How does BTL stack up?

Simon_Brown_2

AdrianC wrote: »

Even in that situation, renting it is still a conscious choice. They have to find a tenant, sort a tenancy, do all the referencing, protect the deposit etc (whether themselves or through an agent they've hired).

"Accidental landlord" is usually a euphemism for "amateurish landlord trying to make excuses".

That's true.
But there's also an aversion amongst the British public towards selling residential property.
''You can't go wrong with bricks 'n' mortar''.

steampowered

Simon_Brown wrote: »

So I'm not sure what will happen in the future. What will replace BTL? Will those investors turn to bonds and shares?

My guess is the cash-rich may go invest into commercial property (without mortgages).

Shares and bonds are the obvious place for that money to go. Most people have always been invested in bonds and shares through pensions.

It wouldn't make very much difference to the global markets if UK BTL money went into bonds/shares instead.

Commercial property has always been an investment option. But one that is sensibly tackled by people investing in real estate investment trusts or the like to spread risk across a portfolio of commercial properties, rather than just buying a single property.

However, very few of the BTL landlords I know would ever consider buying shares. They just have a completely different mindset and comfort zone.

Indeed. Many of them will refuse to accept that the BTL investment environment is very different to what it was only a few years ago.

Particularly in the UK, much more so than in other countries, there is a strong emotional attachment to investing in real estate over other types of assets. That is often not grounded in any sort of economic analysis and will remain there regardless of whether the investment fundamentals are in favour of real estate investment or not.

I'd also point out that most of the BTL landlords you talk to will in fact already own shares through a pension.

AnotherJoe

happyandcontented wrote: »

'Accidental Landlord' by inheritance maybe? It could have happened through a relative dying and the family member renting it out until they had decided what to do with it long term.

In which case it was unaccidental enough for them to go through the hoops to get a mortgage on it in their name.

Mr_Curious

Something else that was mentioned in a different thread regarding working capital. I think this is another area that is easily overlooked with BTL.


What would be a reasonable amount of money required to 'run' a BTL property? Money that has to be easily accessible so likely to miss out on better returns even by locking it away in a term account.

Crashy_Time

Simon_Brown wrote: »

Good point, I hadn't considered the lending aspect.
My understanding is that BTL mortgage lending started when the govt changed the tenancy laws to the AST, which made eviction easier. This made lenders more confident they could repossess if required.

Pre-AST days, BTL was less common. But back then employment was more secure and pensions much better. So it really was a different country.

Farmland prices have been pushed up by govt IHT rules, which encourages wealthy individuals to buy farmland. Yields have been pushed down to less than 1pc.
Obviously the govt could change this - but unlikely they'll want to upset their wealthy friends / donors.

So I'm not sure what will happen in the future. What will replace BTL? Will those investors turn to bonds and shares?

My guess is the cash-rich may go invest into commercial property (without mortgages).

But I don't think anyone really knows.

However, very few of the BTL landlords I know would ever consider buying shares. They just have a completely different mindset and comfort zone.

I believe that politicians benefited from the cheap credit/BTL boom because people felt richer, after all they now "owned" two or maybe three properties like rich folks, and this hid problems like lack of wage growth which could be hard for politicians to spin otherwise. The banks of course got to crank lending (and bonus) right up, win win Until it all went Pear shaped .. but of course the same people who took on all the loans were now on the hook for bailing out the mess created by all the silly lending...happy days...until the next credit crunch


Interesting you mention tenancy rights, because it seems that just as it now gets a lot harder to evict, BTL lending is winding down again? I don`t think there is much real value in property out there at the moment, but smart cash rich landlords who know how to pick good properties will always find something to invest in? The fly in the soup now though is tax, really don`t know how that is going to play out as it is a handy political flag to wave at the moment when so many are priced out.