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

Retireby40

warwick2001 said:

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.

Have you ever worked out how much return you would have recieved had you put the money you put in the house ie deposit and maintenance into say Stocks and Shares?

warwick2001

Retireby40 said:

warwick2001 said:

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.

Have you ever worked out how much return you would have recieved had you put the money you put in the house ie deposit and maintenance into say Stocks and Shares?

Nope, but it's irrelevant to the OP. The implication was (unless I mis-interpreted it) "I buy a house, rent it out, and get a free house. Lovely Job"

I'm saying that it's nowhere near that easy, or simple.

Crashy_Time

seradane said:

moneysavinghero said:

theoretica said:

I am not sure 200k of finance is the fair comparison - for BTL you would need a decent deposit, say £50k.  Investing that £50k in the stock market wouldn't need to be leveraged at all, though it could be. 

7% a year on the stock market and in 25 years the 50k could be 270k with no leveraging and probably less hassle than running a BTL.

But the point the OP is making is that for that £50k deposit he would get a house worth £200k. Even if house prices only rose at 2% after 25 years then that house would be worth £321k. Even on a interest only basis, that would equate to a 5.68%pa return on the £50,000 investment. Based on actual figures from the last 25 years it could rise to £676k / 34% pa (although no guarantee that prices will rise as much). Anywhere inbetween beats your stockmarket returns.

This is effectively the point the OP is missing. Landlords are investing their money in property instead of putting it into other funds, e.g. stock market. As moneysavingexpert has pointed out above, property is likely to be a much better annual return over 25 years than another form of investment, but that's also because it involves more risk and effort than just sitting in a tracker fund.

And using theoretica's figures, and the OP's point about having a 'paid-off house' at the end of it all as some kind of special landlord bonus: If you started with 50k, stuck it in a tracker for 25 years, you'd then have 270k. You could then go buy a house cash with this figure, and voila, you've got a paid-off house. So you could (in theory) get the same result without being a landlord. 

It's also worth noting there are two strategies of landlording-as-investment: rental yield and property growth. You could buy a property because it has a high yield, i.e. larger percentage of return each month in your pocket (e.g. cheap northern property or with an interest-only mortgage). Or, you could buy something that has a low yield, and rely on the property growth to make your money (e.g. expensive London property). The golden goose is one that does both (good luck with that!). Realistically, most properties will be somewhere in between.

Comparing property to trackers isn`t very sensible IMO, and good luck to anyone buying now who wants to beat all other investments on annual return...........but.....the reason property has boomed recently has nothing at all to with it`s risk profile.

Crashy_Time

warwick2001 said:

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.

You have popped a few posters rose tinted bubble with that refreshingly sensible post I`m afraid.

2nd_time_buyer

We have two local buy to let properties.  The combined rent is £18300. After costs, including financing on 75% interest only mortgages, profit is around £9-10k per year (£7-8k after tax). I treat it as a job. We have tried to keep our costs down as low as possible (no agency or management fees, doing minor repairs etc. ourselves). This gives us more margin to offer a better service to the tenant. I am not under the illusion that we are doing the tenants any favours but at the same time I hope we are offering a professional service at a reasonable price. Once they move in it, we make it clear that it is their home not ours. As you can see below, what could appear altruistic (could also be just us trying to increase profit margin ).

1.       Rent set around 5% below market rate (the properties get let out quickly avoiding voids and we get usually get a choice of tenants)

2.       Redecorate fully every 3 years (houses are looked after better and means we keep on top of maintenance)

3.       Aim to resolve any maintenance issues and repairs within 48 hours (tenants report problems promptly)

4.       We try to accommodate the tenants wherever possible (e.g. allowing pets, minor alterations etc.) (tenants stay longer)

For us, I think it stacks up based on the rental yield, any increase in property prices (after CGT) would be a bonus but we are not relying on it.

Crashy_Time

warwick2001 said:

Retireby40 said:

warwick2001 said:

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.

Have you ever worked out how much return you would have recieved had you put the money you put in the house ie deposit and maintenance into say Stocks and Shares?

Nope, but it's irrelevant to the OP. The implication was (unless I mis-interpreted it) "I buy a house, rent it out, and get a free house. Lovely Job"

I'm saying that it's nowhere near that easy, or simple.

I think the OP was just being ironic, having a laugh at some of the posters who trot out nonsense like "dead money" etc.?

newsgroupmonkey_

Crashy_Time said:

I think the OP was just being ironic, having a laugh at some of the posters who trot out nonsense like "dead money" etc.?

Well, I mean it would only be dead money if, for instance, you were to sell your house due to an impending house price crash and interest price hike so then go and rent a bedsit for 17 years rather than pay off a mortgage that you could potentially have fixed at least for a few years.

But yes, if you have no choice - be it financially or because your location plan isn't long-term, it's a means to an end.

The perfect plan, of course, would be to buy a house early on. Step up a couple of times and eventually by the time you retire, you have no worry about a mortgage and can enjoy your pension. But it's not always possible for everyone.

I believe there are very few people who would CHOOSE to rent a house for their entire working life if they had the opportunity to get on the ladder.

Crashy_Time

newsgroupmonkey_ said:

Crashy_Time said:

I think the OP was just being ironic, having a laugh at some of the posters who trot out nonsense like "dead money" etc.?

Well, I mean it would only be dead money if, for instance, you were to sell your house due to an impending house price crash and interest price hike so then go and rent a bedsit for 17 years rather than pay off a mortgage that you could potentially have fixed at least for a few years.

But yes, if you have no choice - be it financially or because your location plan isn't long-term, it's a means to an end.

The perfect plan, of course, would be to buy a house early on. Step up a couple of times and eventually by the time you retire, you have no worry about a mortgage and can enjoy your pension. But it's not always possible for everyone.

I believe there are very few people who would CHOOSE to rent a house for their entire working life if they had the opportunity to get on the ladder.

Do you consider negative equity and mortgage interest "dead money"?

tom9980

Crashy_Time said:

newsgroupmonkey_ said:

Crashy_Time said:

I think the OP was just being ironic, having a laugh at some of the posters who trot out nonsense like "dead money" etc.?

Well, I mean it would only be dead money if, for instance, you were to sell your house due to an impending house price crash and interest price hike so then go and rent a bedsit for 17 years rather than pay off a mortgage that you could potentially have fixed at least for a few years.

But yes, if you have no choice - be it financially or because your location plan isn't long-term, it's a means to an end.

The perfect plan, of course, would be to buy a house early on. Step up a couple of times and eventually by the time you retire, you have no worry about a mortgage and can enjoy your pension. But it's not always possible for everyone.

I believe there are very few people who would CHOOSE to rent a house for their entire working life if they had the opportunity to get on the ladder.

Do you consider negative equity and mortgage interest "dead money"?

Do you consider paying rent beyond a typical 25 year mortgage dead money?

How's that working out for you by the way?

Crashy_Time

tom9980 said:

Crashy_Time said:

newsgroupmonkey_ said:

Crashy_Time said:

I think the OP was just being ironic, having a laugh at some of the posters who trot out nonsense like "dead money" etc.?

Well, I mean it would only be dead money if, for instance, you were to sell your house due to an impending house price crash and interest price hike so then go and rent a bedsit for 17 years rather than pay off a mortgage that you could potentially have fixed at least for a few years.

But yes, if you have no choice - be it financially or because your location plan isn't long-term, it's a means to an end.

The perfect plan, of course, would be to buy a house early on. Step up a couple of times and eventually by the time you retire, you have no worry about a mortgage and can enjoy your pension. But it's not always possible for everyone.

I believe there are very few people who would CHOOSE to rent a house for their entire working life if they had the opportunity to get on the ladder.

Do you consider negative equity and mortgage interest "dead money"?

Do you consider paying rent beyond a typical 25 year mortgage dead money?

How's that working out for you by the way?

25 years is a long time in interest rate terms, would you consider being stuck in a house you can`t sell as "dead money"?