Is a Buy to Let worth it in the current political/economic climate?

Sarah1Mitty2

MobileSaver said:

Sarah1Mitty2 said:

MobileSaver said:

Sarah1Mitty2 said:

MobileSaver said:

Sarah1Mitty2 said:

MobileSaver said:

Sarah1Mitty2 said:

silvercar said:

People go into BTL for the income and capital growth, has to be part of a balanced portfolio. 
When the government was limiting the amount people could put into pensions by punitive tax measures, it was an attractive part of an investment strategy. But it is only a part of the picture.

Problem is that for people who chose their location wisely they have now seen capital growth, so selling out means a CGT bill that not all are prepared to face.

the landlords still looking to exit will be doing so at much lower prices than they had hoped.

The landlords still looking to exit will be doing so at much higher prices than they originally paid all those years ago, in part thanks to people like you paying their mortgage for them for all those years... I don't think many will be upset at the prices they achieve!

I would suggest that those trying to exit are more recent landlords who can`t cover the mortgage debt from rent

So even in your worst case end-of-the-world housing market apocalypse (which is definitely going to be much more bigly than all the other housing market Armageddons you have wrongly predicted over the last 15 or so years) you are talking about a tiny fraction of the 2.5 million private landlords in the UK being affected...

yes IMO not all landlords will be affected and of course just because a landlord`s property falls in price it doesn`t mean they stop being a landlord.

For the avoidance of doubt so that no-one gets the wrong idea from this recent post of yours...

By "not all landlords" you actually mean a tiny, tiny percentage of landlords...

And by "falls in price" you actually mean they're only looking at perhaps a 48% increase over what they paid instead of say 58%...

As said previously I wouldn't shed too many tears for these poor landlords, the vast majority have done extremely well from those misguided enough to sell to rent all those years ago. In fact it does make you wonder whether the HPC site is actually owned by a cabal of landlords as they're the ones generally benefitting from propagating the HPC myth...

No, I mean not all landlords will get into financial difficulty, I don`t know the % and neither do you, and neither do you know the financial situation of most landlords and how much their flats will drop in price,

Oh the irony! Only yesterday you seemed to know the financial situation of landlords like the back of your hand! You claimed recent landlords couldn't cover their mortgage debt from rent and so were exiting the market.

Keep digging that hole!

No, I said landlords who bought flats at peak prices at near zero rates would be more likely to want/need to exit when their fixes end than older landlords maybe at or nearing retirement with no mortgage and who need/want the continued income stream of long term tenants.

Sarah1Mitty2

jimbog said:

Sarah1Mitty2 said:

ThisIsWeird said:

melissarfield said:

I have £250k from savings/inheritance that I'm looking to invest. Is investing in a BTL property wise at this stage?

I'm a FTB and am living with family, so I wouldn't be buying it to live in. It would be purely for investment but as more rules are coming in effect for landlords, I'm wondering if a BTL property is worth it (financially and also worth the headache)? Is there something better I could be doing with that money instead?

Hi Melissa.

I'm not going to give advice, as I just don't have enough knowledge of this area. But I'd have thought that any decision would need to take into account your personal circumstances, and also that of the area where you'd purchase a property.

For example, we know you are happy living with your family, but is that situation likely to continue? Or, would you anticipate moving in the next, ooh, 5 years or so? 10 years? When?

What sort of property could you buy for up to £250k? Could it be a new-build, so at least not require any ongoing maintenance for the duration of the let? ( From what I read on here, poor insulation and/or maintenance seems to be a major cause of dispute between LLs and TS.)

What are typical rents for the type of property you could buy?

Could the place you buy even be suitable for you as your first move out of the family home? Even temporarily? Ie, if you move in for long enough, it's then your main home so presumably not subject to CGT?

Are you 'competent' and reasonably assertive?! Could you manage this rental yourself, in a fair and balanced way? Could you sort out any issues promptly and in the correct manner? And would you be equally firm when required, and not allow things you expressly forbid - pets, for example, sub-letting, that sort of stuff? Would you be happy to carry out your own inspections? Arrange gas certs? Etc etc. If not, you'd likely need to deduct around 10% from your takings to have it managed for you. Factor that in to your sums.

What are the ongoing tax implications of a rental property? 

I'd suggest consider all these factors, and do your sums. See how it compares with other investment opportunities.

Looking at how things appear to be going, it seems to me, a layman, that falling house prices coupled with strong rental charges would be an ideal opportunity for someone like you who does not need a mortgage? Isn't the current chaos being caused in the rental market down to LLs having large mortgages on their properties? That wouldn't apply to you. 

One problem with that is that falling house prices are due to rising mortgage debt costs, and when people have to pay more on their mortgage debt they tend to cut back on spending in the "real economy", leading to job losses and weaker rental demand.

Ok, I bite. Where will those who won't then be renting (or indeed buying) be living?

Young people who can will be back home with parents or in cheaper flat shares rather than a single or couple paying for a larger flat, people looking to buy will just continue living where they already live until interest rates do their work of bringing down prices.

Jaco70

BTL is tough at the moment. I have nine, of which six are mortgaged, and they have always paid for themselves and, importantly, also the mortgage on my own more expensive dwelling.

Now though, the mortgages have gone through the roof. I am trying to figure out ways to keep all ten, but have also considered selling five to hopefully clear all the other debt. It would leave me with a capital gains bill, but probably no more than 80k, which would seem a breeze.

I've always had a very 'buy don't sell' attitude to property because I think its generally been a good investment long term, but its being tested at the moment. 

So basically I'd say hold on for a while, or better still buy a house to live in.

Landlords are definitely leaving the market though, I've no doubt about that, which makes me think renters are going to find it a struggle to find property soon, and this is why I'm trying hard not to get out prematurely and then regret it. 

Just my feeling right now. All the best.

MultiFuelBurner

Jaco70 said:

BTL is tough at the moment. I have nine, of which six are mortgaged, and they have always paid for themselves and, importantly, also the mortgage on my own more expensive dwelling.

Now though, the mortgages have gone through the roof. I am trying to figure out ways to keep all ten, but have also considered selling five to hopefully clear all the other debt. It would leave me with a capital gains bill, but probably no more than 80k, which would seem a breeze.

I've always had a very 'buy don't sell' attitude to property because I think its generally been a good investment long term, but its being tested at the moment. 

So basically I'd say hold on for a while, or better still buy a house to live in.

Landlords are definitely leaving the market though, I've no doubt about that, which makes me think renters are going to find it a struggle to find property soon, and this is why I'm trying hard not to get out prematurely and then regret it. 

Just my feeling right now. All the best.

How many AST's have you got coming up for renewal. LL's across the board are raising rents by over 10%. They are also issuing section 21's to any poor payers before that perceived option disappears with the rent reform bill. Then being very choosey about who they rent out to next.

As you say less rentals = more demand. The demand is already far outstripping supply so things are going to get very bad for tennant's.

If you don't mind me asking were they fixed BTL coming to an end or did you get caught out on trackers and didn't fix as the rates have risen?

I can see the casual LL with one or two properties exiting the market but would expect someone like yourself to tough it out but that depends on your age and your 5/10 year plan etc.

BBC News - Rent: 'We've got £1,750 a month and can't find anywhere'

https://www.bbc.co.uk/news/business-65903095

Jaco70

Tenants are understandably staying much longer than in previous years, but I’m very wary about being greedy and it then biting me in the bum, so I’m tending to keep rent increases very low, if at all. However when people do leave we will spruce them up and hopefully get a reasonably big uplift.

I have another business which is much more time intensive to run, and I’m considering transferring a relatively small amount of money into the rentals to keep them afloat for a year or so. I don’t think being hasty with financial decisions usually ends well, so I’m happy to take a breath.

My wife would like to sell though, and then have very little debt, but we haven’t fallen out over our difference of opinion………yet.

With regards to your questions, the mortgages are trackers, because I’ve always been happy riding the waves on that. Yes it hurts when they rise, but when they went through the floor in 2008 it felt like a lottery win. My plan has always been long term, keep them until I find it too hard. Then sell if the kids aren’t interested. 

MultiFuelBurner

Jaco70 said:

Tenants are understandably staying much longer than in previous years, but I’m very wary about being greedy and it then biting me in the bum, so I’m tending to keep rent increases very low, if at all. However when people do leave we will spruce them up and hopefully get a reasonably big uplift.

I have another business which is much more time intensive to run, and I’m considering transferring a relatively small amount of money into the rentals to keep them afloat for a year or so. I don’t think being hasty with financial decisions usually ends well, so I’m happy to take a breath.

My wife would like to sell though, and then have very little debt, but we haven’t fallen out over our difference of opinion………yet.

With regards to your questions, the mortgages are trackers, because I’ve always been happy riding the waves on that. Yes it hurts when they rise, but when they went through the floor in 2008 it felt like a lottery win. My plan has always been long term, keep them until I find it too hard. Then sell if the kids aren’t interested.

It's interesting that you are considering putting money into your BTL's from another business.

I only comment on your scenario as you have been kind enough to share it and it makes you wonder how many BTL LL's out there are in the same boat with not a couple of properties but multiple properties now running close.to the wind of profitability.