My Btl Is My Pension Or Maybe Not

[2buyornot2buy]

I was looking through some Stormont committee minutes and came across these. It really is interesting for a Landlord out there and any renters who are looking for a deposit protection scheme. It looks like the ones on the hill are all for it but the Landlords Association are surprisingly against it.

The resounding view from the committee is that much greater regulation is need in the private rented sector. The topic of housing benefit being a huge amount comes up often. Lengthy but great read.

http://archive.niassembly.gov.uk/social/2007mandate/reports/2010/report_30_10_11r.htm

A key part

With regard to the economics of providing housing in the private sector, we have distributed a copy of the actual costs based on a £100,000 three-bedroom house, as it might be today, and £200,000, which might have been a reasonable cost at the peak. It is apparent that the rents received from the tenants through housing allowance do not cover the true cost of providing accommodation. Former Governments in the UK and Ireland encouraged people to become involved in the buy-to-let market in order to secure their financial status for later in life. It is not entirely surprising, therefore, that a University of Ulster survey, which was carried out not so many months ago, indicated that 50% of landlords in Northern Ireland entered the market in the past five years, and most of them probably did so in the past three or four years.

375. It is apparent from that survey that 50% of landlords are now sitting on quite substantial amounts of negative equity and will inevitably face grave financial hardship. This is the true picture, which is very different from the Government's apparent perception that landlords are very wealthy; it is quite the reverse. Many people who rent out accommodation are not landlords and do not own their properties, because they took out interest-only loans. However, they are still responsible for all their losses.

376. Mr Declan Boyle (Landlords Association of Northern Ireland): On that point, a £50,000 deposit is now required for a house costing £200,000. The game has changed, because all of the financial institutions now want interest-only to be changed to interest and repayment. Very often, landlords are teachers, civil servants or other averagely paid people, who now have to feed this product called investment property out of their paid employment. Those people thought that they could make money and move on, but they were. They are now in something that is going to take a long, long time to get out of. They might never get out of it. Investment properties have been seized by financial houses all round the place. That is a very real concern.

377. [inaudible.] — public landlord registration. Our concerns range from the nuisance caused to the undesirables. [inaudible.] People who have multiple properties can see their names on a public register, and that is a real concern. The other aspect is that that they would not get any enjoyment from their "house", because people would be calling to say that the washing machine was not working or ask whether there was a house to let. People are arriving at your front door on these issues, so the need for a public register — [inaudible.]

378. The agencies need to get a hold of somebody. If there was a service level agreement or something along those lines whereby agencies and departments could work through and with each other between the Housing Executive, environmental health, the rates office and the Land Registry, the amount of properties that would not be available after going down through those people to find out whether they are available from the owner is tiny; there is nothing to suggest to me that that would be a large number. The register will have a cost implication attached that will be passed on to tenants, who are struggling to pay their rents at the minute. We are going to have a cost now, and — [inaudible.]

379. Mr Joe Nugent (Landlords Association of Northern Ireland): I want to talk about the proposed tenancy deposit scheme. We believe that the Government has not really studied the statistics, which we gave to the Department for Social Development (DSD) during our consultation. For example, 98·9% of deposits are returned amicably. It does not take a genius to work out that 1·1% of deposits are disputed. In fact, a trading standards officer came out and told one of our general meetings that he had only one complaint of a dispute last year, out of 28,000 complaints.

380. We also argue against the very high fees that will be added to taking a deposit. At the moment it is £57·50 per deposit, plus £15 each. That will obviously increase, and inevitably this will be passed on to tenants, increasing their costs.

381. We also want to address the tenancy deposit scheme with regard to social housing with housing benefit. Nowadays, most landlords take a deposit and a guarantor. Some may decide not to take a deposit and not bother with unnecessary bureaucracy, because it is quite a bureaucratic process, so they take just a guarantor. That leaves vulnerable tenants, who are not able to provide a guarantor, having difficulty finding accommodation. That is a major concern in light of the fact that the private rented sector is being asked to increase the uptake in demand for social housing.

382. Mr Laird: The public sector has shrunk considerably over recent decades, with properties sold off and less money being put into it. The private sector is picking up the slack. We are housing a lot of vulnerable tenants who would, perhaps, be better suited to public housing. There does not appear to be any bridging mechanism for those tenants. It would be good if some assistance or mechanism could be put in place for them, because a number almost fall between two stools. Most of the ones in the private sector are probably fine. They understand everything and can comply with everything. However, there will be a percentage at the bottom end who are not as fortunate, and they very much seem to have been cast to one side by the public sector.

383. Ms Lyons: In the private rented sector, the landlord is the primary stakeholder. We have invested capital, time and effort. We have also provided information, and met government officials and politicians, at no expense to government. Yet we can conclude only that we are not being listened to and understood.

384. It would appear that government has its own agenda and a total disregard for our views. Nor does it seem to have direct experience and understanding of the true problems in the private rented sector. That is such a pity, because there is a real housing need. With government intervention through the introduction of unnecessary legislation, the provision of housing by the private sector to social tenants could completely collapse. That is a real concern.

385. The coalition Government in the United Kingdom appears to have understood that. Minister Grant Shapps, on 10 June, in Parliament, announced that he was going to scrap all plans to introduce new legislation on private landlords. That included the national register of landlords. He said:

"With the vast majority of England's three million private tenants happy with the service they receive, I am satisfied that the current system strikes the right balance between the rights and responsibilities of tenants and landlords."

Why, then, is the Government proposing to introduce more legislation in Northern Ireland, especially when, as we heard from Joe, tenant satisfaction is much higher than in England? We do not understand why the Government here feels that it knows better than central Government and those who are the stakeholders in providing the service.

386. Needless to say, we feel totally let down, ignored and burdened by the threat of more bureaucracy. For us, it is hard to imagine a more effective way of discouraging and undermining the long-term investment that people in the private rented sector here have made than by imposing some of the provisions in the Bill, which we feel is not properly thought through. As you can appreciate, we have genuine concerns about the Bill. We thank the Committee for listening to us this morning.

387. The Chairperson: I want to pick up on your final remarks. You asked why the Government here think that they know better than the Government in Westminster. It is the right of this Assembly to decide what it thinks is best for Northern Ireland and its people. That is the nature of the devolved system, so I do not take particularly kindly to being lectured about what —

Another

428. Mr F McCann: That makes it more essential that we have some type of scheme brought in to control the sector. It is totally unaccountable; it is not transparent in any shape or form. When a community group in my area got £30,000, they were pestered and crucified by accountants and auditors. There is around £90 million going into the private rented sector with no controls whatsoever.

Edited March 14, 2012 by 2buyornot2buy

[tinbin]

Great piece - thanks for posting

Well that is quite clear then -- my BTL is my pension or maybe not.

This deserves a topic on the main board with highlighted sections.

Interesting point about the pension. 2buyornot2buy made a similar point a few days back

I was speaking to a work colleague just today who has their house on the market almost 4 years. She was complaining about not being able to sell it and came off with this corker ... I am not dropping the price any further, this is my pension fund and its just not fair ... Oh dear.

[nigooner]

In my opinion the yields on BTLs as a pension don't work if the property costs more than about £70-80k, on a repayment mortgage. Even then theyll need to be bought before the buyer is about 35-40 years old so it's all paid off by retirement age.

Even if someone at retirement cashes in their chips and buys a property, I wouldn't recommend anyone buys a property at £200k! You could get far better returns buying four houses at £50k an letting an agent manage them.

[yadayada]

Even if someone at retirement cashes in their chips and buys a property, I wouldn't recommend anyone buys a property at £200k! You could get far better returns buying four houses at £50k an letting an agent manage them.

Correct. My neighbour can't sell the house for 225k. He now has it up for 700 a month.

8400 - rates 1300 = 7100- 300 insurance = 6800

6800/225000 = 3%.

Minus repairs and maintenance of course. Better not be borrowing much.

[mmca22gr]

Mr Declan Boyle is a professional in this game. He is not your average BTL merchant.

I bet he didn't buy too much at the height - probably sold to the teachers and civil servants he talks about.

I think it is interesting to see the views of the professionals

[2buyornot2buy]

Mr Declan Boyle is a professional in this game. He is not your average BTL merchant.

I bet he didn't buy too much at the height - probably sold to the teachers and civil servants he talks about.

I think it is interesting to see the views of the professionals

Yep a seasoned "professional who uses all the marketing tools available to him

http://thegown.org.uk/2011/04/26/news-union-seek-legal-advice-over-qub-student-rentals/#more-4469

[2buyornot2buy]

Or maybe this from another blog.

http://holylandswarzone.blogspot.com/2006/09/update-holylands-sexual-assault.html

Edited March 15, 2012 by 2buyornot2buy

[2buyornot2buy]

Or here maybe

http://holylandswarzone.blogspot.com/2009/04/king-of-pious-hypocrites.html

[mmca22gr]

Or here maybe

http://holylandswarzone.blogspot.com/2009/04/king-of-pious-hypocrites.html

Just wanted to make the point that there market is made up from those who run it like a business and those accidental landlords. I know which ones will get burned first.

I'm not holding the pros up as a moral elite!

Edited March 15, 2012 by mmca22gr

[2buyornot2buy]

Just wanted to make the point that there market is made up from those who run it like a business and those accidental landlords. I know which ones will get burned first.

I'm not holding the pros up as a moral elite!

Oh I know and I'm not attacking landlords in general, I'm just saying from what I have read on this individual (albeit one sided anecdotes) he does not come across as "professional", and I have found nothing online to suggest he has an actual profession.

[tinbin]

never mind the Pension ... paying off the debt seems to be as big an issue

Homeowners in their 50s 'facing interest-only mortgage timebomb' after taking out loans during boom years

Mortgages are coming to the end of their life - but homeowners have no money to pay off the loan

http://www.dailymail.co.uk/news/article-2115191/Homeowners-50s-facing-mortgage-timebomb-taking-loans-boom-years.html?ito=feeds-newsxml

Edited March 15, 2012 by tinbin

[Shotoflight]

never mind the Pension ... paying off the debt seems to be as big an issue

Homeowners in their 50s 'facing interest-only mortgage timebomb' after taking out loans during boom years

Mortgages are coming to the end of their life - but homeowners have no money to pay off the loan

http://www.dailymail.co.uk/news/article-2115191/Homeowners-50s-facing-mortgage-timebomb-taking-loans-boom-years.html?ito=feeds-newsxml

No, no, no - you pay off the loan with a strategy or a 'repayment vehicle'. The term money is very crude and not for those financial sophisticates who, though they may now be having sleepless nights, are sure it will all turn out allright and anyway, it's not their fault.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/9145518/Retirees-face-mortgage-time-bomb.html

Oh dear, what's a repayment vehicle?

"However, unlike in the 1980s and 1990s, around 75pc of interest-only mortgages in 2007 had no reported repayment vehicle",

[Shotoflight]

Does my new BMW count?

BMeW?

[Shotoflight]

Of course is there any other way?

Motability?

Unless your number's up

Incapacity tests reject 37% of claimants

http://www.bbc.co.uk/news/business-17379564

Anecdotes re cars locally:

Mazda dealer - of 15 cars sold recently, 13 were trading down from large to small cars. Quote "Europe awash with new cars" Massive oversupply - never known it like this - really bad. Drivers really feeling pinch & hanging on to cars longer.

One main dealer allowed £1,500 paid by credit card for a purchase then 2% charge over that. Other main dealer £500 allowed on card then 1.5% charge.

Loan rate of 7.9% offered - also could 'add on' a little extra to pay off any existing loan (Main Dealer Belfast). Would take nothing off for cash - we check prices every 3 weeks then reduce if needs be, says he.

Local dealer pushed finance - alternatively offered to take £200 off a £12,000 car for cash!

Trade in value of old car varied from £1,500 to £2,500.

One fleet seller - things really bad, hoping it picks up soon. Another sales rep 'retired' from financial services a few years ago and related how tight things were - houses down, jobs hard to come by for kids etc - he never expected to be selling cars (of necessity) - thought he could stay retired. Got it spectacularly wrong.

None of the above secured a sale,

[2buyornot2buy]

Was 12k the list price?

[Shotoflight]

Was 12k the list price?

This was a second hand, overpriced to start with, 2010 Avensis. The finance obviously gives him a double hit - profit on car, commission on loan.

Forgot about the attempts to sell GAP insurance, alloy wheel cover, paint protection and something else - all of which were declined in respect of the eventual (2nd hand) car purchase.

Very similar experience as in dealing with EA's ie very unsatisfactory, for the most part with acres of horsesh*t and game playing.

[2buyornot2buy]

This was a second hand, overpriced to start with, 2010 Avensis. The finance obviously gives him a double hit - profit on car, commission on loan.

Forgot about the attempts to sell GAP insurance, alloy wheel cover, paint protection and something else - all of which were declined in respect of the eventual (2nd hand) car purchase.

Very similar experience as in dealing with EA's ie very unsatisfactory, for the most part with acres of horsesh*t and game playing.

I've been looking to buy and all the main dealers are trying to shift that GAP insurance. It is the one to cover the price difference if you write it off? I have yet to find one that hasn't made me feel like he was trying to do me. Not one really "wanted" cash. Still DLA must be paying for the showroom heat and light.

Most refused to do a deal unless I took finance.

On the plus side I have drank some amount for free lattes.

There was a thread on the main board about oversupply. Think it was from the one of the main manufacturer's CEO.

[Shotoflight]

I've been looking to buy and all the main dealers are trying to shift that GAP insurance. It is the one to cover the price difference if you write it off? I have yet to find one that hasn't made me feel like he was trying to do me. Not one really "wanted" cash. Still DLA must be paying for the showroom heat and light.

Most refused to do a deal unless I took finance.

On the plus side I have drank some amount for free lattes.

There was a thread on the main board about oversupply. Think it was from the one of the main manufacturer's CEO.

Correct re GAP

I bought second hand and had to be assertive - Not interested in finance, here's my budget, I'll buy today at this price (after researching car (what car free val as a rough guide) No other product etc. Walked away several times from others before we were both on the same wavelength re intent and ability. It was also end of month, though I think end of quarter may be better. Tip - check for spare wheel - many new and newer cars don't have them

Charging for the credit card also pushes you to their finance. It's like houses eg its only £199 per month or it's only £250k. Think the oversupply thing was flagged up at a recent European show by GM.

http://www.guardian.co.uk/business/2012/mar/06/world-car-production-glut-vauxhall

Good luck