'BTL Landlords go long'

going2die_rich

dannyboycey wrote: »

Those with no equity are playing a VERY dangerous game though. Even a 10% drop would seriously shaft them. They can't sell and they can't turn a profit from rental income. Oh deary me.... This is what happens when greedy people think they can have a go at being Alan Sugar just because they saw someone on TV do it.

You'd only be in trouble if you bought it as a very short term investment. In which case you bought the wrong kind of invement. Buy to Let investments are meant to be medium to long term investments. So if you fall in to that length of category, it doesn't really matter if you have a minus 90% equity today, it only matters when you are planning on selling it that it's not minus . Which many are only planning on doing so come retirement age or a good few years if not a decade or two after buying the property.

The only real way true Buy to Let investors would be in trouble is if house prices dropped so much it became affordable to the tenants to buy, whereby the number of tenants would reduce leaving the landlords to pick up the bill for empty houses. But this is unlikely to happen, as even affordable homes right now wont mean tenants could get a mortgage as many don't have the right sized deposits for todays economy. Thats assuming their is actually enough homes for sale for tenants to buy them all up, which I doubt their ever will be, especially not in a slowing market where people just wont sell.

Vincenzo

I think when many people refer to BTL investors they think of the investment clubs and people blindly buying into new builds at ridiculous yields.

I do not for a second doubt that there are many BTL Landlords who made bad decsions in the past few years. However I am confident that this is the minority.

Many of the BTL Landlords who are in/approaching trouble would have had problems even without the low availability of funds and falling prices. Just think of those who bought with 'rental guarantees' only to find low demand for their property after the guarantee expired. A guarantee, I might add, which was paid for by them in the inflated purchase price.

Only time will tell, but to call time on BTL, as some have done so in the HP forum, is a huge over-reaction.

LillyJ

Our landlord bought this house in the 70s, has done the sum total of nothing to it since then and we are paying what CURRENT mortgage would cost in rent. I think he does pretty well out of it, don't you? I also think that there is no chance of him being repossessed as we know he doesn't pay a mortgage on the place, and he probably bought it for a few thousand pounds. He has other houses in the same street. So he is bringing in £750-£1250 for each house, with 5 houses, (and he NEVER pays for any updating, and rarely repairs) he is not in any trouble as far as I can see!

Benefits_Blagger

it doesnt matter wether you have enough equity to ride out a correction/crash or that the mortgage is low enough enough to generate a positive cash flow. why would anyone stay in an investment which is going to realise a capital loss and at the same time leave their money in to achieve a yield less than they could achieve in a different asset class ?

If BTL'ers are such great business people, which they have been telling us, then they need to get out now.

or simply to sum it up, why would anyone choose to lose money ?

those who have got onto the BTL bandwagon because of HPI without regard for the fundamentals (i.e. yields ?? anyone remember them) have been stupid, those who plan to ride out the HPC with same philosphy must are even more stupid.

i'm beginning to think maybe a lot of people got into BTL because they were sacked from their day jobs because of incompetence.

LillyJ

Who are all you people who are waiting for the crash going to rent from then?

dannyboycey

IveSeenTheLight wrote: »

I think you think (wrongly) that the majority of BTL landlords are on the very edge of affording the property and subsidise the monthly mortgage payments

I didn't say that. I said those with little or no equity, of which there are literally thousands. These include many 'amateur speculators', who may at the moment be able to offset their losses with the equity tied up in their own home. But this is a limited resource upon which they can tap, and losses will have to be paid eventually.

Someone mentioned pushing up rents - but tenants can only take this if there is an upward trend in rent prices. Otherwise they will simply stick two fingers up at the LL and move on. As yet, an significant increase in rental prices is not something I've seen.

dannyboycey

Benefits_Blagger wrote: »

it doesnt matter wether you have enough equity to ride out a correction/crash or that the mortgage is low enough enough to generate a positive cash flow. why would anyone stay in an investment which is going to realise a capital loss and at the same time leave their money in to achieve a yield less than they could achieve in a different asset class ?

If BTL'ers are such great business people, which they have been telling us, then they need to get out now.

or simply to sum it up, why would anyone choose to lose money ?

those who have got onto the BTL bandwagon because of HPI without regard for the fundamentals (i.e. yields ?? anyone remember them) have been stupid, those who plan to ride out the HPC with same philosphy must are even more stupid.

i'm beginning to think maybe a lot of people got into BTL because they were sacked from their day jobs because of incompetence.

Some of these people have actually become millionaires! And as such, they have serious delusions of grandeur. Making money by gearing up is easy in a ridiculously inflating market, but the trick is to jump ship before you reach the peak, as it's just as easy to lose the lot when the market turns! This is exactly what will happen to a lot of these fools.

Benefits_Blagger

rent wont rise for the simple reason that as prices fall, the new LL's of these properties will able able to charge the same rents as existing LL's but acheive a greater yield, thus keeping a lid on rents.

WTF?_2

Benefits_Blagger wrote: »

it doesnt matter wether you have enough equity to ride out a correction/crash or that the mortgage is low enough enough to generate a positive cash flow. why would anyone stay in an investment which is going to realise a capital loss and at the same time leave their money in to achieve a yield less than they could achieve in a different asset class ?

If BTL'ers are such great business people, which they have been telling us, then they need to get out now.

or simply to sum it up, why would anyone choose to lose money ?

those who have got onto the BTL bandwagon because of HPI without regard for the fundamentals (i.e. yields ?? anyone remember them) have been stupid, those who plan to ride out the HPC with same philosphy must are even more stupid.

i'm beginning to think maybe a lot of people got into BTL because they were sacked from their day jobs because of incompetence.

Sensible BTL is about cashflow and yield (vs putting your equity somewhere else).

If your BTL generates cash for you then thumbs up. If it costs you cash every month then what the hell are you thinking?

Basically, people have been ignoring the above simple equation and continuing to buy in the last few years because they perceive that capital gains on their BTL property will compensate for the fact that it is a cash sucking financial leech :rotfl: These people are about to find out how misguided they are.

dannyboycey

Alan_M wrote: »

a large percentage of them are careful how much they expose themselves to risk.

There are an equally large number who have absolutely no concept of risk, and who don't understand how to calculate rental yields or capital gains tax.

You can make money from BTL even in a falling / crashing market, but you have to make your numbers add up and be totally on the ball with your calculations.