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Still life left in the BTL market......in SOME areas !
Comments
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I used to invest in stocks and shares but fell out of love with the idea when I started to realise that it's just another form of gambling. Diversifying the risk makes it a little safer but there is no guarantee the portfolio value will go up.
You don’t have to invest in stocks and shares.
It was a contrast because I have to do very very little (actually I do reply to my advisor saying “please make recommended changes” up to 4 times a year).
It’s a comparison I’m familiar with without the work and risk involved in individual properties, but other alternatives are available.
For me and many other employed people a Pension is a no brainer because of the employer contributions plus the tax and NI reliefs.
Some people even get benefits (like child benefit) if they salary sacrifice.
The one thing we could agree on is that each opportunity needs to be judged on its merits.
Denying you do legally required work such as gas safety checks, deposit scheme etc. is not a good way to make a fair comparison.
I have ZERO issue with anyone doing BTL but if I was doing it unless I really enjoyed certain aspects as a hobby (some people do with their own business) I would want to factor in the time spent on
Tax/business planning
Admin - advertising, arranging visits & checks
Repairs
Because I think it’s folly to pretend this is free when comparing with other investments.
Of course if you LOVE painting and book keeping then perhaps you don’t mind giving your free time, but many of us would consider that WORK.0 -
Seems you have forgotten the stamp duty on your 10 flats, ground rent, service charges, maintenance of the properties, refurbishment of the kitchens and bathrooms every say 10 years.
Void periods and damage done by tenants, Bad tenants who don't pay and take months to be evicted.
Gatekeeping by councils,
Getting a BTL mortgage in the first place with all the fees involved.
No just a case of the money rolling in each month
I haven't forgotten the stamp duty but I would include it in any calculations should the time come to sell. It is a necessary expense.
Service charges can be as low as £ 40 per month in some places.
Maintenance of the property is not something that needs to be done all the time. I'm not saying this is overlooked but it also shouldn't be something that is feared as an ongoing expense.
Void periods-if you're lucky then you can end up with a tenant who stays for years. If you're clever, you only buy a flat in an area that is very popular.
No idea what you mean by "gatekeeping by councils".
"All the fees involved" in a BTL mortgage-You mean the mortgage fee ?
Look-I'm not saying everything is easy but just trying to add some balance to people who only talk about the negatives associated with BTL.No Unapproved or Personal links in signatures please - FT30 -
I haven't forgotten the stamp duty but I would include it in any calculations should the time come to sell. It is a necessary expense.
When going through an exercise of comparing investments the transactional costs should be included. These are not limited to stamp duty. There could be CGT. Of course if comparing with equities/art or whatever then the equivalent transactional costs should be included.Maintenance of the property is not something that needs to be done all the time. I'm not saying this is overlooked but it also shouldn't be something that is feared as an ongoing expense.
It needs to be included when doing the exercise of a comparison.
So far you are all but ignoring - removals, stamp duty, CGT, estate agents fees and maintenance. Quite significant when comparing investments.Void periods-if you're lucky then you can end up with a tenant who stays for years. If you're clever, you only buy a flat in an area that is very popular.
It’s not always about being clever (and apparently finding great tenants takes Zero time or effort).
People’s circumstances can change and then they are told by the council not to make themselves intentionally homesless and be forcibly evicted (for example).
This is a TRUE story from very successful friends.
They have been successful in property and good for them I say, but they don’t deny that risks exist or don’t apply to clever people. Smart people can mitigate risks (the thinking takes time and effort) but things can go wrong for anyone.Look-I'm not saying everything is easy but just trying to add some balance to people who only talk about the negatives associated with BTL.
I’m only pointing out the negatives as some people are trying to deny a significant amount of work, risks and costs namely
Tax planning
Deposit system
Mortgages
Advertising
Tenant checks
Itineraries
CGT
Income tax
Stamp duty
Mortagage fees - legal, survey, conveyancing
You also have to factor in whether you LIKE dealing with the investment.
It appears that some people like it so much it’s as if the work doesn’t exist.
Well that’s actually a great place to be but it’s not making a FAIR comparison.0 -
I read with interest the threads on this forum about the buy to let market and the general consensus seems to be that it's not really worth it anymore.
I live in the north of England (outside the property bubble of South East England) and here you can buy a one bed flat for between £ 40,000 to £ 50,000 with expected rental income of £ 380 - £ 400 per month.
Worst case income yield would be 9.6%. Best case would be 12%
Forking out a 25% deposit equates to £ 12500 and there are mortgages on the market that fix the rate for five years at about 2.45% making the mortgage payments around £ 80'ish a month.
As long as homework is done on the area and as long as a buyer is happy with that return then is there anything that I am missing out on that should deter a prospective buyer ?
Yes but to attract good tenants who look after the property and are no trouble you have to spend nearer £180k not what you are suggesting.0 -
I used to invest in stocks and shares but fell out of love with the idea when I started to realise that it's just another form of gambling.
This is a completely absurd statement.
If a balanced portfolio of stocks & shares is 'gambling', the type of BTL you are proposing is russian roulette with a loaded gun.
You are leveraging your investment, funding it with debt that has to be repaid. That's much higher risk than investing capital. What if the tenant stops paying rent?
The average long term return on stocks & shares is about 8-10% a year, which is very decent, and easily beats the figures you are describing when costs and risks are taken into account.
The economic difference to the type of BTL you are describing is that you are borrowing the maximum amount of money that the bank will possibly lend to make your investment. This can turn out brilliantly if things go well, or can be a disaster if they don't.0 -
Denying you do legally required work such as gas safety checks, deposit scheme etc. is not a good way to make a fair comparison.
I have not denied doing legally required work ? Where did you get that from ? I have already stated that some properties do not have gas so I am puzzled as to why you continue to mention the need for gas safety checks when it simply doesn't apply.
Yes, a deposit scheme and some of the other admin work may take some time but I don't really consider that to be a drain on someone's resources. I could spend one hour browsing through Netflix or spend my time more productively and do the necessary admin most of which is performed at the start of the tenancy/purchase anyway so it's not like it's an ongoing thing.
It needs to be included when doing the exercise of a comparison.
So far you are all but ignoring - removals, stamp duty, CGT, estate agents fees and maintenance. Quite significant when comparing investments.
I wasn't making a comparison. Of course, it isn't "free" either in time or costs but neither is stocks and shares.
I'm pretty sure you don't just pick a fund and invest your well earned money into it.
How much time do you spend researching the funds and contacting different fund managers to ask questions ? Did you manage to do all of that in a day or did it take a while before you felt comfortable with your decision ? What would you consider your hourly rate to do all of that legwork ?
How much are management fees for the fund ?
What are the risks ? Shares can go down as well as up and past performance is no guarantee of future earnings.
Are you locked into a fixed term ?
What happens if your investments nose-dive ? Presumably you then have less money to invest in another fund and then you have to go through the whole process again.
7% isn't bad but there is no way that is guaranteed. It could be 1% next year, it could even lose you money.
A £ 12,500 deposit on a £ 50,000 flat could potentially earn £ 4800 each year for 5 years (based on a fixed 5 year mortgage).
Yes....there are initial costs involved but not massive costs. I am not talking about property that needs major work done to it (if any). Yes, there are tax implications but you only pay tax if you're making money. Likewise with CGT. You only pay it if the property goes up in value.
There are risks involved in everything. I am not denying they exist but there does appear to be an air of negativity about BTL that whenver it's mentioned all the negative points are aired and it's perhaps inconvenient to the narrative to consider that many BTL investors have relatively stress-free experiences but of course we don't hear about them as it's only human nature to share our bad experiences with the whole world !No Unapproved or Personal links in signatures please - FT30 -
I have not denied doing legally required work ? Where did you get that from ?
30-60 minutes is not enough to do all the legally required parts of the job.r
There are taxes to pay etc.
Here’s a list
https://easyproperty.com/what-are-my-obligations-as-a-landlord/#electricalbut I don't really consider that to be a drain on someone's resources
That’s a ridiculous statement.
Doing work that has to be done is a factor to be considered.
You are factoring it in for free, so that’s not a fair comparison of investments.I could spend one hour browsing through Netflix or spend my time more productively
You could also do paid employment OR simply enjoy having the free time.
But it’s a COST to having the investment.
If things go wrong e.g. tenant has no heating or hot water, then you may have to do work at time that’s not particularly convenient for you.and do the necessary admin most of which is performed at the start of the tenancy/purchase anyway so it's not like it's an ongoing thing.
Ah right, so any one offs - conveyancing, moving, stamp duty, voids, painting, CGT etc. Can just be ignored.
Ridiculous !!
For a comparison you need to factor in all these one-offs.Of course, it isn't "free" either in time or costs but neither is stocks and shares.
I'm pretty sure you don't just pick a fund and invest your well earned money into it.
I have delegated this and I can tell you the exact cost 0.5%.
My IFA selects the funds.
To be specific I send an email up to 4 times per year saying “please go ahead with your recommendations”.
So yes i’ll Be honest about the cost and time.
4 emails and 0.5%.
It’s in an ISA and SIPP so no CGT or income tax.How much time do you spend researching the funds and contacting different fund managers to ask questions ? Did you manage to do all of that in a day or did it take a while before you felt comfortable with your decision ? What would you consider your hourly rate to do all of that legwork ?
Went with the IFAS we already knew from employment so no effort selecting them.
My hourly rate is £25 as I compare with my paid employment, so that’s what I’d factor in if I was doing specific WORK e.g. painting, admin for an active investment such as property.How much are management fees for the fund ?
I get institutional rates which start at 0.2%, some funds are higher but I take them if recommended by the advisor as I don’t mind paying higher charges for something better.What are the risks ? Shares can go down as well as up and past performance is no guarantee of future earnings.
They do go up and down (in a few cases there are guarantees - it’s called with profits).
Highly likely to go up over the LONG term and be better than cash.
There is no guarantee your tenants will always pay rent.
I think generally one set of tenants would be regarded as a greater risk than a globally diverse portfolio of funds.Are you locked into a fixed term ?
ISA - no. Can liquidate within about 2 weeks, quite cheaply.
Pension - can’t take it until 55, then limited by tax rules I.e. I would plan to take less than higher rate tax each year, but can take 25% lump sum.
When drawing down the pension you can be flexible (but would want to avoid higher rate tax).
Property is sometimes quite illiquid especially if you are trying to sell at a bad time e.g. during brexit uncertainty.What happens if your investments nose-dive ? Presumably you then have less money to invest in another fund and then you have to go through the whole process again.
Those that have guarantees wouldn’t nose dive, that why you diversify.
If I was in drawdown I would stop selling until they recovered and live off the lump sum.
If I was buying then that’s a great situation as you buy cheaply.
You tend to invest in equities monthly so you get some good months, some bad months but it tends to even out.
low prices are GOOD for buying of course, but if you have flexi drawdown you can stop selling in a crash, so much more flexible than property.7% isn't bad but there is no way that is guaranteed. It could be 1% next year, it could even lose you money.
Sometimes it does goes down, but over the long term (and for some of it were talking 70 years) the. It’s very likely to go up and beat cash/inflation.
Basically if you don’t believe this basic premise then you should be doing it.A £ 12,500 deposit on a £ 50,000 flat could potentially earn £ 4800 each year for 5 years (based on a fixed 5 year mortgage).
Yes....there are initial costs involved but not massive costs. I am not talking about property that needs major work done to it (if any). Yes, there are tax implications but you only pay tax if you're making money. Likewise with CGT. You only pay it if the property goes up in value.
Then why are you afraid of full and fair comaprisons where you compare all the costs e,g, stamp duty.There are risks involved in everything.
Agreed, but the risks are higher with one BTL than a globally diversified portfolio.I am not denying they exist but there does appear to be an air of negativity about BTL that whenver it's mentioned all the negative points are aired and it's perhaps inconvenient to the narrative to consider that many BTL investors have relatively stress-free experiences but of course we don't hear about them as it's only human nature to share our bad experiences with the whole world !
I do know some BTLers who’ve done really well (chucknorris for one).
None of them tell me it was easy and stress free and I can think of two who’ve been in the game for a while (both successful) who’ve had to start court action to get things sorted (in both cases it never got to court but they had to start the action).
All of them say it’s hard work a PITA sometimes and none would get into it now in this country.
I’ve got no issue with fair comparisons as you can see from the transparent, clear and honest information about my investments.
I don’t think I have any bias except not wanting to contribute time for free without factoring it in which I think is entirely reasonable.0 -
30-60 minutes is not enough to do all the legally required parts of the job.r
There are taxes to pay etc.
Here’s a list
https://easyproperty.com/what-are-my-obligations-as-a-landlord/#electrical
Thanks for kindly telling me what you think I don't know.
"Gas Safety". Not applicable as I keep telling you
"Electrical safety"-Done and carried out every 5 years
"Fire Safety" .Done.
"Deposit Protection". Done
"Energy performance". Done
Most of these actions are carried out upon completion of the property and are therefore not an ongoing annual "job"That’s a ridiculous statement.
Doing work that has to be done is a factor to be considered.
You are factoring it in for free, so that’s not a fair comparison of investments.
You could also do paid employment OR simply enjoy having the free time.
But it’s a COST to having the investment.
If things go wrong e.g. tenant has no heating or hot water, then you may have to do work at time that’s not particularly convenient for you.
Look-I think i have been reasonably polite in expressing MY opinion. It seems that you take objection to anyone who has an opinion different to your own. We CAN agree to disagree you know without resorting to labeling the other person's comments are "ridiculous".
Doing some admin is not something I personally account for in managing a property.
I am guilty of being a little glib with my 30-60 minutes admin at the end of the year because I haven't the appetite to detail every minute I spend to satisfy your suspicion.
You keep banging on about the need to make a fair comparison-why ? I didn't claim to compare the benefits of BTL with an investment fund......YOU did.
Without knowing exactly what fund and property you are trying to compare then you have no way of making a comparison at all whether that be fair or broad !
Again, you seem obsessed with making a comparison with your enlightened decision to go with a stocks and shares fund. Good for you and I hope it works out well for you.Ah right, so any one offs - conveyancing, moving, stamp duty, voids, painting, CGT etc. Can just be ignored.
Ridiculous !!
For a comparison you need to factor in all these one-offs.
Based on a £ 44,000 flat then the conveyancing and stamp duty are still fairly modest figures and do not massively distort the overall financial gains from this level of investment.
You do realise that CGT only applies if you make a profit ?I have delegated this and I can tell you the exact cost 0.5%.
My IFA selects the funds.
To be specific I send an email up to 4 times per year saying “please go ahead with your recommendations”.
So yes i’ll Be honest about the cost and time.
4 emails and 0.5%.
It’s in an ISA and SIPP so no CGT or income tax.
This isn't a criticism so please tone down your defensive stance a little but I personally would not be comfortable giving an IFA carte blanche to do what they wish with my money. IFA's are open market sales reps picking from funds which are ALL packaged to appear as great investment opportunities (otherwise nobody would buy them).
But we're not talking about cash are we ? You're intent on making this a comparison between BTL and shares so please be consistent.They do go up and down.
It very diversified.
Highly likely to go up over the LONG term better than cash.
And shares are as safe as houses (pardon the pun) at bad times e.g. during Brexit ?Property is sometimes quite illiquid especially if you are trying to sell at a bad time e.g. during brexit uncertainty.Sometimes it does goes down, but over the long term (and for some of it were talking 70 years) the. It’s very likely to go up and beat cash/inflation.
Basically if you don’t believe this basic premise then you should be doing it.
Again, I never said shares performed worse than cash/inflation. You are making an unnecessary point.
I am not afraid to make a full and fair comparison it is just that I can't be bothered to write it down in an online forum in forensic detail just because you prefer it that wayThen why are you afraid of full and fair comaprisons where you compare all the costs e,g, stamp duty.
Your response actually reinforces my original point which is that many people claim BTL is not worth it anymore and I was trying to make a point that in some cases it very much is. That DOESN'T mean that what you are doing is silly or foolish just that there are other ways to invest money. Some are riskier than others, some make more money than others but the BTL market is not dead.
I trust you will concede at least that there are some BTL landlords who have a relatively hassle free ownership and management of their property and who are making attractive returns from their property ?No Unapproved or Personal links in signatures please - FT30 -
Thanks for kindly telling me what you think I don't know.
Of course you know it.
You are just being selective in what you count as work for an investment.
You want to ignore everything that’s a one off and that’s not correct.
If something needs doing every 10 years then the effort is costed at 10% per annum.Look-I think i have been reasonably polite in expressing MY opinion. It seems that you take objection to anyone who has an opinion different to your own. We CAN agree to disagree you know without resorting to labeling the other person's comments are "ridiculous".
Incorrect. I like different opinions and welcome them.
But if you say you can ignore CGT, stamp duty as they are one-offs then that’s simply incorrect.Doing some admin is not something I personally account for in managing a property.
I don’t believe that’s correct when costing an investment.
Admin is work.
There may of course be work that someone likes doing so of course they can decide to so that for free and that’s why some things will appeal to some people, but it should not be denied that the work exists.You keep banging on about the need to make a fair comparison-why ?
Because this is a discussion board and people are entitled to discuss the merits of your arguments and I’m saying that other investments may be better.Without knowing exactly what fund and property you are trying to compare then you have no way of making a comparison at all whether that be fair or broad !
Well you can make estimates and comparisons.
This is what people have to do when they do some analysis and planning.Again, you seem obsessed with making a comparison with your enlightened decision to go with a stocks and shares fund. Good for you and I hope it works out well for you.
Err no, you asked me lots of questions about it so I answered them.Based on a £ 44,000 flat then the conveyancing and stamp duty are still fairly modest figures and do not massively distort the overall financial gains from this level of investment.
Then there’s no issue in factoring them in then is there?You do realise that CGT only applies if you make a profit ?
Of course i do. The G stands for gains.
I would expect property to go up over the long term especially in nominal terms.This isn't a criticism so please tone down your defensive stance a little
Don’t know what you mean,
Just making points.but I personally would not be comfortable giving an IFA carte blanche to do what they wish with my money. IFA's are open market sales reps picking from funds which are ALL packaged to appear as great investment opportunities (otherwise nobody would buy them).
Entirely up to people what they want to do.
I’ve dealt with my IFA for many years and I believe they are interested in doing good business by providing long term realtionships and not ripping people off (there are good and bad in all industry’s).
Yes sure some people can do it themselves, just as you can choose to so your plumbing, roofing, car servicing yourself.
I think that’s a personal choice and personally I’m happier with a professional doing it.
The point was it’s a passive investment for which I don’t need to do anything and there’s a transparent cost that can be factored in.But we're not talking about cash are we ? You're intent on making this a comparison between BTL and shares so please be consistent.
I don’t any idea why you are referring to cash.
Happy to give an honest answer if you tell me what your referring to.
In general I was making a comparison between an equity portfolio that’s totally passive and an active property investment which requires work and constant availability (if tenants have an emergency),And shares are as safe as houses (pardon the pun) at bad times e.g. during Brexit ?
I did not claim they were safe, although over the long term I’d expect a diversified portfolio to go up.
My US shares have risen in GBP when the £ has dropped, so you are not totally exposed to British issues if you have a globally diversified portfolio.
Brexit has not been great for property or equities but being globally diversified has reduced the risk.I am not afraid to make a full and fair comparison it is just that I can't be bothered to write it down in an online forum in forensic detail just because you prefer it that way
That’s fine, but anyone making a decision about where to invest needs to do a fair comparison.Your response actually reinforces my original point which is that many people claim BTL is not worth it anymore and I was trying to make a point that in some cases it very much is.
I would agree with that, but I think the cases are limited.That DOESN'T mean that what you are doing is silly or foolish just that there are other ways to invest money.
With free money from my employer (pension contributions) and tax and NI relief I am absolutely positive it’s not silly. It’s a generalisation but I’d say it’s a no brainer to at least claim the free money.
And I’m sure you know it doesn’t have to entirely equities - in fact mine isn’t - it includes property, cash, bonds and gilts as well.Some are riskier than others, some make more money than others but the BTL market is not dead.
In general in the uk I don’t think it’s a good idea at today’s prices.
There may be pockets where it works out.I trust you will concede at least that there are some BTL landlords who have a relatively hassle free ownership and management of their property and who are making attractive returns from their property ?
Sure and those making attractive returns have mostly bought at previous prices in previous years/decades.
However there aren’t ANY landlords who aren’t at risk of getting called at an inconvenient time from a tenant with a flood (or are paying an agent to take care of it for them).
And there’s nowt wrong with that if you accept that’s what you want to do.
It just isn’t a passive investment that takes 30-60 mins a year.0 -
P.s. why don’t you keep quiet about it and buy them up alongside your friends an family?
Serious and polite question.0
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