Do landlords not get to keep their properties after the mortgage is paid off by tenants?

AdrianC

theartfullodger said:

Lovely graphs but they're simply telling you history.  Doesn't say what's coming up.

When you drive a car do you look out if the rear window (which is your argument) or look forward?

I bow in awe of your psychic abilities.

But you could have given us a heads-up about 2020...

SpiderLegs

theartfullodger said:

Lovely graphs but they're simply telling you history.  Doesn't say what's coming up.

When you drive a car do you look out if the rear window (which is your argument) or look forward?

Well actually...
self drive cars are heavily reliant on machine learning, which is a product of the analysis of vast amounts of historical data to predict future outcomes.
And that’s really the same as how your brain knows how to drive a car aswell. 

steampowered

theartfullodger said:

When you drive a car do you look out if the rear window (which is your argument) or look forward?

I look forward, but I also rely on past experience to know what I'm doing.

I wouldn't want to drive a car before I'd had driving lessons to teach me how it works and what the likely outcomes are!

Ditzy_Mitzy

It's fairly complicated, but the biggest problem with buy to let is programmes like 'Homes Under the Hammer' peddling this idea that any fool with, say, £20 grand can get a mortgage on a basket case of a house; can buy said house and throw in a chipboard kitchen and a few yards of grey nylon carpet; and then, voila, spend the rest of his life riding the gravy train in a state of FINANCIAL INDPENDENCE because of MASSIVE CASH PAYOUTS.  
Don't work like that, sorry.  
Unfortunately, however, the world and his wife swallowed the misconception that being a landlord means swanning around in a Range Rover whilst adoring young families shower you with pound notes.  It's an attractive idea, who wants to work, but it's false.  Or at least it is now.  Unreasonable demand from landlords and dreamers for 'investment property' has pushed prices up hugely.  Any old rubbish now costs a mint and, as a result, those driven by 'the profit motive' have increased rents; whilst real wages haven't really gone up.  Property prices are now too high for rents to be anything like proportional.  Something's gotta give, guys and gals.  Usually this is any notion of standards in the private letting sector.  Landlords are peddling accommodation that isn't fit for dogs, let alone people.  Repairs are expensive and landlords are cutting corners.  That can't be true!!  It is, I promise.  I've seen it: broken boilers, water running down interior walls, great blooms of fungus sprouting from partially collapsed ceilings, bare concrete floors, forty year old kitchens with all the units smashed.  Oh well, they're only a bunch of chavvy shop workers who get !!!!!! up on Stella, fight and take drugs.  They deserve to live like that.  Hell, you can even get a less than scrupulous lettings agent to do it all for you, often at taxpayers' expense.  
You get the landlord who does charge a fair rent and tries her best to look after the place (me).  But she don't make a profit!  Oh no.  The other side of the price/rent/income disparity coin is the annual loss on the landlord's balance sheet.  To do it properly, or fairly, is expensive.  It entails charging rent below market because you know that's all the tenant can realistically afford and that asking for more is only going to do him and his child out of the odd treat.  'Well he could give up smoking or not see his friends or not allow his daughter to go on a school trip.  It's his responsibility to ensure he can pay the going rate and he doesn't deserve to live there if he can't...'  You know who you are.  Admit it, you who call me a lunatic and a heretic and economically immoral.  You think you are right.  
Perhaps you are, but I'm not the only one charging less than I'm supposed to.  A good tenant is worth keeping.  Besides he actually pays the rent and doesn't complain.  If I was squeezing him until the proverbial pips squeaked, he may have been less inclined to.  
In sum: houses and flats cost far too much these days for the average person to consider making a living as a landlord.  You need lots of houses, preferential mortgage rates, possible social housing contracts, local government contacts and so on if you want to be Miss/Mr Look at my black Range Rover and Chanel sunglasses and lovely 'forever home' with all mod cons.  The average Jo isn't going to get rich or even break even.  There is the long term investment aspect, which is worth considering, but that's not why most people do it.  

Angela_D_3

Retireby40 said:

warwick2001 said:

Retireby40 said:

lr1277 said:

Not luck to find a good tenant. When I was a landlord I used agents for a tenant finding service but did the maintenance and rent collection myself. I had 3-4 agents I would use for finding tenants. In the end I took tenants from 2 of them. I would also meet and interview tenants before accepting them. On the whole it worked out ok. There was 1 agent who provided great tenants, but then there was a change of management and staff and the quality of service was appalling so I stopped using them. Their branch closed down sometime soon after, unsurprisingly.
You need to stay on top of things. A different way to look at it as compared to your OP is that you are lending the tenant the mortgage amount to live in your property and you are responsible for all outcomes. Are you aware even though you might put the tenant’s deposit in a protected scheme, if the scheme is unable to payout, you are still responsible for returning the deposit to the tenant? As stated earlier you need goals, plans and a list of good trades people. Run it as a business.

 Good tenants can still lose their jobs. Good tenants can still develop addictions. Good tenants can still suffer from depression. Good tenants can still have relationship breakdowns. All of those things could impact how they will behave in the future. And while doing your homework and looking at past history is a good indicator, nobody can tell what can happen tomorrow.

All very good points. And I agree that getting a 'good' tenant is sometimes good research and a bit of luck. However, you MUST assume that you will get 'bad' tenants (hope that you won't, but the possibility is always there). As a business (buying/inheriting and holding onto a house is an investment, but choosing to let it is a business decision), you must be aware of, and prepare for, all future risks associated with it. And non-payment is absolutely a very obvious risk. The tenant damaging the house is a very obvious risk. Granted, the COVID pandemic was an unforeseen risk, but the fall-out of it i.e. non-payment, no evictions for months etc. could have been, and should have been assessed and quantified for. These risks could happen without the help of the pandemic (there are hundreds of threads about 'bad' tenants well before 2020).

Any business owner will plan for the future, be it slow uptake of products/services etc., down-turn in the markets, and a whole heap of other stuff. Letting properties? They also should be planning for the risks ahead. 

To give a quick example, I rented out a house for 6 years. After all the mortgage payments etc. had been sorted, I 'made' £60 a month from the rent. And then in the 7th year, it needed a load of repairs on the roof (the house is approx. 100 years old, lovely slate roof). This cost me £4,500. So, ALL profits made in the preceding years was gone, and probably for the next 10 years as well. So on a purely business front, the house will cost me money. So I sold it. The reason I'm giving this example.... Letting property is not just sitting back and watching the money roll in. There are many times where it WILL cost you money. That's the risk of letting, its not always the gravy-train some people think it is.

My issue wasnt in not expecting bad things to happen. My gripe was people saying that luck doesnt play a part in how successful a rental property is. Some people believe that they have a superior skillset that eliminates luck factors. Which they dont. 

In regard to your experience while you had to sacrifice your "profits" you still had someone paying the mortgage of the house. So even if you didnt make any profits in 20 years you would ultimately own a house that someone else paid for you. Which is no bad thing. Especially as theres a good chance the house increases in value.

You could literally say that about any aspect of life,  the higher the career ladder I’ve climbed the less actual work I do for more money.  It’s nothing to do with superior intelligence or work ethic that sets me apart from millions who work harder for less,  it’s pure luck but people don’t like hearing  that 

Angela_D_3

I have also charged below market rate,  got no thanks for it,  never again.  

dannya1978

Ditzy_Mitzy said:

It's fairly complicated, but the biggest problem with buy to let is programmes like 'Homes Under the Hammer' peddling this idea that any fool with, say, £20 grand can get a mortgage on a basket case of a house; can buy said house and throw in a chipboard kitchen and a few yards of grey nylon carpet; and then, voila, spend the rest of his life riding the gravy train in a state of FINANCIAL INDPENDENCE because of MASSIVE CASH PAYOUTS.  
Don't work like that, sorry.  
Unfortunately, however, the world and his wife swallowed the misconception that being a landlord means swanning around in a Range Rover whilst adoring young families shower you with pound notes.  It's an attractive idea, who wants to work, but it's false.  Or at least it is now.  Unreasonable demand from landlords and dreamers for 'investment property' has pushed prices up hugely.  Any old rubbish now costs a mint and, as a result, those driven by 'the profit motive' have increased rents; whilst real wages haven't really gone up.  Property prices are now too high for rents to be anything like proportional.  Something's gotta give, guys and gals.  Usually this is any notion of standards in the private letting sector.  Landlords are peddling accommodation that isn't fit for dogs, let alone people.  Repairs are expensive and landlords are cutting corners.  That can't be true!!  It is, I promise.  I've seen it: broken boilers, water running down interior walls, great blooms of fungus sprouting from partially collapsed ceilings, bare concrete floors, forty year old kitchens with all the units smashed.  Oh well, they're only a bunch of chavvy shop workers who get !!!!!! up on Stella, fight and take drugs.  They deserve to live like that.  Hell, you can even get a less than scrupulous lettings agent to do it all for you, often at taxpayers' expense.  
You get the landlord who does charge a fair rent and tries her best to look after the place (me).  But she don't make a profit!  Oh no.  The other side of the price/rent/income disparity coin is the annual loss on the landlord's balance sheet.  To do it properly, or fairly, is expensive.  It entails charging rent below market because you know that's all the tenant can realistically afford and that asking for more is only going to do him and his child out of the odd treat.  'Well he could give up smoking or not see his friends or not allow his daughter to go on a school trip.  It's his responsibility to ensure he can pay the going rate and he doesn't deserve to live there if he can't...'  You know who you are.  Admit it, you who call me a lunatic and a heretic and economically immoral.  You think you are right.  
Perhaps you are, but I'm not the only one charging less than I'm supposed to.  A good tenant is worth keeping.  Besides he actually pays the rent and doesn't complain.  If I was squeezing him until the proverbial pips squeaked, he may have been less inclined to.  
In sum: houses and flats cost far too much these days for the average person to consider making a living as a landlord.  You need lots of houses, preferential mortgage rates, possible social housing contracts, local government contacts and so on if you want to be Miss/Mr Look at my black Range Rover and Chanel sunglasses and lovely 'forever home' with all mod cons.  The average Jo isn't going to get rich or even break even.  There is the long term investment aspect, which is worth considering, but that's not why most people do it.  

Hi Ditzy_Mitzy - excellent post however........excuse me for stating but it seems like you are on a social crusade to help the under privileged and treat the tenants as such. Some of my tenants are working professionals and act accordingly. There are bad eggs in all sectors of business so it seems unfair to single out rogue landlords. A good, solid business plan would / should address most of the points you have made. 1) Property prices too high as regards yields - you have the entire country at your disposal where there are swathes of towns / cities where this is simply is not the case and as with any business it attracts competition so demands better deal selections. 2) Landlords charging "fair" rent so as not to make a large enough profit - It's a business not a social enterprise! Make it work or don't go into it. 3) A good tenant is worth their weight in gold admittedly, but charging under market value isn't a good way to make money long term - if the property is in a good enough area in the first place then demand and therefore under pricing to keep them should not be a relevant factor. Your last paragraph is spot on however, you need plenty of properties / a job to help to fund the properties and a mixed portfolio to succeed in the long term.

Retireby40

Ditzy_Mitzy said:

It's fairly complicated, but the biggest problem with buy to let is programmes like 'Homes Under the Hammer' peddling this idea that any fool with, say, £20 grand can get a mortgage on a basket case of a house; can buy said house and throw in a chipboard kitchen and a few yards of grey nylon carpet; and then, voila, spend the rest of his life riding the gravy train in a state of FINANCIAL INDPENDENCE because of MASSIVE CASH PAYOUTS.  
Don't work like that, sorry.  
Unfortunately, however, the world and his wife swallowed the misconception that being a landlord means swanning around in a Range Rover whilst adoring young families shower you with pound notes.  It's an attractive idea, who wants to work, but it's false.  Or at least it is now.  Unreasonable demand from landlords and dreamers for 'investment property' has pushed prices up hugely.  Any old rubbish now costs a mint and, as a result, those driven by 'the profit motive' have increased rents; whilst real wages haven't really gone up.  Property prices are now too high for rents to be anything like proportional.  Something's gotta give, guys and gals.  Usually this is any notion of standards in the private letting sector.  Landlords are peddling accommodation that isn't fit for dogs, let alone people.  Repairs are expensive and landlords are cutting corners.  That can't be true!!  It is, I promise.  I've seen it: broken boilers, water running down interior walls, great blooms of fungus sprouting from partially collapsed ceilings, bare concrete floors, forty year old kitchens with all the units smashed.  Oh well, they're only a bunch of chavvy shop workers who get !!!!!! up on Stella, fight and take drugs.  They deserve to live like that.  Hell, you can even get a less than scrupulous lettings agent to do it all for you, often at taxpayers' expense.  
You get the landlord who does charge a fair rent and tries her best to look after the place (me).  But she don't make a profit!  Oh no.  The other side of the price/rent/income disparity coin is the annual loss on the landlord's balance sheet.  To do it properly, or fairly, is expensive.  It entails charging rent below market because you know that's all the tenant can realistically afford and that asking for more is only going to do him and his child out of the odd treat.  'Well he could give up smoking or not see his friends or not allow his daughter to go on a school trip.  It's his responsibility to ensure he can pay the going rate and he doesn't deserve to live there if he can't...'  You know who you are.  Admit it, you who call me a lunatic and a heretic and economically immoral.  You think you are right.  
Perhaps you are, but I'm not the only one charging less than I'm supposed to.  A good tenant is worth keeping.  Besides he actually pays the rent and doesn't complain.  If I was squeezing him until the proverbial pips squeaked, he may have been less inclined to.  
In sum: houses and flats cost far too much these days for the average person to consider making a living as a landlord.  You need lots of houses, preferential mortgage rates, possible social housing contracts, local government contacts and so on if you want to be Miss/Mr Look at my black Range Rover and Chanel sunglasses and lovely 'forever home' with all mod cons.  The average Jo isn't going to get rich or even break even.  There is the long term investment aspect, which is worth considering, but that's not why most people do it.  

Dont think anyone believes it's a get rich quick scheme. Nor do I believe in your stereotypical view that everyone who wants to be a landlord believes theyl be driving around in a range rover picking up rent. People are trying to get a little more value for their money than the 0.01% the banks are offering.

People understand houses and the process more than they do putting say 50k savings into one of the million stocks and shares sites/ranges available. 

AdrianC

Well said, Mitzy. You are definitely not so Ditzy.

(The Range Rover is probably PCPd, and the Chanel sunnies are probably knock-off anyway)

One of my rental properties is a two-bed split-level 50m2 maisonette in a very good urban location. It was bought in early 2014, and the raw rental yield is nearly 7%. We've had just one tenant-change in that time, and no bad debt. The current tenant loves the place, and has no plans to move.

An identical flat in the block is for sale now - it's been on the market since Feb, the asking price came down 10% last month, and is now only 5% higher than we paid. The 2007 price as new-builds was 30% higher.

The service charge has risen more than 60% over the time we've owned it, and is now approaching one month's rent every quarter.

I've told our current tenant that he is very welcome to purchase it from us, any time he wants.

warwick2001

Retireby40 said:

warwick2001 said:

Retireby40 said:

lr1277 said:

Not luck to find a good tenant. When I was a landlord I used agents for a tenant finding service but did the maintenance and rent collection myself. I had 3-4 agents I would use for finding tenants. In the end I took tenants from 2 of them. I would also meet and interview tenants before accepting them. On the whole it worked out ok. There was 1 agent who provided great tenants, but then there was a change of management and staff and the quality of service was appalling so I stopped using them. Their branch closed down sometime soon after, unsurprisingly.
You need to stay on top of things. A different way to look at it as compared to your OP is that you are lending the tenant the mortgage amount to live in your property and you are responsible for all outcomes. Are you aware even though you might put the tenant’s deposit in a protected scheme, if the scheme is unable to payout, you are still responsible for returning the deposit to the tenant? As stated earlier you need goals, plans and a list of good trades people. Run it as a business.

 Good tenants can still lose their jobs. Good tenants can still develop addictions. Good tenants can still suffer from depression. Good tenants can still have relationship breakdowns. All of those things could impact how they will behave in the future. And while doing your homework and looking at past history is a good indicator, nobody can tell what can happen tomorrow.

All very good points. And I agree that getting a 'good' tenant is sometimes good research and a bit of luck. However, you MUST assume that you will get 'bad' tenants (hope that you won't, but the possibility is always there). As a business (buying/inheriting and holding onto a house is an investment, but choosing to let it is a business decision), you must be aware of, and prepare for, all future risks associated with it. And non-payment is absolutely a very obvious risk. The tenant damaging the house is a very obvious risk. Granted, the COVID pandemic was an unforeseen risk, but the fall-out of it i.e. non-payment, no evictions for months etc. could have been, and should have been assessed and quantified for. These risks could happen without the help of the pandemic (there are hundreds of threads about 'bad' tenants well before 2020).

Any business owner will plan for the future, be it slow uptake of products/services etc., down-turn in the markets, and a whole heap of other stuff. Letting properties? They also should be planning for the risks ahead. 

To give a quick example, I rented out a house for 6 years. After all the mortgage payments etc. had been sorted, I 'made' £60 a month from the rent. And then in the 7th year, it needed a load of repairs on the roof (the house is approx. 100 years old, lovely slate roof). This cost me £4,500. So, ALL profits made in the preceding years was gone, and probably for the next 10 years as well. So on a purely business front, the house will cost me money. So I sold it. The reason I'm giving this example.... Letting property is not just sitting back and watching the money roll in. There are many times where it WILL cost you money. That's the risk of letting, its not always the gravy-train some people think it is.

My issue wasnt in not expecting bad things to happen. My gripe was people saying that luck doesnt play a part in how successful a rental property is. Some people believe that they have a superior skillset that eliminates luck factors. Which they dont. 

In regard to your experience while you had to sacrifice your "profits" you still had someone paying the mortgage of the house. So even if you didnt make any profits in 20 years you would ultimately own a house that someone else paid for you. Which is no bad thing. Especially as theres a good chance the house increases in value.

They have contributed towards this, I agree. But ultimately they were paying for a service I provided i.e. accommodation. I paid for the 'upkeep' of this service. I took on the original risk of this service. On balance, I would suspect most good Landlords will end up paying approx. 30% of the overall costs of the house (once fully paid off) through maintenance, repairs and upgrades/improvements.  (I bought my house for £88k in 2007, sold in 2020 for £90k. I invested approx. £10k during the time I rented it out (7 years) for improvements, repairs and keeping up with current Regulations (and I live up north, where things are cheap and we all drive tractors). Believe me, even if I kept the house until the mortgage was paid off, I wouldn't be walking away into the sunset with a 'free' house.)

All I'm saying is that isn't as simple as saying 'Buy a house, Rent out the house, Free house in 20 years!!'. There are costs and risks associated with this business model that are rarely taken into account. If it really were that simple I'd have a pretty decent portfolio by now, cruising around in my Range Rover counting my cash.