Why do people resent buy-to-letters so much?

BananaRepublic

chucknorris wrote: »

According to your own link if you bought the average property in Northumberland in 2004 and sold it in 2014, the property value was the same at £166k in both years. So in the 10 years of ownership that would be a capital loss of approx £12k:

£500 Mortgage valuation
£500 Mortgage arrangement fee
£3,000 Furniture/white goods
£1,660 Stamp duty
£1,800 Solicitor’s fees (buying/selling)
£1,220 Allowance for minor work to bring up to standard (there’s always something)
£3,320 Estate agent’s fees

£12,000 Total loss

If it was bought with a 20% deposit (additional £33,200 invested) that would equate to a 26.5% loss on ROCE (return on capital employed).

EDIT: That's a 26.5% loss on an average property, there will be people who lost more.

I advise you to get in a tenant. Had you done that, you would now own a lot more equity and would be looking at a profit. I'm surprised I have to say this to a BTL landlord.

BananaRepublic

chucknorris wrote: »

I thought the best way to demonstrate that property isn't necessarily a one way bet was to throw his own link's data back at him, unadjusted.

Anyway, I've been watching scrooged which is just finishing, and now it is time to cook the Xmas dinner, so I'm off now. Merry Xmas to you cells (and to too Banana R).

Incidentally the recent crash was the worst economic event since the great crash in the last century. Measures have been put in place to make banks resilient to another such event. To get a better assessment of expected returns it might be wiser to look back over a period of 40 years.

chucknorris

BananaRepublic wrote: »

I advise you to get in a tenant. Had you done that, you would now own a lot more equity and would be looking at a profit. I'm surprised I have to say this to a BTL landlord.

What on earth are you talking about? Obviously I am merely talking about capital growth, it wouldn't surprise me if you are the only one on this thread that doesn't realise that. You don't tend to make much (if any) rental profit in the early years either if you have an 80% mortgage. I'm beginning to realise how little you know about property investment.

EDIT: Taking the rental profit into account on the above example, the loss over that decade would be approx £4k.

chucknorris

BananaRepublic wrote: »

Incidentally the recent crash was the worst economic event since the great crash in the last century. Measures have been put in place to make banks resilient to another such event. To get a better assessment of expected returns it might be wiser to look back over a period of 40 years.

Bearing in mind that our properties dipped by about £1m, I can assure you that I did notice the impact of that crash. But personally I don't think that it was much more significant than the late 80's/early 90's crash (probably depending upon where your property is).

Past returns do not necessarily give an accurate indication of future returns.

michaels

chucknorris wrote: »

What on earth are you talking about? Obviously I am merely talking about capital growth, it wouldn't surprise me if you are the only one on this thread that doesn't realise that. You don't tend to make much (if any) rental profit in the early years either if you have an 80% mortgage. I'm beginning to realise how little you know about property investment.

Aren't you now confusing the whole country with London/SE - just cos rental return on capital is poor in the SE doesn't mean it is every where. It would not be impossible for the capital invested to have cost 2% (mortgage rate and loss on deposit interest) and fr the annual rent to have been 6% net after expenses other than mortgage interest so on that 116k property we are talking 35k of rental profit over 10 years (116k times 6% less 3% financing costs). Add this to the capital loss of say 10k on a 25k investment and the total return is 20k on a 25k investment over 10 years or high single digits per annum which is better than the stock market but for arguably more work and higher risk.

chucknorris

michaels wrote: »

Aren't you now confusing the whole country with London/SE - just cos rental return on capital is poor in the SE doesn't mean it is every where. It would not be impossible for the capital invested to have cost 2% (mortgage rate and loss on deposit interest) and fr the annual rent to have been 6% net after expenses other than mortgage interest so on that 116k property we are talking 35k of rental profit over 10 years (116k times 6% less 3% financing costs). Add this to the capital loss of say 10k on a 25k investment and the total return is 20k on a 25k investment over 10 years or high single digits per annum which is better than the stock market but for arguably more work and higher risk.

No, I'm not, my parents live in the N.E. (Northumberland, that's why I chose Northumberland), which of course you already know because you actually thanked me on this post:

chucknorris wrote: »

My parents bought a flat to rent out, and they had a few bad (but not absolute nightmare) tenants, but luckily in the 5 years that they owned it, they made decent capital gain. They wouldn't buy another one as they have now seen the downside, even though they did quite well out if it, but only because they were lucky enough to have owned it for the right 5 years, when prices happened to have shot up in the North East, it could so easily have been a different story if the timing had been different.

I'm familiar with the market up there, I nearly went half in with them, but I didn't like numbers enough to commit) and they had an investment property up there too. First of all let me re-emphasise that I am not saying property investment is or was bad everywhere (obviously I know taht it wasn't), I'm merely backing up cells' assertion that it isn't necessarily a one way bet.

I have just ran the figures through my spreadsheet for a property in Bedlington Northumberland (where my parents live) and the rental profit comes out at just under £800 PA for the 5/6th years with an 80% mortgage (taking an average of the 10 year period. So over the 10 years INCLUDING rental profit there would still be a loss of £4k.

EDIT: I have edited my above post accordingly.

kinger101

chucknorris wrote: »

What on earth are you talking about? Obviously I am merely talking about capital growth, it wouldn't surprise me if you are the only one on this thread that doesn't realise that. You don't tend to make much (if any) rental profit in the early years either if you have an 80% mortgage. I'm beginning to realise how little you know about property investment.

EDIT: Taking the rental profit into account on the above example, the loss over that decade would be £4k.

You are wasting your time. He'll never understand, even if you took a 100 years to explain it to him. He either doesn't want to see it as it is, or simply isn't capable of understanding, either way it is a lost cause .

BananaRepublic

I have reported the abusive post.

chucknorris

BananaRepublic wrote: »

I have reported the abusive post.

oh an abusive post! Where is it? Obviously not on this thread, unless of course you mean this one, admittedly he was being a (text removed by MSE forum team), but abusive might be pushing it:

BananaRepublic wrote: »

Those are very stupid remarks.

cells

michaels wrote: »

Aren't you now confusing the whole country with London/SE - just cos rental return on capital is poor in the SE doesn't mean it is every where. It would not be impossible for the capital invested to have cost 2% (mortgage rate and loss on deposit interest) and fr the annual rent to have been 6% net after expenses other than mortgage interest so on that 116k property we are talking 35k of rental profit over 10 years (116k times 6% less 3% financing costs). Add this to the capital loss of say 10k on a 25k investment and the total return is 20k on a 25k investment over 10 years or high single digits per annum which is better than the stock market but for arguably more work and higher risk.

3% finance cost is probably low ball when considering that a mortgage and subsequent remortgaged have often £2k fees and valuations and solicitors.

Also the 'business' side of BTL should make a running profit as it takes up your time. A more fair method to look at would be to look at the business side with a full unmanaged service (including all your legwork and paperwork) which I reckon is worth about 20%