Is BTL still worth it

ian1246

I think it could be worthwhile, providing the figures stack up.

Your talking about leveraging a £36,000 investment to get a £120,000 Property with a £90,000 Interest Only Mortgage. Return of £750 a month rent - a £9000 return on a £36,000 Investment (£30,000 Deposit & £6000 Stamp Duty) - your claimed £300 profit a month is a £3600 Net Return on £36,000, so a 10% yield.

That figure excludes additional costs as a Landlord - including costs to evict and renovate the property (if trashed), but on the flip-side also excludes any property price increases (which you'll admittedly have to pay CGT on at the point of sale - but it will still be a profit).

There's also the risk associated with interest rates spiking - subsequently impacting your interest only mortgage payments (& thus eating into your £300 margin), but on the flip-side, these can be partially mitigated against via a Fixed-Deal i.e. 5 or 10 years, during which time you will increase the rent on a yearly basis to reflect inflation / market increases - i.e. £750 today, assuming an average of a 2.5% inflationary rise every year, would be £848.55 in 5 years time and £960 in 10 years time.

That means, assuming interest rates are 5.5% currently, your £90,000 mortgage would be £4,950 a year - £412.50 a month. If you had fixed for 10 years, the extra £210 rent per month (£960-£750) you'd expect to be getting in 10 years time (assuming an annual 2.5% rise) would be equivalent to a 2.8% interest rate rise.

Personally, I'd only look to get into the Landlord Business if I could afford to get 2 or more properties, since that way you start to spread the risk and if in the worst case you end up with a non-payer, the profits from the other properties would help cover the mortgage / legal costs.

The above all assumes your figures are correct, however,

ReadySteadyPop

ian1246 said:

I think it could be worthwhile, providing the figures stack up.

Your talking about leveraging a £36,000 investment to get a £120,000 Property with a £90,000 Interest Only Mortgage. Return of £750 a month rent - a £9000 return on a £36,000 Investment (£30,000 Deposit & £6000 Stamp Duty) - your claimed £300 profit a month is a £3600 Net Return on £36,000, so a 10% yield.

That figure excludes additional costs as a Landlord - including costs to evict and renovate the property (if trashed), but on the flip-side also excludes any property price increases (which you'll admittedly have to pay CGT on at the point of sale - but it will still be a profit).

There's also the risk associated with interest rates spiking - subsequently impacting your interest only mortgage payments (& thus eating into your £300 margin), but on the flip-side, these can be partially mitigated against via a Fixed-Deal i.e. 5 or 10 years, during which time you will increase the rent on a yearly basis to reflect inflation / market increases - i.e. £750 today, assuming an average of a 2.5% inflationary rise every year, would be £848.55 in 5 years time and £960 in 10 years time.

That means, assuming interest rates are 5.5% currently, your £90,000 mortgage would be £4,950 a year - £412.50 a month. If you had fixed for 10 years, the extra £210 rent per month (£960-£750) you'd expect to be getting in 10 years time (assuming an annual 2.5% rise) would be equivalent to a 2.8% interest rate rise.

Personally, I'd only look to get into the Landlord Business if I could afford to get 2 or more properties, since that way you start to spread the risk and if in the worst case you end up with a non-payer, the profits from the other properties would help cover the mortgage / legal costs.

The above all assumes your figures are correct, however,

What happens if you end up with two non-payers? Two or more properties is just more debt and more risk, that leveraging up approach worked best when interest rates were at near zero and before councils and government started targeting landlords with tighter legislation and double council tax etc.

BikingBud

Gam2015 said:

Hi all i have some money tucked away in premium bonds (not winning huge amounts) i have been pondering on the idea of paying down my mortgage with said funds. I have just done some quick figures on a 2 bed property for sale in the area for £120k with rent hopefully at £750pcm so it would be about £300 profit per month after mortgage and home insurance payments before tax and any repairs and that would be a 36k out lay 30k deposit and 6k stamp duty 🤔 

Was it ever worth it? Why do you feel it was? Because some said it was any you feel you "missed out"?

I would offer if you felt it was worth it before you might feel it still is, see @Grumpy_chap.

If you felt it was always marginal then you might find the margins are even less now. You should investigate the LL's obligations and risks to see how much of your £300 per month "profit" you can really expect to achieve.

Do not forget your time where is £300 in your normal wage return, 1/2 day, 1 day, 2 days. If you could spend the time generating more lower risk cash is it worth the grind and the stress?

Also anticipated and historic capital growth figures might have run their course and where previously you knew the properties was gaining year on year, you might now find that capital is also under threat.

All of the previous answers are different because everyone's opinion is different and @theartfullodger's flippant flip a coin might be your means to differentiate.

ReadySteadyPop

BikingBud said:

Gam2015 said:

Hi all i have some money tucked away in premium bonds (not winning huge amounts) i have been pondering on the idea of paying down my mortgage with said funds. I have just done some quick figures on a 2 bed property for sale in the area for £120k with rent hopefully at £750pcm so it would be about £300 profit per month after mortgage and home insurance payments before tax and any repairs and that would be a 36k out lay 30k deposit and 6k stamp duty 🤔 

Was it ever worth it? Why do you feel it was? Because some said it was any you feel you "missed out"?

I would offer if you felt it was worth it before you might feel it still is, see @Grumpy_chap.

If you felt it was always marginal then you might find the margins are even less now. You should investigate the LL's obligations and risks to see how much of your £300 per month "profit" you can really expect to achieve.

Do not forget your time where is £300 in your normal wage return, 1/2 day, 1 day, 2 days. If you could spend the time generating more lower risk cash is it worth the grind and the stress?

Also anticipated and historic capital growth figures might have run their course and where previously you knew the properties was gaining year on year, you might now find that capital is also under threat.

All of the previous answers are different because everyone's opinion is different and @theartfullodger's flippant flip a coin might be your means to differentiate.

Good point.

MEM62

BTL - just about the most tax-inefficient investment going.  It also carries a level of risk (void periods, bad tenants can cost you a fortune, repairs etc etc)  For most, there are much better ways of getting your money to work for you.  

ReadySteadyPop

MEM62 said:

BTL - just about the most tax-inefficient investment going.  It also carries a level of risk (void periods, bad tenants can cost you a fortune, repairs etc etc)  For most, there are much better ways of getting your money to work for you.  

Most people are borrowing money to participate in the property bubble, that is why BTL took off, the bank won`t lend to you to buy stocks and loads of ordinary people thought they understood "bricks and mortar".

newsgroupmonkey_

BikingBud said:

Also anticipated and historic capital growth figures might have run their course and where previously you knew the properties was gaining year on year, you might now find that capital is also under threat.

Can I ask, are you, like Crashy, renting?

It sounds to me like you missed a bubble and are bitter about it.
I don't see this changing anytime soon. Obviously, peaks and troughs happen, but overall, property has always beaten inflation.

And as gets pointed out, there's a housing crisis in many parts of the country - there just isn't enough to go round.

ReadySteadyPop

newsgroupmonkey_ said:

BikingBud said:

Also anticipated and historic capital growth figures might have run their course and where previously you knew the properties was gaining year on year, you might now find that capital is also under threat.

Can I ask, are you, like Crashy, renting?

It sounds to me like you missed a bubble and are bitter about it.
I don't see this changing anytime soon. Obviously, peaks and troughs happen, but overall, property has always beaten inflation.

And as gets pointed out, there's a housing crisis in many parts of the country - there just isn't enough to go round.

Where do all the people live?

daveyjp

No different than it has ever been, right property in the right location and it is a good option, but its not a passive investment.

A few of the properties around us are BTL, one tenant has served notcice and the landlord has had viewings every day for about a week.  The rent he will achieve is about 25% more than the current passing rent.

ReadySteadyPop

daveyjp said:

No different than it has ever been, right property in the right location and it is a good option, but its not a passive investment.

A few of the properties around us are BTL, one tenant has served notcice and the landlord has had viewings every day for about a week.  The rent he will achieve is about 25% more than the current passing rent.

Makes you wonder how the media can come up with stories like this....

https://www.telegraph.co.uk/money/property/house-prices/properties-for-sale-flood-market-house-prices-plumment/

I found this comment confusing;

"This is not primarily a market correction prompted by falling demand, but one triggered by an inescapable imbalance: too many sellers, not enough serious buyers.”

I would have thought that was textbook "lack of demand"!