How does BTL stack up?

Crashy_Time

littlepixel72 wrote: »

Speaking as a recent accidental landlord, it doesn't stack up. We haven't had bad tenants or any voids, so we're lucky in that respect.

But now our interest only mortgage payments are going up (and we don't earn enough to remortgage at a better rate). We can't afford to serve the tenants notice and have the house standing empty while we market it. Through wear and tear and the market falling, house is possibly worth 20% less than it was 2 years ago. We'd love to sell it, but not confident it would sell except at a rockbottom price. It's not attractive to investors as yield is low or to potential owner occupiers as it's too expensive!

As for us, we're just about maintaining in our new place, but forget holidays and making improvements, let alone saving or overpaying on the mortgage. The prospect of being able to use the BTL as a pension isn't even certain because anything could change. Hoping to ride out the current stagnation and wait for the market to pick up again at some point, but to get out of our current situation, we'll probably need to sell our current home and move back into a place we were happy to leave to avoid accruing more debt.

I won't mention tax, except to say it definitely adds to the overall picture of BTL not stacking up.

I would make a different choice now. In hindsight, I would have put it on the market in 2016 without trying to achieve top price. That would still have left us better off than where we are now, and with freedom intact.

We live and learn ;-).

People who managed to exit the market at still decent profit/price probably did this around then IMO.

AnotherJoe

littlepixel72 wrote: »

Speaking as a recent accidental landlord, it doesn't stack up. We haven't had bad tenants or any voids, so we're lucky in that respect.

But now our interest only mortgage payments are going up (and we don't earn enough to remortgage at a better rate). We can't afford to serve the tenants notice and have the house standing empty while we market it. Through wear and tear and the market falling, house is possibly worth 20% less than it was 2 years ago. We'd love to sell it, but not confident it would sell except at a rockbottom price. It's not attractive to investors as yield is low or to potential owner occupiers as it's too expensive!

As for us, we're just about maintaining in our new place, but forget holidays and making improvements, let alone saving or overpaying on the mortgage. The prospect of being able to use the BTL as a pension isn't even certain because anything could change. Hoping to ride out the current stagnation and wait for the market to pick up again at some point, but to get out of our current situation, we'll probably need to sell our current home and move back into a place we were happy to leave to avoid accruing more debt.

I won't mention tax, except to say it definitely adds to the overall picture of BTL not stacking up.

I would make a different choice now. In hindsight, I would have put it on the market in 2016 without trying to achieve top price. That would still have left us better off than where we are now, and with freedom intact.

We live and learn ;-).

How do you get to be an accidental landlord* with an interest only mortgage? If you arent in negative equity, then sell it at a rock bottom price and move on with your life before it gets worse if "wear and tear" (just what sort of tenants do you have" have dropped the price by 20%.
Very few areas have seen 20% decreases in the last 2 years through prices falling. Maybe you are in one but if so, Get rid now










* I dont believe you suddenly acquired a property with an IO mortgage with tenants in it. You did something deliberate to keep this place and become a landlord.

Cakeguts

I don't understand the term accidental landlords either. I am a landlord and nothing we did happened by accident we made the choice to become landlords with all the property we own. Not only that but we also did research into what kind of property to buy. That can't happen by accident either.

Thrugelmir

Complancey with regards to the future direction of interest rates is the elephant in the room. As will significantly hit income returns. Suspect many BTL empire builders aren't fully factoring in such a change. Leveraging with debt is a double edged sword.

Crashy_Time

AnotherJoe wrote: »

How do you get to be an accidental landlord* with an interest only mortgage? If you arent in negative equity, then sell it at a rock bottom price and move on with your life before it gets worse if "wear and tear" (just what sort of tenants do you have" have dropped the price by 20%.
Very few areas have seen 20% decreases in the last 2 years through prices falling. Maybe you are in one but if so, Get rid now













* I dont believe you suddenly acquired a property with an IO mortgage with tenants in it. You did something deliberate to keep this place and become a landlord.

Not everybody wants to drop their selling price to rock bottom, and in some cases, depending on where in the country the house is there still might not be a buyer, that is IMO good enough to be called "accidental". Many people just assumed that they could sell a house at a good profit anytime and move on without any problem, that was the accident that can happen when you join in a Ponzi scheme

chucknorris

Mr_Curious wrote: »

Hi Guys,


Just a discussion point really. I have been speaking to a number of people who have recently retired. It turns out that, in their opinion/experience the key to early retirement is property/BTL.


Is that still the case? I appreciate that the value of a house may increase over time and rent should exceed costs but does it all add up?


Tax? Maintenance? Voids? Bad tenants? Regulatory changes?


Seems like planning for retirement the hard way... unless the property goes crazy like London in the past.


Any thoughts or experiences?


(Just to be clear this isn't a point to say one way is the only way or cause huge division and name calling. Just a talking point)


Mr_C

IMO it is best to hold investment property when you are younger and dispose of it as you approach (or shortly after) retirement for a number of reasons:

- Property is hassle, I want a more relaxed lifestyle when I am older

- Property can be tying, I want to be free to go on long/lots of holidays when I am retired

- Property is not liquid, and if you hold it until you are quite old, you might have to sell it when the market is down

- After the tax changes, I would favour equities over property anyway, although it can have a place in a portfolio with equities/other investments

- it is difficult to avoid CGT on investment property compared to equities

- Dividend income receives better income tax treatment

Crashy_Time

chucknorris wrote: »

IMO it is best to hold investment property when you are younger and dispose of it as you approach (or shortly after retirement) for a number of reasons:

- Property is hassle, I want a more relaxed lifestyle when I am older

- Property can be tying, I want to be free to go on long/lots of holidays when I am retired

- Property is not liquid, and if you hold it until you are quite old, you might have to sell it when the market is down

- After the tax changes, I would favour equities over property anyway, although it can have a place in a portfolio with equities/other investments

- it is difficult to avoid CGT on investment property compared to equities

- Dividend income receives better income tax treatment

Good advice.

Simon_Brown_2

Interesting discussion.

In my experience there are a group of people who just do not trust shares / equities or bonds. They view them as risky. They see houses as hard tangible assets that are easy to understand and cannot just 'disappear' like numbers on a screen.

Maybe this cohort of investors will move into commercial property or farmland etc?

As many posters have said, BTL has been a reasonable investment for many over the past 20 years or so.

One question that interests me, is why have large investment funds largely stayed out of residential housing and stuck to commercial property?

I have read that more recently large-scale investment funds have started to show interest in residential property. This appears to be mainly in the large apartment blocks for students etc. Presumably the reason these large funds go for apartment blocks is the logistics of having all maintenance issues in one place keeps costs down.

The more 'traditional' terraced houses etc, seem to be the preserve of social housing associations / landlords. Maybe they get tax incentives that offset the cost of maintaining disparate houses scattered around towns? I don't know, but I have noticed that social housing does now involve some property funds. But the charges for these REITs or PAIFs seem high compared to other equity funds etc.

Crashy_Time

Simon_Brown wrote: »

Interesting discussion.

In my experience there are a group of people who just do not trust shares / equities or bonds. They view them as risky. They see houses as hard tangible assets that are easy to understand and cannot just 'disappear' like numbers on a screen.

Maybe this cohort of investors will move into commercial property or farmland etc?

As many posters have said, BTL has been a reasonable investment for many over the past 20 years or so.

One question that interests me, is why have large investment funds largely stayed out of residential housing and stuck to commercial property?

I have read that more recently large-scale investment funds have started to show interest in residential property. This appears to be mainly in the large apartment blocks for students etc. Presumably the reason these large funds go for apartment blocks is the logistics of having all maintenance issues in one place keeps costs down.

The more 'traditional' terraced houses etc, seem to be the preserve of social housing associations / landlords. Maybe they get tax incentives that offset the cost of maintaining disparate houses scattered around towns? I don't know, but I have noticed that social housing does now involve some property funds. But the charges for these REITs or PAIFs seem high compared to other equity funds etc.

Many will just move into bankruptcy IMO, and the banks won`t lend for the things you mentioned to Average Joe like they did on BTL. BTL lending was a deliberate policy by the banks to get existing homeowners into even more mortgage debt.

lisyloo

Any thoughts or experiences?

I don't think it stacks up now buying at todays prices with todays tax regime (it can still stack up now for properties bought some time ago).


The propspects for capital gains and the tax regime and the bureacracy involved have all changed.


The people you are talking to are referring to either past experiences or current experiences but at past purchase prices.


It's very hard to retire both early and comfortably these days and requires a lot of planning.