Baffling London BTL economics

wotsthat

mwpt wrote: »

The short answer to the last question is that property in Bristol would be a no go for me if I were a BTL investor but not because I don't think property would increase over 30 years but because I'd want a performing business that could stand knocks (such as me losing job) over a shorter term without losing me a lot of money.

<snip>

That's what I'm implying - the long term will (or won't) take care of itself but cash flow over the short term is what makes the decision. I'm confident prices in Bristol will be higher in 30 years but a no from me too because I don't want to/ can't take a cash flow hit early on from a void.

We'll likely never be BTL owners because others will find the investment attractive somewhat before we do and snap up the opportunity. Plus I can't be bothered.

cells

mwpt. add a NPV if equity in gilts in columns O.
And difference between property and gilts NPV in P.

Somewhere around year 10 the property should pull forward on a NPV basis vs the gilts. Or thats how long you need to hold to make some sense given all the assumptions

Then post that up its a much improved version imo

Generali

mwpt wrote: »

Take you bet against the shorts.

Residential builders are rarely good shorts as they tend to yield okay and are often illiquid.

mwpt

Generali wrote: »

Residential builders are rarely good shorts as they tend to yield okay and are often illiquid.

http://shorttracker.co.uk/company/GB00B02L3W35/all

cells

£500k London investment with inflation at 2% and HPI/RentPriceInflation at 2.5%


Turnover tax makes a huge difference to the NPV of 30 year investment £251k v £98k

George has managed to grab nearly 2/3rds of the long term real gain (about gilts/bank savings) via his turnover tax.

Generali

mwpt wrote: »

http://shorttracker.co.uk/company/GB00B02L3W35/all

Well precisely.:)

mwpt

cells wrote: »

£500k London investment with inflation at 2% and HPI/RentPriceInflation at 2.5%


Turnover tax makes a huge difference to the NPV of 30 year investment £251k v £98k

George has managed to grab nearly 2/3rds of the long term real gain (about gilts/bank savings) via his turnover tax.

It is a system which actually encourages debt rather than equity investment. I can see why he'd want to reduce that incentive.

cells

mwpt wrote: »

It is a system which actually encourages debt rather than equity investment. I can see why he'd want to reduce that incentive.

why not do the same to owners like yourself?

Why not have a bank debt levy. A flat 1% on all debt/mortgages/credits from banks.

Debt is bad so mwpt should have to pay more on his mortgage

its a system which actually encourages debt rather than equity. I can see why he'd want to reduce that incentive....

westernpromise

cells wrote: »

there must be some rules as to what type of business qualifies.

you can also keep profits in the company you dont have to take them out and pay a dividend tax on top.

out of interest what types/rates/LTV of mortgage was he able to get inside the company.

I'm not sure what the LTV was but I think he has put eg a million into the company, then used 300k to buy houses along with 700k of debt which is secured on both the houses and on the remaining cash. The credit risk is then so small that the terms are attractive.

cells

westernpromise wrote: »

I'm not sure what the LTV was but I think he has put eg a million into the company, then used 300k to buy houses along with 700k of debt which is secured on both the houses and on the remaining cash. The credit risk is then so small that the terms are attractive.

I dont understand how/why/what you mean by that

he took out a mortgage for £700k and used a security of £700k on a business bank account somewhere?

what is the reason for that? He may be paying 4% on the £700k borrowing while he gets 0-1% on the £700k savings on the account