Landlords enjoy windfall from global storm

Generali

SquatNow wrote: »

Because everything I say is available in the public domain, as is backed by economists, where-as everything they say is backed by estate agents...?

Really? There are economists that believe in 18 year property cycles and the idea that 95% of all money accrues to land owners? Show me one, I mean a proper one, not a lunatic with a keyboard.

Gorgeous_George

SquatNow wrote: »

Well it's the same as the BTLers saying they intend to buy more properties if there is a crash, but not saying where they will get the money from.

It is not rocking horse science.

If I decided to buy another BTL, the money would come from a mortgage.

Say the house costs £100K and rent was £7K per year (I wouldn't buy it but 7% may seem reasonable to some - I'd want double digits). I'd put up 25% and borrow £75K. In the eyes of the bank, I'd be an ideal customer as the forst £25K in price falls is covered by my deposit and the mortgage payments are covered by rental income. A owner occupier buying the same property would have to pay the mortgage out of their salary and they are stuffed if they become unemployed. I'd find new tenants if mine failed to pay the rent.

Anyway, that's my master plan out in the open. Where's yours?

GG

Luckno7

mystic_trev wrote: »

If you look back at the last crash, yields also increased dramatically, one of the reasons being that prices were dropping. I've been in the BTL game over ten years and it's time to lock in some of my profits, which is why I'm selling. The last ten years of HPI is comming to an end, andthere's no point in 'looking in the rear view mirror! I wouldn't be surprised if prices don't even keep up with inflation for the next ten years. Time for me to move on and try to sniff out the next 'Goldmine' I note you've only been in the BTL market for the past year, a warning from the article you quote.



Good luck.

So at a time when inflation is devaluing money you think it's wise to exchange a physical asset for meaningless "money"?

Lock in profits? lol, money isn't worth anything to anyone, a house is. Whether that value is "monetarily" more or less in terms of pounds, pence euro's, painted shells or blocks of tea a house will have value as a house-a shelter first and a stutus symbol second- beyond any currency.

WTF?_2

IveSeenTheLight wrote: »

The two paragraphs above kind of contradict each other.

The first details that to be a viable long term BTL strategy the rent must cover the mortgage payment and recent BTL mortgages were using a 125% ratio.

The second is saying that the rent does not cover the mortgage payment and that they need to subsidise the tenants. If this is the case then there really has been a problem with the mortgage companies approving the release.

I think that too many people have been associating the cost of buying a BTL now and comparing against the rent now. I wonder how many mortgages released in the last year or two are not receiving the rental income to cover the mortgage payments. Other than periods of no tenancy, it should be a pre-requisite that the rent covers the mortgage payments.

Rents may well increase - but by nowhere near enough to bail out the BTLers who ploughed into the market on the basis that capital appreciation thanks to house price inflation would make their venture worthwhile.

Given the doo-lally prices of the last couple of years it should be pretty obvious that you don't need to have taken out a 125% loan to be in trouble. eg. For me to have bought the house I live in at recent market prices would mean me paying a mortgage almost 3x what I currently pay in rent. As the LL bought it well before the prices went nuts, my rent is covering his mortgage nicely so we're both happy with the arrangement. But that's hasn't been an option for new buyers for a long time.

Many of the amateur BTLers are nothing more than property speculators who view the rent they get as a subsidy to paying the mortgage whilst they wait for their property to appreciate- not something that should cover the mortgage. As for the 'safeguards' out there that's pretty laughable considering the emerging scale of mortgage fraud that's been going on in recent times. Many haven't even declared that they are letting the house to their bank/lender and aren't paying any tax on their earnings. Others are simply gearing up by remortgaging existing properties to raise the capital needed to secure a mortgage for a new 'addition to their property portfolio'. This leaves them highly leveraged and totally exposed to even minor deteriorations in the market.

The landlords who will gain from increasing rents aren't the myriad numpties who bought into the property dream in the last few years, it will be the ones who have been around for a long time and bought when the cost of the loan vs the rent attainable made it sensible to do so. Those who mortgaged themselves to the hilt in the last couple of years to get a BTL property are going to get a very rude awakening if they are holding out for higher rents to save their skin. Do they ever do their maths?

WTF?_2

Luckno7 wrote: »

So at a time when inflation is devaluing money you think it's wise to exchange a physical asset for meaningless "money"?

If that asset is depreciating in nominal terms at the same time that monetary inflation is taking place then the answer is "Yes, absolutely, Sell as soon as possible and put your money into something else".

Luckno7 wrote: »

Lock in profits? lol, money isn't worth anything to anyone, a house is. Whether that value is "monetarily" more or less in terms of pounds, pence euro's, painted shells or blocks of tea a house will have value as a house-a shelter first and a stutus symbol second- beyond any currency.

I understood that we were talking about BTL/letting property in this thread. In that case any decisions are based purely on money at the end of the day. It's a business after all.

Luckno7

!!!!!!? wrote: »

If that asset is depreciating in nominal terms at the same time that monetary inflation is taking place then the answer is "Yes, absolutely, Sell as soon as possible and put your money into something else"..

I think you have the concept of money !!! backwards. Say you own a brick today worth £1, inflation devalues money you don't want to sell your brick now unless you get £2. Even if the demand for that brick goes down and people only offer less, hold onto that brick it's still a brick and always will be if you sold it yesterday for £1 and went to the shop today to by an apple that cost £1 yeserday, that apple is now £2. Your pound is loosing value and always will at least with the brick it was a brick.

Eventually the guy selling apples has got loads of money, he doesn't need money though he can't eat the money, he can't live in the money infact his "money" has no value to him unless he can exchange it for something he wants... Something like a brick and who has that brick?

Now what commodity has lasted the ages in terms of demand?
Land/property

Gorgeous_George

!!!!!!? wrote: »

Rents may well increase - but by nowhere near enough to bail out the BTLers who ploughed into the market on the basis that capital appreciation thanks to house price inflation would make their venture worthwhile.
...eg. For me to have bought the house I live in at recent market prices would mean me paying a mortgage almost 3x what I currently pay in rent. As the LL bought it well before the prices went nuts, my rent is covering his mortgage nicely so we're both happy with the arrangement.

I'm sure you are both happy with the arrangement at the moment. One day your LL may decide to sell as his profit could be maintained with investments outside of property - and without the hassle of a tenant.

If more and more LLs do this (maybe after April's tax rules change), more and more people will be forced into home-ownership.

Oh how we will miss the BTL LL.

GG

mystic_trev

Luckno7 wrote: »

Now what commodity has lasted the ages in terms of demand?
Land/property

So, the brick I bought for a £1 ten years ago is now worth £4. I can buy that brick back in a couple of years for £3, so will have have 25% more bricks for my money (which has been earning interest in the meantime) that seems to me like a good deal, unlike you who seems to be a couple of bricks short of a hod.:rotfl:

Gorgeous_George

I think it is HEW (House Equity Withdrawal) or just EW but that is by the by.

I have the cash in various investments but, if someone wishes to withdraw equity from other properties that seems a reasonable, if risky, way to increase their portfolio.

If the right property comes available at the right price, I'll consider buying it.

GG

WTF?_2

Luckno7 wrote: »

I think you have the concept of money !!! backwards. Say you own a brick today worth £1, inflation devalues money you don't want to sell your brick now unless you get £2. Even if the demand for that brick goes down and people only offer less, hold onto that brick it's still a brick and always will be if you sold it yesterday for £1 and went to the shop today to by an apple that cost £1 yeserday, that apple is now £2. Your pound is loosing value and always will at least with the brick it was a brick.

Eventually the guy selling apples has got loads of money, he doesn't need money though he can't eat the money, he can't live in the money infact his "money" has no value to him unless he can exchange it for something he wants... Something like a brick and who has that brick?

Now what commodity has lasted the ages in terms of demand?
Land/property

I refuse to enter a battle of wits with a clearly unarmed man.