The fed just raised interest rates by .25%

westernpromise

Crashy_Time wrote: »

So you knew in the mid 90`s that there would be the biggest property bubble in history ten years in the future, and you come on here at what, 7am or something to post that nonsense? You really need to stop thinking about imaginary wealth for a while and get out more, and I mean that seriously.

You didn't read what he wrote and you don't understand history.

In the mid-1990s you could buy a house with a small deposit and a BTL mortgage, and immediately let it out for more than the mortgage cost. Instant free money. The providers of the free money were people scared to buy in case prices fell further who were prepared to pay inflated rents to avoid negative equity. As has been pointed out before, rent is crash insurance and in 1995 you could charge whatever you liked for it.

The fact that and extent to which house prices then went up was unforeseeable and also completely unimportant to the economics. At some point, the accumulated surplus income of rental profit over mortgage payments became enough to pay off the mortgages, and then you own a property outright at its market value with an income.

Its actual market value is pretty immaterial. Buy a house for £100k, receive £100k in income, net own the house. It could be worth 90% less than you paid (hooray! £10k free money!) or 300% more (hooray! £400k free money!). It's just a different amount of free money, and meanwhile, the rent rolls in.

The logical next step is then not to use the surplus to pay off the mortgage at all. Instead you stick the surplus into funds or whatever and you use the income from that to service the mortgage. Each year you slip another £15k (£30k if married) into ISAs and gradually the investment returns become tax free.

Do you really not understand this, or do you need to not understand it?

Graham_Devon

westernpromise wrote: »

In the mid-1990s you could buy a house with a small deposit and a BTL mortgage, and immediately let it out for more than the mortgage cost. Instant free money. The providers of the free money were people scared to buy in case prices fell further who were prepared to pay inflated rents to avoid negative equity. As has been pointed out before, rent is crash insurance and in 1995 you could charge whatever you liked for it.

Oh come off it.

To believe what you write you'd have to assume the majority of renters in the mid 90's were all sitting on cash piles in the bank, able financially to go and buy a house, but refrained, scared of housing values?

Welcome to the land of la-la. :doh:

wotsthat

Graham_Devon wrote: »

To believe what you write you'd have to assume the majority of renters in the mid 90's were all sitting on cash piles in the bank, able financially to go and buy a house, but refrained, scared of housing values?

You didn't need piles of cash to buy a place in the nineties.

5% deposit was all that was needed on lowest in a generation house prices. I think my builder paid one deposit for me and for another I borrowed a few £k short term and paid it off with a 100% cashback mortgage. Happy days.

Glad I didn't rent instead. Thought about it because there was some fear of falling prices at the time but I thought if I'm going to pay a mortgage it may as well be my own.

Graham_Devon

wotsthat wrote: »

You didn't need piles of cash to buy a place in the nineties.

5% deposit was all that was needed on lowest in a generation house prices. I think my builder paid one deposit for me and for another I borrowed a few £k short term and paid it off with a 100% cashback mortgage. Happy days.

Glad I didn't rent instead. Thought about it because there was some fear of falling prices at the time but I thought if I'm going to pay a mortgage it may as well be my own.

Careful now - you'll knock over the apple cart on the "it's always been hard to buy a house, I lived on cardboard soup for 3 years and didn't have a window to buy my place" line from all the boomer threads.

Now, suddenly, it was all pretty easy and the only real requirement to buy a house was that you weren't stupid.

Things have moved on here I see in the past few months.

michaels

Graham_Devon wrote: »

Oh come off it.

To believe what you write you'd have to assume the majority of renters in the mid 90's were all sitting on cash piles in the bank, able financially to go and buy a house, but refrained, scared of housing values?

Welcome to the land of la-la. :doh:

Speaking from experience FTBs were very nervous of buying in the 90s - all their formative experience of housing was negative equity and sky-high interest rates. I bought 6 years too late and paid double what I need have done for my first house.

chucknorris

michaels wrote: »

Speaking from experience FTBs were very nervous of buying in the 90s - all their formative experience of housing was negative equity and sky-high interest rates. I bought 6 years too late and paid double what I need have done for my first house.

I remember that time all too well, I started buying in the early 90's when the market was really bad and it was always a subject that came up at work when we went out for a few drinks. Usually with them thinking that I was mad, saying why on Earth are you buying now when prices are falling. But I remember one night Andre a South African QS was out with us, and he said 'But he isn't buying those properties, his tenants are buying them for him' (he understood). Also you can only see the bottom after it has passed, so if it is visible it is too late to buy at the bottom. So I made my decisions based upon income/profit (not second guessing capital values). But don't get me wrong, I knew that I was taking on risk, but I thought that the potential reward was worth the taking on the downside.

Now that the time to sell has arrived, I am selling based upon the same principal, i.e. income not capital value, one is a quantifiable and the other is simply a guess, that is something that Crashy will never understand. He simply isn't capable of making rational financial decisions, he is obsessed with house prices, it isn't about prices, it is about profitability. Although I must say at this particular time, we don't differ in that property (as an investment rather than a home) isn't the best way to go (for me), but I have only recently arrived there based on logic, that is his default position (based on ignorance).

wotsthat

Graham_Devon wrote: »

Careful now - you'll knock over the apple cart on the "it's always been hard to buy a house, I lived on cardboard soup for 3 years and didn't have a window to buy my place" line from all the boomer threads.

Yes it usually has been quite difficult to buy a house. Some of us got lucky though and I've never been shy about mentioning it.

Crashy_Time

https://www.property118.com/negative-equity-end-mortgage-term/93304/


Unfortunately the average member of the public isn`t in the same investment class as some on here...........:)

padington

Crashy_Time wrote: »

https://www.property118.com/negative-equity-end-mortgage-term/93304/


Unfortunately the average member of the public isn`t in the same investment class as some on here...........:)

Every renter in the country (bar prime London who recently rented) is in negative equity.

Some are drowning in it to the point of spending years on property price forums trying to justify or get back their huge loss.

Crashy_Time

padington wrote: »

Every renter in the country (bar prime London who recently rented) is in negative equity.

Some are drowning in it to the point of spending years on property price forums trying to justify or get back their huge loss.

It would take me twelve and a half years to make the "loss" that woman has experienced in a short time, and she has more to go.... :rotfl: You need to figure out the difference between a "loss" and a "cost".