'BTL Landlords go long'

beer_tins

Vincenzo wrote: »

Whilst I am a little more optimistic for the future, I think you are right to call time on the excessive popularity of BTL.

I wonder what will come next? I remember in c.2000 when everyone I knew suddenly became a stock market trader. Many of them lost a great deal taking punts on companies they read about in the FT in the morning and had invested by lunchtime.

Many of those people, unsurprisingly turned their attention to property. Perhaps now they will turn to commodities trading? Or spread betting?? I here you can make loads in that game!

Like share trading and property investment, you can make loads in that game. But you need to know what you're doing! You're quite right that a lot of people just assume they can make money out of something without knowing much about it, just because they see others are. I don't know if your post was tongue in cheek, but spread betting is already fast growing and yes, the majority of clients lose money on it (I have sources!). A few well informed and experienced people who can afford to do it as their job (watch their screens all day) make a mint out of it.

IveSeenTheLight

!!!!!!? wrote: »

I think we definitely need a "Bang head against wall" smiley.

One final time in the hope that gets through: There is no contradiction between me seeing a likely decline in overall BTL investment in the 3-5 year timeframe and me personally planning to invest in BTL in that timeframe.

* I've explained why I think BTL generally will decline. It's mainly about means.

* I've explained why I personally am considering investment (at the appropriate time) and why I think I will be in a position to do so.


I really can't be bothered chasing the argument around in circles any more. You seem quite peeved off that in fact I am not anti-BTL per se, just completely anti-BTL investment at this time.

I'm not peeved at all, please don't try to guess my emotions or think I mean something I have not said.
Stick to the points

I too have had enough of this point, sometimes you just can't show someone how they say one thing and by saying another they contradict themselves.

• I AGREE THERE MAY BE SOME BTL SALES, 2% reported by RICS.
• You say that personally you will buy when the time is right.

Can you not see that as well as you, there will be other investors all wishing to capitalise at the bottom end of the market.

I am only disagreeing with your statement that

By the time this is over there are going to be a good few less BTL properties out there

I think with house prices being lower there may be a good few more BTL properties out there.

dannyboycey

IveSeenTheLight wrote: »

Can you not see that as well as you, there will be other investors all wishing to capitalise at the bottom end of the market.

People like this will be in the minority. The ordinary working 'man on the street' is likely to suffer a big blow to his finances over the next few years (rocketing utility bills, petrol, food, general inflation, possible recession, possible job-losses, failiure of pension schemes.....). Sure, the cycle will repeat, as it always does but the majority of people wont be able to afford to experiment with BTL / developing until the market is in it's latter stages of growth as has happened now.

EdInvestor

!!!!!!? wrote: »

It's no coincidence that BTL has rocketed in the last decade in tandem with the credit bubble.

That's not actually the case.From 1997 (when BTL mortgages were offered for the first time) until around 2002, the vast majority of the new mortgages were taken out by long standing landlords running letting businesses, often quite substantial, who remortgaged onto BTL loans from the former commercial mortgages they had in the past because they offered much better terms. These people are indeed well capitalised individuals or companies.Most of Bradford and Bingley's BTL lending is based on this group, so it's much less risky than some people think.

If BTL is such a surefire, easy thing then why do people only seem to have copped onto that fact en-masse in the last decade?

They haven't. Apart from the professionals, there were quite a few people who fell accidentally into BTL during the last crash, as it was the only way they could move when they got into negative equity.There is (and was) considerable demand for nice rental property and so it turned out to be quite a reasonable side investment for these ordinary people, and many of them kept it up even when they could sell - and later switched to BTL mortgages. Temporary and long term expats were another group who've let their homes for years.

But the main reason BTL was not a popular activity was because of the restrictive tenancy laws which were only changed in (IIRC) around 1998, with the introduction of the AST lease.This is what kicked off the BTL boom, nothing to do with lax credit.

You correctly identify various older groups of BTLers eg those who inherited property, couples who got together and rented out the surplus home.There are also couples who bought flats for their student kids and investors who bought a single property to let out as a "pension type" investment.

You go on to say:

In recent times it means your house went up by a boatload of money and you withdrew the equity to get a cheap and easy mortgage on another house because 'you can't ever lose with property'. Many of these genii then realised that what with the magically ever-increasing house price market they could then do the same again: Hey presto! A property portfolio and you are a property manager!

These people are not in the letting business.They are speculators.So are the "flippers" who bought flats off plan with the idea of selling on pre completion and making a turn.

Take away the cheap and easy means to purchase additional properties, add the generally grim financial state the economy is likely to be in and top off with an almost certain shift in sentiment to 'property loses you a packet' and it's not hard to see that BTL's popularity as an investment is going to fall like a stone.

No, what will happen IMHO is as follows:

The BTL speculator groups will get their fingers well and truly burnt.

The professional landlords (the largest group by far) will continue in the normal way and expand their portfolios where they see value.They will be unaffected by the crunch as they have low LTVs and profitale businesses.

The smaller investors who are actually running a letting business, not speculating, will be fine because there is a boom in tenants and rents are going up, which should cover extra mortgage costs. They might face a period of higher mortgage costs if they don't have much equity, but that should be affordable.

It's really important to separate in your mind the people in the residential letting business from the geared-up speculators, if you want your analysis to be correct.
The former will be fine and the latter will be in deep doodoo.But the latter are in the minority and will tend to be involved in the inner city new-build flats disaster.That particular flame-out shouldn't affect anyone else.

pickles110564

EdInvestor wrote: »

That's not actually the case.From 1997 (when BTL mortgages were offered for the first time) until around 2002, the vast majority of the new mortgages were taken out by long standing landlords running letting businesses, often quite substantial, who remortgaged onto BTL loans from the former commercial mortgages they had in the past because they offered much better terms. These people are indeed well capitalised individuals or companies.Most of Bradford and Bingley's BTL lending is based on this group, so it's much less risky than some people think.



They haven't. Apart from the professionals, there were quite a few people who fell accidentally into BTL during the last crash, as it was the only way they could move when they got into negative equity.There is (and was) considerable demand for nice rental property and so it turned out to be quite a reasonable side investment for these ordinary people, and many of them kept it up even when they could sell - and later switched to BTL mortgages. Temporary and long term expats were another group who've let their homes for years.

But the main reason BTL was not a popular activity was because of the restrictive tenancy laws which were only changed in (IIRC) around 1998, with the introduction of the AST lease.This is what kicked off the BTL boom, nothing to do with lax credit.

You correctly identify various older groups of BTLers eg those who inherited property, couples who got together and rented out the surplus home.There are also couples who bought flats for their student kids and investors who bought a single property to let out as a "pension type" investment.

You go on to say:



These people are not in the letting business.They are speculators.So are the "flippers" who bought flats off plan with the idea of selling on pre completion and making a turn.




No, what will happen IMHO is as follows:

The BTL speculator groups will get their fingers well and truly burnt.

The professional landlords (the largest group by far) will continue in the normal way and expand their portfolios where they see value.They will be unaffected by the crunch as they have low LTVs and profitale businesses.

The smaller investors who are actually running a letting business, not speculating, will be fine because there is a boom in tenants and rents are going up, which should cover extra mortgage costs. They might face a period of higher mortgage costs if they don't have much equity, but that should be affordable.

It's really important to separate in your mind the people in the residential letting business from the geared-up speculators, if you want your analysis to be correct.
The former will be fine and the latter will be in deep doodoo.But the latter are in the minority and will tend to be involved in the inner city new-build flats disaster.That particular flame-out shouldn't affect anyone else.

Best sensible post I have read for a long long time, I wish I could put my views across as well as you just have.

:T

pickles110564

dannyboycey wrote: »

People like this will be in the minority. The ordinary working 'man on the street' is likely to suffer a big blow to his finances over the next few years (rocketing utility bills, petrol, food, general inflation, possible recession, possible job-losses, failiure of pension schemes.....). Sure, the cycle will repeat, as it always does but the majority of people wont be able to afford to experiment with BTL / developing until the market is in it's latter stages of growth as has happened now.

I think you are wrong, I know of several BTL's who are waiting to buy several properties once they get to a decent level.

pickles110564

!!!!!!? wrote: »

I suspect that the general public however won't have the spare cash/ access to borrowed cash to throw around in what they perceive as investments. There are an awful lot of indebted people out there who have spent their next 3-5 years' wages.

I will stick to what I know and invest more into BTL's, by the way please inform me when the market is just about to hit rock bottom so I can join in on your tidal wave.:rolleyes:

Gorgeous_George

dolcevita wrote: »

Stick to what you know?


Making a few quid on the back of recent HPI doesn't make you a property expert.
A monkey could have made money on property over the last few years.

True, but there are plenty more monkeys that didn't.



GG

pickles110564

dolcevita wrote: »

Stick to what you know?


Making a few quid on the back of recent HPI doesn't make you a property expert.
A monkey could have made money on property over the last few years.
This monkey has been making money for several years now and will carry on in whatever cycle we are in.

Now an expert would know that things work in cycles.

The monkey, on the other hand, would keep on buying.

That's right, when I can see a few bucks to be made I will as always buy more property.
I would like to see how much you would have turned a £1k investment into over the last 25 years, with very little education but loads of hard work and dedication.

pickles110564

dolcevita wrote: »

While the ones that did will end up chained to a cage paying their dues.

You lost me on this one Bud.
How much have you made over the HPI then?