Falling prices and BTL opportunities

dolce_vita

HugoSP wrote: »

Hammersfan, your post makes good sense.

From the outside in it can look worse than it is, but as you say, those with fixed rate mortgages who are set to make a profit for 5 years, and those with BoE tracker mortgages who will benefit from the rate cut in January will be spared cashflow problems that they didn't have before.

BTL LL who are highly geared will be at a disadvantage if they need to sell.

Historically, there were several options open to btl LLs once they had the property.

1) Rent it out
2) Sell it, at a profit
3) Leave it empty
4) Raise finance on it then do any of the above
5) Develop it and then do any of the above

Now the options are limited:

1) A good option, perhaps better if more people need to rent
2) Not as viable as was previously
3) Fine if you don't want to earn aything from your investment
4) Not a good idea in this market, unless you've got a good reason to do so, also the equity may not be there.
5) Still possible, provided you can raise the cash.

The BTL investors of the future are likely to be people who

1) May Have cash
2) Perhaps Can buy and develop property to the extent that the yield is reasonable given the interest rate or other alternatives to investing the money.
3) Are definitely not highly geared unless they are already in it.
4) Are already in buy to let
5) Have property that they cannot sell and/or don't need to sell
6) may be able to buy at a knockdown price
7) Maybe living abroad and decide to rent out their UK pad.

Although the value of the properties may suffer in the short term, BTL LLs are in the same boat as homeowners - Prices are only a problem if they need to sell, and even then the situation for all BTLs may not be that bad depending on demand for that type of property in that location.

Yet another poster with no idea of economic cycles who is about to learn a lesson in how things work in reality.

DreamBreaker

dolce_vita wrote: »

Yet another poster with no idea of economic cycles who is about to learn a lesson in how things work in reality.

Looks like HUGOSP is getting knives in the back now! You had a go at me now moved onto someone else! I don't understand why people have to belike this on this forum. His points were valid points, even moreso just his opinion. I don't think there was any need for your above statement!!!

dolce_vita

DreamBreaker wrote: »

Looks like HUGOSP is getting knives in the back now! You had a go at me now moved onto someone else! I don't understand why people have to belike this on this forum. His points were valid points, even moreso just his opinion. I don't think there was any need for your above statement!!!

Because, like your HPI cheerleading posts, it is nothing more than rehashed VI sh1te and wishful thinking with no grounding in economic reality.

SquatNow

Important to add to all potential buyers....

DON'T BUY WHILE PRICES ARE ON THE WAY DOWN ELSE YOU WILL BE AS SCREWED AS THE NI STRICKEN SELLER YOU ARE BUYING FROM.

To be honest your best to wait for about 5 years. Wait until the housebuilders shares have been rising for 12 month continuously.

Of course this brings in the big question:
Who are all the BTLers hoping to sell up going to actually sell their houses to? I hear so often people saying that if the struggled with their mortgage they'de just sell up. When you ask they "who to" they just say "buyers". The possibility that no-one will want to buy houses when prices are falling completely misses them.

Incidently, I like the Way HugoSP says "Historically, there were several options open to btl LLs once they had the property."

BTL has been around for what... 3 or 4 years? The BTL concept has never been tested in a falling market... it's only existed while prices were skyrocketing.

HugoSP wrote: »

Although the value of the properties may suffer in the short term, BTL LLs are in the same boat as homeowners - Prices are only a problem if they need to sell.

A complete misunderstanding of what BTL is. BTL loans are COMMERCIAL Loans NOT I repeat NOT residential mortgages. The big difference is that you are generally required with BTL to maintain the equity levels in the property. This is what killed a lot of businesses in the 80s. If the equity in the property drops below the contracted %age, the banks can and will (the have to contractually!) demand that you reduce the loan amount to increase the equity to the agreed levels.

Dear Mr BTLer,

It appears that the equity in your property, 1 New Road, Newtown, has fallen below the agreed 5% level in your contract. We require you to immediately reduce the LTV level to 95% or less.

Please send to us, by return of post within 7 days, a bank cheque for £35,000 to reduce the loan to the agreed amount. If you fail to do this your loan will be terminated and repayment in full will be due immediately.

Yours etc etc

HSBC Ltd.

epz_2

btl ltv is more like 15% but i doubt it will become an issue till remortgage time, its not like the banks will send folks round looking at the properties they have loans secured on.

Gorgeous_George

BTL is only a problem if the LL is a bit thick. There are some around but many more know what they are doing.

My tracker is a very low LTV and the modest rent (£420 for 4 bedrooms) more than covers running costs. When I can buy a 3 bedroomed house for £50K in a good area, I'll buy again.

GG

DreamBreaker

dolce_vita wrote: »

Because, like your HPI cheerleading posts, it is nothing more than rehashed VI sh1te and wishful thinking with no grounding in economic reality.

Someone made you GOD?

HugoSP

dolce_vita wrote: »

Yet another poster with no idea of economic cycles who is about to learn a lesson in how things work in reality.

Well. you could do the courtesy of backing that up, rather that just writing a witty one liner.

Where have I missed your point about economic cycles? If loans can be serviced, where's the problem.

I never claimed that properties wouldn't fall in value. However your "lesson in economic cycles" would surely teach you that once prices fall they will bounce

HugoSP

dolce_vita wrote: »

Because, like your HPI cheerleading posts, it is nothing more than rehashed VI sh1te and wishful thinking with no grounding in economic reality.

I suppose it's too much to ask you to back this up......

Maybe I'm just not up to this intillectual debate where it seems to be the HPC brigade who just come out and hurl abuse at anyone who's view doesn't coincide with theirs.

epz_2

Gorgeous_George wrote: »

BTL is only a problem if the LL is a bit thick. There are some around but many more know what they are doing.

My tracker is a very low LTV and the modest rent (£420 for 4 bedrooms) more than covers running costs. When I can buy a 3 bedroomed house for £50K in a good area, I'll buy again.

GG

at that point i would expect rental yeilds to collapse, that would be £229 interest only mortgage aka renting from the bank.

that said i would imagine the ecconomy would also be in bits as all the muppets who bought plasma tvs on home equity take the retail sector out and without tax revinue the army of public secor workers which has grown so much as labour tried to build its voter base is going to shrink fast.

yeh im up for a mental recession, my job is way too international and fundimental to be affected and they always have better music.