Buy to Let - has the time passed?

housebuyer143

Mstty said:

housebuyer143 said:

But, I read that for the first time in 15 years or more the cost of mortgages are more than rent in many areas. 
I did BTL 2016-2021 and honestly it was an excellent investment. Mortgage £130, rent £500 and then I made £50k profit when I sold. I would never do it now. The numbers don't stack up and property growth seems less likely and as an investor, that's what you go in relying on to make money.

Of course going in now (new) you have to look at property in at least 5-10 year chunks as an investment nit a quick in and out 1-4 years toe dip.

Are you saying property won't increase in value in the next 5-10 years?

The plan should always be to keep the property 10 years+ however we decided to sell it sooner because it was Oct 21 and the prices were through the roof and places selling like crazy, our fixed rate just ended and we wanted the money to upsize our residential. 

Im not sure we will see the growth we have on the same scale as recent years even in another 10 years. I'm no expert, but the very low rates were a major contributor to the sky high property prices and pent up demand from covid.

Sg28

ProDave said:

Sg28 said:

Doesnt make any sense to me, you can get £5400 a year gross on a 1 year fix saver completely passive with no work involved. 

Basically you need house price growth to make it worthwhile. 

Yes you can, now that interest rates are somewhere close to the long term average, but little over a year ago savers were getting almost nothing.  And when interest rates go back to the new normal of almost nothing, you will again get very little as a saver.

That does not make it imho worth getting back into BTL.  But my view is skewed by the fact I am retiring and don't want "work" and ties.

Surely the long term average is normal? 

Theres no reason to suggest interest rates will ever go back to near 0. 

Sarah1Mitty2

Mstty said:

From that article linked above

There are still 43 per cent fewer rental homes on the market than there were in 2019, with every region of the country recording a fall of at least 25 per cent, and Scotland leading the way with a 65 per cent drop.

That only means one thing. Demand grossly outstripping supply and higher rents.

Or maybe it means that landlords with voids or who can`t make the sums work are selling up, wonder where all the people who had those rentals (if they were let) are living now?

Sarah1Mitty2

ProDave said:

Sg28 said:

Doesnt make any sense to me, you can get £5400 a year gross on a 1 year fix saver completely passive with no work involved. 

Basically you need house price growth to make it worthwhile. 

Yes you can, now that interest rates are somewhere close to the long term average, but little over a year ago savers were getting almost nothing.  And when interest rates go back to the new normal of almost nothing, you will again get very little as a saver.

That does not make it imho worth getting back into BTL.  But my view is skewed by the fact I am retiring and don't want "work" and ties.

Can`t think of many realistic scenarios where that would happen, a global war or depression maybe? In that case there would be so many empty rentals and ex - AirBnb`s that it would definitely be closing time on BTL. Not going to happen though is it, they are going to crank rates until there is a recession then you will see AirBnB go under and loads of rental properties hitting the market either to sell or rent.

Sarah1Mitty2

Mstty said:

housebuyer143 said:

But, I read that for the first time in 15 years or more the cost of mortgages are more than rent in many areas. 
I did BTL 2016-2021 and honestly it was an excellent investment. Mortgage £130, rent £500 and then I made £50k profit when I sold. I would never do it now. The numbers don't stack up and property growth seems less likely and as an investor, that's what you go in relying on to make money.

Of course going in now (new) you have to look at property in at least 5-10 year chunks as an investment nit a quick in and out 1-4 years toe dip.

Are you saying property won't increase in value in the next 5-10 years?

Not without rate cuts, they held onto the very damaging zero rates for 15 years, who is to say they won`t stay at 5 or 6% for the next 20 years? In fact I think holding base rate as low as 6% could get tricky depending on the geopolitical/global economic outlook over those years.

Grumpy_chap

Mstty said:

As an example two properties we have would have a resale value of £150k but the rent in the are is £1000-1200 pcm

It really is ridiculous in the rental market right now.

That does sound rather attractive.
Our BTL is valued around £300k and currently let at £1,250.  Checking Rightmove today, we'd probably market at £1,500 if vacant.
We'd be better to sell, buy two properties like yours and generate the far higher yield plus, presumably, less likelihood of a 100% void.

Mstty

Grumpy_chap said:

Mstty said:

As an example two properties we have would have a resale value of £150k but the rent in the are is £1000-1200 pcm

It really is ridiculous in the rental market right now.

That does sound rather attractive.
Our BTL is valued around £300k and currently let at £1,250.  Checking Rightmove today, we'd probably market at £1,500 if vacant.
We'd be better to sell, buy two properties like yours and generate the far higher yield plus, presumably, less likelihood of a 100% void.

Indeed the margins have always been good but conversely property doesn't shoot up in value so there are pros and cons to all areas.

Sg28

Mstty said:

Grumpy_chap said:

Mstty said:

As an example two properties we have would have a resale value of £150k but the rent in the are is £1000-1200 pcm

It really is ridiculous in the rental market right now.

That does sound rather attractive.
Our BTL is valued around £300k and currently let at £1,250.  Checking Rightmove today, we'd probably market at £1,500 if vacant.
We'd be better to sell, buy two properties like yours and generate the far higher yield plus, presumably, less likelihood of a 100% void.

Indeed the margins have always been good but conversely property doesn't shoot up in value so there are pros and cons to all areas.

What part of the country is this in?

Sarah1Mitty2

Solarstart001 said:

Hello All,

Looking for some advice on a BTL investment. Rookie investor and understand a lot of the landlords are coming out of their investments. However, the house prices are finally on a slight down shift and  this ‘might’ be a good time to get a fair deal? Some details below on the BTL option. 

90k house
25k deposit
6.6k rent p.a
say 15 year term
Higher rate taxpayer
considering repayment (not interest only mortgage). So no tax to pay as no profit made whist the mortgage payments are being made. 

Not looking for this as a monthly income stream but outright house ownership (at the end of mortgage term).

Thoughts and advice very welcome.

thanks 

What rate are you getting on your mortgage? I ask because the FED today have come out and said they are sticking to the 2% inflation target, this means mortgage rates much higher for much longer.

silvermum

I've had a single BTL for the past nine years and have just given my tenant notice as I'm selling up. In short, I DO think the days of BTL being a good investment are over. Mine was bought outright (no mortgage) as a result of inheritance and I've had a  good run with excellent capital growth and an annual yield which surpassed anything available in the savings market until the hike in base rates over the last year.

There are too many things now (and on the near horizon) which work against even the best of landlords, making it a more onerous and uncertain investment:

- On-going changes/ requirements in legislation: 'right to rent' tenant checks, electrical reports, possible changes to EPCs, possible changes to choice of tenants (on benefits, with children, with pets etc). Many of these have good intentions, but they hike up landlord insurance and can result in property damage which is rarely recoverable from a deposit (which is capped at 5 weeks rent).

For me, the straw that broke the camel's back was the prospect of future legislation that would make it difficult or impossible to reclaim my property in any reasonable timeframe, except in the most limited of circumstances. With Labour poised to win the next election, I would say things will only get harder for landlords in the future.

As a previous poster points out, without the promise of capital gain (and I think it's likely the property market might suffer a correction /stagnate for a few years) it's possible to make the same return in some fixed rate savings accounts and forgo the on-going stress of a damaged door lock, broken dishwasher and unexplained boiler problem which a tenant invariably reports at 9pm on a Friday night.

If you decide to employ an agency to manage things for you your yield will be even further reduced!