Landlords enjoy windfall from global storm

WTF?_2

Gorgeous_George wrote: »

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

It's unlikely he'll sell any time soon - I advised him to sell at the local peak around last spring/summer and pocket the substantial equity in the house (he would have had no CGT at all due to circumstances, he's an 'accidental' BTLer who found himself with a 'spare' house). However, he looks at the house as a way of generating revenue into retirement.

Personally I'd have sold and taken the huge tax-free windfall and invested it somewhere else but that's his choice. The forthcoming CGT changes actually disadvantage him and make it less attractive to sell. Plus of course the house has devalued in the course of the last year.


Anyway, regardless of the financial efficiency of his choice he's still going to do OK as existing rental values cover the mortgage and since it's repayment, he'll start to make money as well as having a substantial asset paid for by tenants. That sort of option hasn't been available to buyers for about 3 or 4 years because the absolutely reckless lending of the last few years has enabled just about any Tom, !!!!!! and Harry to raise a huge mortgage, driving prices up up up, beyond the point of BTL profitability. Not that this incovenient truth has stopped people jumping in and inflating the market by paying over the odds for completely uneconomic properties.

Gorgeous_George

If he has no CGT liability then the new rules will make no difference to him.

GG

SquatNow

Gorgeous_George wrote: »

If he has no CGT liability then the new rules will make no difference to him.

It's all pointless... as prices are plummeting, the LL will end up selling at a loss. No profit, no CGT.

Generali

Gorgeous_George wrote: »

If he has no CGT liability then the new rules will make no difference to him.

GG

If (s)he doesn't sell then there's CGT liabilty either.

WTF?_2

SquatNow wrote: »

It's all pointless... as prices are plummeting, the LL will end up selling at a loss. No profit, no CGT.

The LL is highly unlikely to ever sell at a loss - I know what the purchase price of the house was and what it's likely to achieve now.

There would have to be falls far in excess of 50% before it even approaches the point where it would selling for a loss.

Personally I would have sold about a year ago when there was simply massive tax-free equity in the place but his decision to hold it for the long term benefits me as I have an affordable house to rent for as long as I want. Once prices have declined to the point where they are sensible again, I'll buy a house of my own as I have quite a decent sized deposit which is increasing steadily. That isn't likely to be for around 2 years though.

That's a much better situation than many renters are in as they find themselves in the middle of the amateur BTL minefield. We're already starting to see more and more anecdotal tales on this board of people whose landlord is being repossessed or is trying to suddenly sell up because of inability to afford to meet mortgage repayments given that the rent comes nowhere close to covering them.

mystic_trev

mystic_trev wrote: »

Many recent 'Investors' who subscribed to the likes of Inside Track will find their dreams become a nightmare, with nobody else to blame. I know one personally who've bought a number of Investment properties 'off plan' and think they're just fine!

From todays Guardian

When her marriage was on the rocks, Tamsin Barks knew her life needed new direction, and better financing, as she was about to be single again. Then she received an unsolicited mailshot from property investment company Inside Track Seminars. It said she "could give up work and be a property millionaire" and that she could "live on easy street instead of struggling for a living".
Barks, a self-employed vet until her marriage disintegrated, had never seriously considered property investment until then. But instead of celebrating the property millionaire status Inside Track appeared to promise, she calculates the £1.1m portfolio of seven properties she invested in could end up losing hundreds of thousands of pounds.

http://www.guardian.co.uk/money/2008/feb/16/property.houseprices2

Generali

What I've been trying to point out for years is that, while BTL can be a very good investment, it is also a high risk one as houses are very illiquid (one of the most illiquid investments there are) and also because most people borrow to purchase and in so doing magnify any profits or losses.

Luckno7

mystic_trev wrote: »

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:

The "Value" of the brick doesn't change, it s a brick. The value of money changes as it is meaningless....it is what the person with the brick is willing to accept for their brick they determin the value of your "pound." and since money is constantly devaluing why would you ever want to give up your brick?

Short term speculation that the price of a comodity will be lower in the future so you can buy it back then? Ok if you want to take that gamble, if anyone had any sense they own that comodity, and you don't why would they sell it to you when they could rent it or lease it to you? Then they have the comodity, and your money, your money can't buy you something the owner doesn't want to sell.

Earning intrest, what a joke! The rate of interest the bank of England pays on the bonds it issued when it was nationalised is more than the rate on interest you recieve from your hightreet bank. Ipso facto your "money" is constantly being de devalued and always will be.

Land is the ultimate means of production and probably the only thing that will retain is intrinsic value, unless it falls into the sea, suffers toxic spoilage etc. Once you own a free hold (as an investement) on a piece of land, don't ever sell it that free hold in exchange for pieces of paper which are reedemable in...F all. Even the term "legal tender" is a misnoma, a person doesn't have to accept your payment in pounds and pence if they don't want to.

Generali

The relative value of the brick does change though. Look at how many bricks you'd need to buy a gallon of petrol over the last 50 years or entrance to a football match or a rib of beef.

We have do the concept of legal tender in this country, currently governed by the Coinage Act of 1971. You have to accept a note issued by the Bank of England in settlement of a debt.

I have my doubts about fiat money too though.

Luckno7

Generali wrote: »

The relative value of the brick does change though. Look at how many bricks you'd need to buy a gallon of petrol over the last 50 years or entrance to a football match or a rib of beef.

We have do the concept of legal tender in this country, currently governed by the Coinage Act of 1971. You have to accept a note issued by the Bank of England in settlement of a debt.

I have my doubts about fiat money too though.

In settlement of a debit yes, but not in in exchange for a transaction I believe.

Also if you settle a debit in "legal tender" to the full value of the debit then you are legally protected from claims of non settlement.

Relative values do change, but intrinsic value is retained. If you need a brick and you own a brick you are your own king, if you own £5 and you need a brick then the brickholder is king.

The brick analogy was a poor one replace it with plot of land as, really ownership of land is all you can ever count on.

Credit Crunches