Baffling London BTL economics

Conrad

Cornucopia wrote: »

So, yes, you can make money. It's difficult to predict, but the risk of major losses is relatively low. My worst property (a new-build) produced a 5% gain over 2.5 years, and my best (a refurb) 61% over 3 years.

Have you any thoughts on buying off plan from companies such as Galliard Homes (not in overly hot over supplied London locales though), and selling the contracts on prior to completion?


An agent is trying to get me to buy one of these contracts from a flipper, but one has to stump up more cash to cover the flippers capital gain + the usual deposit. So it got me thinking whether I might try and buy a new contract or two and just flip, but I notice the Galliard fliiper contracts aren't re-selling all that quickly.

chucknorris

Conrad wrote: »

Have you any opinion on the merits or otherwise of small scale property developing?


It's been a long held dream of mine that I would start buying, renovating and selling 2 or 3 places a year, without requiring finance, but the stamp duty is hideous. I suppose one might buy them in a company name to get around / reduce the SD?


I'm a bit of an over-analyser (despite what I said earlier) and tend to focus overly on the downsides, one of which is 'why isn't everyone doing it'? For example Mum has retired to the Welsh coast. You can snap up a tired bungalow for £200k, do it up to a high standard for about £30k and sell to newly retiring people for £275k. So why isn't everyone doing this?


If I could make a profit of £60k pa, together with my rental income I'd be as happy as a hog in brown stuff.

We did think about it, and being a chartered quantity surveyor would have helped, but I'm 58 now and fast approaching the time when all I will want to do is enjoy myself, there is also the issue of having to spend the money, and making more money is going to make that even harder.

All that said though, I am finding it hard to 'switch off' and switch to leisure only activities, but the thing is that you can't afford to leave it too late, there is very little chance that I will run out of money, but it is 100% certain that I am going to run out of time. We may however become interested in self building our home, selling after 4/5 years (no CGT) and repeating.

Conrad

Generali wrote: »

I guess it comes down to what floats your boat and how much you value the happiness money can provide versus the happiness fulfillment can provide.

I'm very into self fulfilment - I don't get out of bed until about 9 most mornings - going with my natural rhythms after years of long hours previously, just need enough to live well on which for us means keeping our current home, nice holls, which when all said and done would mean making £60k pa personal income from developing plus our rental income.


It's a big gamble and so far I just plod along with my consultancy knowing it's generating the income we need, and not that hard, after all I'm on this ruddy forum much of the day.


I'd probably like living in Australia as the great out doors is one of my thangs, there's little in the way of wilderness in England now. Love the ocean and have a very strange pre-occupation with catching reptiles by hand, nothing gives me more pleasure in fact and can make the average walk quite an adventure. Weird eh. Lived in Singapore as a kid - that's where this reptile thing began. Australia is the place for lizards.


Funnily enough am returning there this August for the first time - cant believe how it looks now from the photos I'm seeing - then it's off to some place called Gaya Island for 10 days - lizard heaven!

Cornucopia

Conrad wrote: »

Have you any thoughts on buying off plan from companies such as Galliard Homes (not in overly hot over supplied London locales though), and selling the contracts on prior to completion?


An agent is trying to get me to buy one of these contracts from a flipper, but one has to stump up more cash to cover the flippers capital gain + the usual deposit. So it got me thinking whether I might try and buy a new contract or two and just flip, but I notice the Galliard fliiper contracts aren't re-selling all that quickly.

I've heard their advertising, and for a while there were some attractive offers. I could never get my head around exchanging now for completion in 18-24 months time, and the impact that might have on my other projects.

The other thing is that I am a Londoner, so I know the slightly down-market locations of some of their developments. That doesn't necessarily make them bad buys, but it does detract.

The only reason, really, for looking at newbuilds at all was when developers had reasonable Part-Ex schemes that genuinely took away elements of hassle, complexity and risk without costing too much in terms of additional premium. 3 valuations and generally you were done, apart from maybe baby-sitting a few viewings when you were nearly ready to move out.

In a sequence involving 9 properties over 11 years or so, there were 2 Part-Exs (one of which involved trading my poorest performing property to the developer at £8k more than market price).

economic

Conrad wrote: »

I'm very into self fulfilment - I don't get out of bed until about 9 most mornings - going with my natural rhythms after years of long hours previously, just need enough to live well on which for us means keeping our current home, nice holls, which when all said and done would mean making £60k pa personal income from developing plus our rental income.


It's a big gamble and so far I just plod along with my consultancy knowing it's generating the income we need, and not that hard, after all I'm on this ruddy forum much of the day.


I'd probably like living in Australia as the great out doors is one of my thangs, there's little in the way of wilderness in England now. Love the ocean and have a very strange pre-occupation with catching reptiles by hand, nothing gives me more pleasure in fact and can make the average walk quite an adventure. Weird eh. Lived in Singapore as a kid - that's where this reptile thing began. Australia is the place for lizards.


Funnily enough am returning there this August for the first time - cant believe how it looks now from the photos I'm seeing - then it's off to some place called Gaya Island for 10 days - lizard heaven!

me too, im going to be quitting my banking job next month now that i have completed on my residential home. i absolutely hate banking now and just want to do something fulfilling and enjoyable whilst covering my expenses excluding the mortgage (around £1k a month expenses). i have a 2nd bedroom that i will let out as a spareroom to generate enough to cover the mortgage.

cells

spoke to my letting/estate agent and he confirmed what I have been seeing on rightmove. The rental market is tough right now and rents are down about 10% and time to let has increased.

He reckons its due to renters buying homes further out in London to live in mostly via parental gifts. He says at the moment some 60% of sales and 80% of inquires are from FTBs which is not typically for inner London where BTL dominates.

I dont know what to make of it its quite different from the norm.


If its not just a blip and the agents views are correct then it suggests to me stagnation in inner London and HPI further out. Only time will tell

economic

is that for london? what area in london?

the market rises have been mostly driven my FTB. BTL only make a small (less then 30%) part of the demand even in inner london.

rents an rentlal demand falling is interesting.

cells

economic wrote: »

is that for london? what area in london?

the market rises have been mostly driven my FTB. BTL only make a small (less then 30%) part of the demand even in inner london.

rents an rentlal demand falling is interesting.

Zone 2 hackney

I think the mix here is 1/3rd home buyers and 2/3rd BTL

Overall including the social homes its about 80% rentals here and its been a high rental area for ever if for no other reason than the social stock has been 40-50% over the last 20 years

I think next door Islington to the west and and tower hamlets to the south east is similar proportion

economic

cells wrote: »

Zone 2 hackney

I think the mix here is 1/3rd home buyers and 2/3rd BTL

Overall including the social homes its about 80% rentals here and its been a high rental area for ever if for no other reason than the social stock has been 40-50% over the last 20 years

I think next door Islington to the west and and tower hamlets to the south east is similar proportion

ok, yes there are certain part of london heavily concentrated with BTL. i think it is these regions that will underperform. they tend to be the rough areas as well. i just sold my flat in kilburn which has a lot of BTL and social housing. i dont believe in the gentrification hype.

when the BTL demand falls, it is these areas that will suffer more relatively.

cells

economic wrote: »

ok, yes there are certain part of london heavily concentrated with BTL. i think it is these regions that will underperform. they tend to be the rough areas as well. i just sold my flat in kilburn which has a lot of BTL and social housing. i dont believe in the gentrification hype.

when the BTL demand falls, it is these areas that will suffer more relatively.

possibly, but on the upside (2010-2015) they went up more

Long term if London does grow to become 12 million over the next 30-35 years then the Zone 2 areas are going to become the new central areas. If the old crap solid wall cheap build council estates are knocked down and replaced by shiny steel and glass new builds then Zone 2 areas can and should gentrify.

It makes no sense for places like Hackney or Tower Hamlets where people can walk to the three big employment hubs (city/Westminster/Doclands) to have 40-50% social housing while people train in from Watford. The social home tenants should be moved out and replaced by workers its better all round and makes logistics sense.

of course hard left councils like Islington and hackney are hardly going to be happy about exporting life long labour voters and importing possible blue voters.