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

Doozergirl

ruggedtoast wrote: »

LOL! You just cant beat that BTL logic.

It's got sod all to do with BTL. If prices fell 10% from the current ceiling price, I'd still be up but it really doesn't matter to me anyway. As I said, I'm not selling.

michaels

lypsey wrote: »

H
I never say anything just for effect , I really believe it will happen
Take a look at this
http://www.in2perspective.com/nr/stats/house-price-to-earnings-ratio.jsp

One last thing , I have sold my house and now rent a 700K house for 900 quid a month , in the middle of the country side . The house I sold a while back will be 50% of what it is today , I am sure of that

Arguments about the relative price of renting vs buying I can understand. Arguments re cyclicality and price expectations I am more than happy to follow.

However please stop bandying about price/income ratios as these are irrelevant. The only ratio that matters is the monthly mortgage cost (capital plus interest) as a proportion of disposable income and I would even argue that housing demand is inelastic and thus this ratio is likely to rise with rising real incomes. Before anyone thinks this is an argument supporting house prices, please note it is a double edged sword, suggesting that house prices will be extremely sensitive to interest rates given the propensity for people to use floating rate finance.

lypsey

Doozergirl , I am not attacking you , and you have to do what you think is right

If you are borrowing 60,000 and it is a business mortgage I would guess you are paying 450 per month mortgage , you are getting 500 rent (less EA's fees of 5-10%??) So you are making 50 quid a month GROSS . I still can't see how this is that great, less insurance , upkeep , yearly gas mandatory check , as I say the odd leaky pipe , replacement fridge etc

I am not getting at you in any way at all but do you know how much 50 quid a month makes if you are saving it in a bank account over 25 years???

Also , a question for you if there is a crash as I suggest , what properties do YOU think will be hardest hit?? Personally , percentage wise it is will the very big houses and small properties will be hardest hit

Also , why out of curiousity if YOU also believe house will fall, consider this. If I am wrong and they don't fall 40 -50% but.... they fall 20% , if you sold today you would keep your 20% and then you buy back into the market , when they rise (as property always does over the long term) you will then gain 20% , you have a nice 40% in your pocket?? Hope that makes sense??

lypsey

Micheals , you say "However please stop bandying about price/income ratios as these are irrelevant. The only ratio that matters is the monthly mortgage cost (capital plus interest) as a proportion of disposable "

My dear friend ,let me explain something to you .
Price /income ratio and mortgage cost as proprotion of disposible income are exactly the same. Let me explain

I will keep it to easy figures , say you earn 55k , you will take home about 2800 per month. Now as the graph says you borrow 5 times salary , you get 275k mortgage , it will cost you 1900 quid a month

A decade ago you could only borrow 3x salary , so this time (in the old days when things were sensible) you could borrow 165 k costing 1200 quid a month.

Please try to explain to me how cost price/salary ratio's are irrelavent when my very simple example show a difference of 700 quid??

trulysaintly

lypsey wrote: »

Micheals , you say "However please stop bandying about price/income ratios as these are irrelevant. The only ratio that matters is the monthly mortgage cost (capital plus interest) as a proportion of disposable "

My dear friend ,let me explain something to you .
Price /income ratio and mortgage cost as proprotion of disposible income are exactly the same. Let me explain

I will keep it to easy figures , say you earn 55k , you will take home about 2800 per month. Now as the graph says you borrow 5 times salary , you get 275k mortgage , it will cost you 1900 quid a month

A decade ago you could only borrow 3x salary , so this time (in the old days when things were sensible) you could borrow 165 k costing 1200 quid a month.

Please try to explain to me how cost price/salary ratio's are irrelavent when my very simple example show a difference of 700 quid??

Finding a lender in the current climate to give you 5x salary is similar to the 'rocking horse' scenario....

Derfel

Just to provide a conclusion to this thread I started.

We backed out today - it was pretty painless, the EA didn't even bat an eyelid (which makes me feel worse for the seller).

I still have friends who own 2nd (and 3rd ) properties who think I've done the wrong thing but reading all the comments and advice on here and in the press I think i'm going to be happier sleeping at night and buying the kids one or two more extra Xmas presents.

We're not cut out to be landlords (and the moral part of me thinks house prices are obscene if young couples can't reasonably afford a starter home so I shouldn't be trying to make money out of it)

Thanks to all who contributed - appreciated all the comments/ advice/ insults :rolleyes:

Cheers :beer:

carolt

Derfel wrote: »

We're not cut out to be landlords (and the moral part of me thinks house prices are obscene if young couples can't reasonably afford a starter home so I shouldn't be trying to make money out of it)

Nice to actually read this - there IS a moral angle to BTL, in the current market and those who prefer to view it otherwise are either kidding themselves or amoral, as far as I'm concerned (or even immoral in the case of a few landlords one hears of...).

dunstonh

In any period of growth, any fool can make money and some of those go on to think they are experts. The longer the period, of growth the more "experts" and the more "fools". Its the same with stockmarket investing as well.

Knowing when it is or isnt right to be doing something and measuring the potential reward against the risk and making the right decision based on that is the first stage to being a real expert.

That doesnt mean there are not opportunities to be had. Its just damned harder than it used to be spotting these is where the skill is. The fools will just keep buying until they get themselves into trouble.

Doozergirl

lypsey wrote: »

Doozergirl , I am not attacking you , and you have to do what you think is right

If you are borrowing 60,000 and it is a business mortgage I would guess you are paying 450 per month mortgage , you are getting 500 rent (less EA's fees of 5-10%??) So you are making 50 quid a month GROSS . I still can't see how this is that great, less insurance , upkeep , yearly gas mandatory check , as I say the odd leaky pipe , replacement fridge etc

I am not getting at you in any way at all but do you know how much 50 quid a month makes if you are saving it in a bank account over 25 years???

Also , a question for you if there is a crash as I suggest , what properties do YOU think will be hardest hit?? Personally , percentage wise it is will the very big houses and small properties will be hardest hit

Also , why out of curiousity if YOU also believe house will fall, consider this. If I am wrong and they don't fall 40 -50% but.... they fall 20% , if you sold today you would keep your 20% and then you buy back into the market , when they rise (as property always does over the long term) you will then gain 20% , you have a nice 40% in your pocket?? Hope that makes sense??

Oh come on! The simple fact is that even if I had to put a wee bit more of my money into the house over the first few years, which is unlikely anyway, at the end of 25 years, I have something which really will have been paid for in entirity by someone else. Interest, capital, everything. Rents will go up with inflation, the mortgage will down and I will have a little income to keep me in gin, sherry and younger men for hopefully a good 30 years after the mortgage is paid off. I'm not interested in living off it right now at all but I'll be grateful for it in future.

And in the meantime, someone who I love that isn't in a position to buy, can live far more comfortably and with far more security than the average tenant and treat the house like her own until she is ready to buy, if that's what she wants. And it costs me nothing

I haven't got a clue what you're on about with your buying/selling thing but I've done the buying/selling thing quite a bit.

fc123

Derfel wrote: »

Just to provide a conclusion to this thread I started.

We backed out today - it was pretty painless, the EA didn't even bat an eyelid (which makes me feel worse for the seller).

I still have friends who own 2nd (and 3rd ) properties who think I've done the wrong thing but reading all the comments and advice on here and in the press I think i'm going to be happier sleeping at night and buying the kids one or two more extra Xmas presents.

We're not cut out to be landlords (and the moral part of me thinks house prices are obscene if young couples can't reasonably afford a starter home so I shouldn't be trying to make money out of it)

Thanks to all who contributed - appreciated all the comments/ advice/ insults :rolleyes:

Cheers :beer:

i followed your thread and think you have done the right thing for now...that's all one can do........deal with the present. Who knows??....1 yr on you could do it then??? We are landlords by accident and, yes its okaaay....but it's not a simple case of "provide property, collect wodges of cash in rent"....prefer my real job!!