Buy to let advice - would you go ahead in the current market?

Derfel

dannyboycey wrote: »

Even with a small amount of growth - once you and in all your fees and costs, not to mention time, hassle and stress, you will still be operating at a loss. It's a no-brainer really.

I'm astonished by the amount of posts of this nature recently - I don't mean to sound rude, but have you worked out the math? It's not rocket science. If you have cash on the hip, you can get 6-7% on your investment in high interest accounts and bonds - risk free!! Can you beat this with BTL? (No is the answer BTW).

Thanks for your comments - its okay, its not rude, its a fair point and much appreciated. We don't have that much spare cash, enough for a deposit (by taking a small mortgage out on our own place) and paying the solictors fees.

The point is the house we're buying sold for £80k in the mid 90's and is now worth £160k. If it doubles again in the next 10 - 15 years it would be worth £320k and we'll have paid out around £35k. Of course who's to say it will double again and would anybody ever be able to afford that for what is essentially a starter home? But I would have said no-one would have paid £80k for this house in the mid 90's and so on and therefore why shouldn't house prices be just as ridiculously over-priced in 2018?

Derfel

lypsey wrote: »

Derfel
You say "but if we pull out now we'll have a very angry seller and estate agent chasing us."

So what , this is business not a charity for EA's and sellers

No, you're right, too soft sometimes!

Dithering_Dad

lypsey wrote: »

Derfel
You say "but if we pull out now we'll have a very angry seller and estate agent chasing us."

So what , this is business not a charity for EA's and sellers

Agreed. However, if you're set on this course of action, you could at least try to get the house price dropped so that you have a higher profit margin. This is your pension we're talking about here, are you happy to have a smaller pension just so that Mr. Estate agent (who you'll never see again) or Mr Seller (who you will also never see again) have a good opinion of you?

Also, if you are so reserved in backing out of a deal because of upsetting the feelings of the seller/estate agent then how will you be when/if your tenant stops paying your rent and brings you a sob story about losing his job and the kids not having a roof over their heads or food in their bellys. Will you really be able to throw them onto the streets if you can;t even back out of a house sale?

ISAs are tax free, have no tenant hassles and don't need subsidising to the tune of £180 per month!

dannyboycey

Derfel wrote: »

If it doubles again in the next 10 - 15 years it would be worth £320k

Maybe it will, maybe it wont. None of us have a crystal ball. However, here's the important point - we can make an informed judgement based on whats happening now both at home and in the US, and can fairly safely say that house prices will not rocket in 2008. So perhaps just hold of a while till things look a little rosier. I could be completely wrong, but 2008 looks set to be a really bad year for those burdoned with a large amount of debt.

carolt

Is your mortgage a repayment mortgage? If not, don't even think about it - you would just be relying on capital appreciation to make any money at all.

Are you young enough that you can continue to subsidize the mortgage by minimum £180/month without feeling it for some time to come?

If the worst came to the worst and you couldn't sell the property except at a huge capital loss and couldn't rent it, would you be in position to pay the mortgage off yourself?

Have you fully researched the letting market for the property in question ie not just taking an estate agent's word for it (particularly the one selling it, as it's in his interest to overstate the potential rent)? Do you have a potential tenant waiting to rent?

Would you be able to sleep easy at night if you bought the property now at the agreed price, only to find it losing its value month by month - the latest betting in the City is that house prices will fall by 7% next year alone - see here:

http://www.ft.com/cms/s/0/83bb1a7a-9bc1-11dc-8aad-0000779fd2ac.html?nclick_check=1

Or would you kick yourself you hadn't waited a bit and saved yourself some money?

Only you can answer those questions.

Good luck!

poppy10_2

kissingthepink wrote: »

I think that your biggest regret will be not buying this property. Over a 10-15 year time frame you are bound to ride out any clycles in the market and be able to sell at a point where you can make a profit. This is my view, and the reason why I am buying at the moment.

Cycles in property prices take much longer than this. Prices have been rising for the last 10 years, and we are right on the crest of the peak.They will probably be falling now for the next 7-10 years, and will take another 20 years after that to recover to where they are now (in real terms)

mlz1413

If this investment means EVERYTHING for your retirement then I would say don't. None of us have a crystal ball but we all know that currently changes are happening (lenders/interest rates/house prices)

Put the £180 pm and any lump sum in a 6% account and wait for spring/summer 2008. Then have a look again prices might be lower they might be the same (really doubtful they will be higher) but interest rates and lending should have been through the worst turbulance and so you might be able to see more wood than trees.

If this investment will just help out in the future then go for it. If you want more time just tell EA and seller you can't complete before xmas, moving the date to new year will give you a bit more chance to find a tenant.

Remember only hindsight wil be able to do a better job!!

Deb1820

we'll have a very angry seller and estate agent chasing us

So many deals fall through, it's the name of the game, so don't feel guilty. The market has changed since you agreed to buy, so your conscience should be clear. Let the seller be angry and don't worry about the agent - you don't have to pay commission if you are buying, surely? Cut your losses now - much better than regretting it for years.

Derfel

I've also read that there are less BTL mortages because of the new legislation the demand for a deposit is so much higher that it is deterring amateur landlords - won't that continue to drive the market up for rental incomes with less property available? And doesn't it follow there will be demand for more first time buyer houses also driving the price upwards and onwards?

sarkin

How about, a guy comes up to you in a pub and offers you the chance to invest in something that will loose £180 a month, what would you do?