Buy to Let - has the time passed?

Sarah1Mitty2

silvermum said:

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!

Yes, if you have the money available to invest as you did but many (most?) BTL people are borrowing the money (or were borrowing the money) to get access to the "income stream", it is just another ponzi scheme ready to collapse isn`t it?

[Deleted User]

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.

Your time frame and story is remarkably similar to mine. Investment does involve risk and kudos for having good timing. BTL is probably only a good investment now if mortgage free and well within 20% income tax bracket. 

[Deleted User]

silvermum said:

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!

Very good commentary. It resonates. I think anyone who bought 8 to 10 years ago like us, unencumbered, and who has just sold, will have done well. Rough figures for me:  200k in, 350k out, and rental profits yearly. Now, happy enough to stick it in savings with the higher rates and take it from there. I won't miss having to panic about being told that the vacuum cleaner is broken, when it's the bag that is full (and similar)!

housebuyer143

[Deleted User] said:

Very good commentary. It resonates. I think anyone who bought 8 to 10 years ago like us, unencumbered, and who has just sold, will have done well. Rough figures for me:  200k in, 350k out, and rental profits yearly. Now, happy enough to stick it in savings with the higher rates and take it from there. I won't miss having to panic about being told that the vacuum cleaner is broken, when it's the bag that is full (and similar)!

I got a call once at 11pm to say the power had gone out and they wanted it fixed... it was a power cut and honestly it was 11pm, just go to sleep and call me in the morning! I do not miss those days ha ha

Ditzy_Mitzy

silvermum said:

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!

As a fellow small-time landlord I agree.  The above is a good commentary, which makes a number of valid points.  

The only reason one ought to consider buy-to-let is as a very long term investment in the property itself.  Rent itself rarely provides an income stream when the property is mortgaged.  Profit, possibly, comes at the end of the lifecycle when the mortgage is paid off and the premises sold.  If buy-to-let is viewed as a way of acquiring a property for less than the going rate, it makes sense in limited circumstances.  It isn't a mechanism for providing income in the short term.  

Schwarzwald

Undoubtedly it seems the time of easy returns by simply buying assets - be it a BTL or also stock - is over for now and it is hard to see it return in the next decade.
However, that doesnt mean you cant make money in BTL or achieve absolute returns in stocks, but you probably need to be far more diligent, business savvy and need to know what you getting into. 
Simply buying a BTL at market rates and letting it out without doing anything to it ... I am not convinced this is a good relative return to what other securities can offer.

Building out a BTL portfolio with a strategy over the next 1-2 decades, adding value to it and approaching it like a real business ... I think there will always be a space for it, some years you might achieve better yields, some years a lower yields, but over a long period of time, you probably have a good chance at generating return and value. Especially when being in this asset class might be complimentary to your overall asset portfolio.

But simply putting money into property so you can tell your mates that you run a £££k property portfolio .... and you actually still end up making money by pure luck as many did (especially boomers and GenX that keep preaching that UK property is the best thing ever invented), that time seems over, and from a wider macro perspective ... that is probably a good thing. 

TerryTeacake

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.

I wouldn't say things are as rosy as you make out.  The chart shows a major increase in landlords defaulting on their mortgages. Also in the last quarter, there has been a massive increase in mortgage holders falling behind on their mortgage payments.

Apologies if the image is not very clear but you can click on the above link to see better.

Mstty

TerryTeacake said:

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.

I wouldn't say things are as rosy as you make out.  The chart shows a major increase in landlords defaulting on their mortgages. Also in the last quarter, there has been a massive increase in mortgage holders falling behind on their mortgage payments.

Apologies if the image is not very clear but you can click on the above link to see better.

I think you will find teacake I never said things were Rosey. I merely highlighted from a posted article that supply reducing (so yes LL exiting the market could well add to that especially those leveraged in the last few years with no reserves) means more demand on the properties left and higher rents.

Demand outsripping supply grossly.

Put another way those LL that have been in the game a long time with no to little BTL mortgage debt will be making as much money in the next few years as they did when the tax breaks were at there optimum.

TerryTeacake

Mstty said:

TerryTeacake said:

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.

I wouldn't say things are as rosy as you make out.  The chart shows a major increase in landlords defaulting on their mortgages. Also in the last quarter, there has been a massive increase in mortgage holders falling behind on their mortgage payments.

Apologies if the image is not very clear but you can click on the above link to see better.

I think you will find teacake I never said things were Rosey. I merely highlighted from a posted article that supply reducing (so yes LL exiting the market could well add to that especially those leveraged in the last few years with no reserves) means more demand on the properties left and higher rents.

Demand outsripping supply grossly.

Put another way those LL that have been in the game a long time with no to little BTL mortgage debt will be making as much money in the next few years as they did when the tax breaks were at there optimum.

I don't disagree that those LL who have been in the game a long time and who are not overleveraged will be in a better position than those who are overleveraged. For most cases, I have been crunching the numbers and it is definitely cheaper to rent at the moment than to buy especially where the interest rates are along with these high house prices. Surely something has to give!

[Deleted User]

TerryTeacake said:

Mstty said:

TerryTeacake said:

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.

I wouldn't say things are as rosy as you make out.  The chart shows a major increase in landlords defaulting on their mortgages. Also in the last quarter, there has been a massive increase in mortgage holders falling behind on their mortgage payments.

Apologies if the image is not very clear but you can click on the above link to see better.

I think you will find teacake I never said things were Rosey. I merely highlighted from a posted article that supply reducing (so yes LL exiting the market could well add to that especially those leveraged in the last few years with no reserves) means more demand on the properties left and higher rents.

Demand outsripping supply grossly.

Put another way those LL that have been in the game a long time with no to little BTL mortgage debt will be making as much money in the next few years as they did when the tax breaks were at there optimum.

I don't disagree that those LL who have been in the game a long time and who are not overleveraged will be in a better position than those who are overleveraged. For most cases, I have been crunching the numbers and it is definitely cheaper to rent at the moment than to buy especially where the interest rates are along with these high house prices. Surely something has to give!

A property we rented in 2018 for 650 is now 950. Paying someone else's mortgage or paying interest on your own. No choice is a big winner really in our locality.