multiples. I think they have genuinely not figured this out.

Generali

Conrad wrote: »

As Chuck points out, its yield based on equity that counts, not yield based on asset value. That's what often maes B2L so attractive. One example I have is equity of £50k and income costs of £5500pa, not to mention capital growth.

What you're measuring isn't yield, its ROE.

Yield measures income against current value. ROE measures returns versus equity.

The whole point of yield as a measure is that you can compare it across different asset classes to see whether they still make sense as an income producing asset.

There's little point in holding on to a house with a yield of 1% if you can get 10% risk free for example (not that you can right now).

cells

London is a rare example of a city that saw a population crash and then a recovery and in this sense it is almost unique in the UK (and perhaps much of the rest of the world too)

From 1951 to 1991 inner London Lost a million people and outer London lost 200,000 people such that in the 1990s London had a relative excess of homes and homes were cheap especially in inner London

That all changed from 2000 onwards when London population started booming adding 100,000 people a year while build rates did not move much at all.

so its a story of a huge demographics swing from a falling population to a rapidly rising population.

London in the late 1990s was undervalued,
It didn't go from fair value to super crazy
It went from under valued to fair value and now a little expensive
Though if we get another 60%+ increase over the next 5 years its definitely entering the crazy-o-meter

chucknorris

chappers wrote: »

That's fair enough and most sensible if you don't need to sell to fund your upcoming retirement, why not hold on until your BTL investment performs to the level you want.
To be honest I haven't really analysed exactly how my BTLs have performed to that degree, but may do after reading this thread, but more out of curiosity. All I do know is that they have given me an ok yield over the years I have had them, especially when you consider that most of the money to buy them was borrowed and paid back by others, and I don't mean that glibly, just from an investment point of view. Also they have appreciated in value beyond my wildest expectations.
As I said I'm not ready for retirement and my overriding motivation is to liquidate some cash to fund buying a business in the country for a change of lifestyle.

As you hint at CGT is an issue, but I have always been mindful of that and consider the money I pay my tax accountant each year to hopefully be money well spent, so hopefully we have been as efficient on that as possible.
Still that's not my number one concern, whilst I have always tried to be as tax efficient as possible, I have always taken a pretty pragmatic view and been of the mind that you have to earn it to pay it.
Maybe the government will surprise me and spend my bit wisely :rotfl:

CGT is an issue only in that it is significant (over £800k), I do like to be hands on, and I find tax interesting, but I have been thinking about consulting a tax specialist, but there isn't that much can be done to mitigate CGT:

1. We considered a move to the Isle of Man (that tax loophole has now been closed).
2. There isn't much point in sharing ownership of our properties, as both my wife and I usually use up our entire annual CGT allowance when bed and breakfasting our shares annually. The annual allowance difference would just be peanuts anyway.
3. We wouldn't want to disrupt our lifestyle by moving back into some of the properties (which would mitigate some CGT).
4. The bottom line is that although it is a lot of tax, I wish it was twice as much (the more you pay, the more profit you have made).
5. I have been thinking about (significantly) extending our home, selling it, then building a home (then repeat after a few years), that would give a return greater than 7.5%. So being a bit more creative with the equity is something that needs exploring, when I retire next year, I will have more time to look into this.