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And Now For Some Good News

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From the LettingAgentToday website:

Landlords who entered the buy-to-let market five years ago are unlikely to have made any money at all – and could be counting their losses.

Those with buy-to-let mortgages are making losses on their investments, while cash buyers are unlikely to make profits.

The warning has come from financial consultant Brian Hall, founder of The Model Works and who specialises in reports on the housing market.

Hall criticised data from the Association of Residential Lettings Agents which shows stable buy-to-let profits, describing it as ‘incomplete, inaccurate and biased’.

Hall’s model uses house price indexes and mortgage data, and also factors in costs such as Stamp Duty, fees, arrears and management costs. While ARLA projects returns over the next five years, Hall looks back over the last five years and calculates the returns should the property be sold now.

His numbers show that anyone who had bought a typical buy-to-let property five years ago would have made a net yield loss of £9,811. After ten years, the net yield becomes a profit of £10,239, climbing to over £29,000 in 15 years.

Hall said: “If you read the numbers you can see geared investors are making a loss and cash buyers are making no profit at all. It is crucial someone making such an important decision is properly informed.”

ARLA defended its own reporting. It said: “The ARLA Review and Index is based on surveys conducted among ARLA members and investor landlords. It is independently written and includes clear details on the methodology used.

“The index model used has provision for altering assumptions for different scenarios and is one of a number of reports across the property industry.”

However, Hall’s report comes as another – from BDRC Continental’s landlords Panel – shows that a landlord in central London would rack up £8,071 per year in maintenance, insurance, fees and other costs, excluding mortgage repayments. In outer London, the costs would be £7,870.

The panel findings show that just under one-quarter (23%) of private landlords letting out property in inner London spent over £5,000 on maintenance in the last 12 months. Insurance was the next highest cost with 14% of landlords spending £2,000 or more, and 12% spending the same on agent fees.

In outer London, maintenance has cost almost one-quarter (24%) of private landlords over £5,000, 11% spent £2,000 or more on agents, and 5% spent the same amount on accountants. Although spend on insurance is lower, the amounts spent on letting fees are higher.
Mark Long, director for BDRC Continental, said: “There are a lot of costs associated with being a private landlord, not least maintenance, insurance and professional advice from accountants and solicitors.

“However, our survey tells us that the market for private rental across London is strong and landlords feel positive about their prospects, so despite the costs, the market for letting property in the capital in London remains buoyant and profitable.”

:lol:

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Calculations I have made based on properties I know the exact details of show that you've been on to a loser if you bought since 2003/2004. I guess it varies across property types and regions.

Don't tell them though, let them snigger at you for throwing your money away on their 'investment' when in fact they are subsidising your living costs for you while you wait to buy at value.

Sshh!

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Guest eight

I dont believe it, homes under the hammer tells me everyone makes money.

OTOH, I can't believe there's a single person with six figures in the bank hasn't at least thought about putting it into property. When you're only trying to beat 2% it must look tempting. Whether many of them follow through or properly do the sums is another matter, but I know anecdotally of at least one.

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When you're only trying to beat 2% it must look tempting.

2 is larger than a negative number, your money is immediately available in a savings account and you don't have to manage letttings agents and tenants and maintain a property.

Other than that, youre in leveraged debt secured against a depreciating asset. And banks are raising rates, like the bank of Ireland for example.

Great idea! Pile in! Fill yer boots!

:lol:

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Anyone who joined the BTL party post 2004 will have lost money yet few would own up to it.

Very smart, clued BTL investor and letting agent I know sold up 2004/2005.

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Wasn't there a tread on here a few years ago concerning the very same man trying to sell of his portfolio in the Stock port area (all of which were just hear say/rumor) ?

Perhaps this is his new angel

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Very smart, clued BTL investor and letting agent I know sold up 2004/2005.

+1

Someone I know got out in 2005/6 then started to have doubts, luckily or unluckily the credit crash happened before he had a chance to wade back in. It'd have been sweet to see him taught a lesson. :angry:

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Very smart, clued BTL investor and letting agent I know sold up 2004/2005.

Interesting. Seems to be following our typical bubble life cycle. The smart money has left while the masses have been piling in. How long until we see capitulation is I guess dependent on how many fingers the government has left to plug the leaks in the dam.

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Seems to me both of them are wrong.

Noone really cares what will happen if they go back in time 5 years and invest in BTL because step 1 is impossible (and if not there are easier ways to make money with a time machine)

People do want to know how much they'll make in 5 years if they invest in BTL now. But that's impossible to know being largely dependent on guessing what'll happen to house prices (see step 1 above)

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Noone really cares what will happen if they go back in time 5 years and invest in BTL because step 1 is impossible

I find it interesting because although you are unable to change your mind retrospectively it is interesting to see how you would have fared had you taken another route. Buy to let has never been on my agenda but I do intend to buy property for a home at some point, and whether you were better off renting or buying over this period is essentially the same maths.

It is good to find that I made the right choice, not just from a straight economic renting versus buying calculation but also looking back I can now see all other things being equal I would be in a significantly worse position now had I tied myself down to one location.

And the future does not look bright for those with a mortgage who bought over that period. I expect the decision to rent will pay more dividends in the future as well.

It often pays not to follow the herd.

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I find it interesting because although you are unable to change your mind retrospectively it is interesting to see how you would have fared had you taken another route. Buy to let has never been on my agenda but I do intend to buy property for a home at some point, and whether you were better off renting or buying over this period is essentially the same maths.

It is good to find that I made the right choice, not just from a straight economic renting versus buying calculation but also looking back I can now see all other things being equal I would be in a significantly worse position now had I tied myself down to one location.

And the future does not look bright for those with a mortgage who bought over that period. I expect the decision to rent will pay more dividends in the future as well.

It often pays not to follow the herd.

You can't compare renting against owning using the BTL analysis.

If you rented compared to buying over any period you've lost out as unless there is a large reduction in house prices you've missed out on 5 years worth of payments into a mortgage instead paying rent onto the pocket of a landlord.

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You can't compare renting against owning using the BTL analysis.

If you rented compared to buying over any period you've lost out as unless there is a large reduction in house prices you've missed out on 5 years worth of payments into a mortgage instead paying rent onto the pocket of a landlord.

********,

Hope that helps

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You can't compare renting against owning using the BTL analysis.

If you rented compared to buying over any period you've lost out as unless there is a large reduction in house prices you've missed out on 5 years worth of payments into a mortgage instead paying rent onto the pocket of a landlord.

Are you new?

Buy to let income barely covers the interest payment on the loan, so similarly if you have a repayment mortgage the proportion of that 'repayment' that is the interest charged on the loan is equivalent to paying rent. Paying rent = paying interest on mortgage

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You can't compare renting against owning using the BTL analysis.

If you rented compared to buying over any period you've lost out as unless there is a large reduction in house prices you've missed out on 5 years worth of payments into a mortgage instead paying rent onto the pocket of a landlord.

Of course you can.

BTL pay maintenance and insurance as the reports said. Owning you also pay those two.

Renting you pay neither, another person does.

Of course you're absolutely right about it being dead money. Get on the ladder now before it's too late. Blah blah blah blah blah :lol:

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Incredible. Their financing costs have fallen 90% since 2008. From a base rate of over 5% to just 0.5%. Meanwhile, their income (otherwise known as landlord housing benefit) hasnt dropped at all. Only BTLers possess the unique degree of incompetence to make a loss with those fundamentals.

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Are you new?

Buy to let income barely covers the interest payment on the loan, so similarly if you have a repayment mortgage the proportion of that 'repayment' that is the interest charged on the loan is equivalent to paying rent. Paying rent = paying interest on mortgage

Or, to put it another way, the non-interest part of a mortgage payment is invested in a house.

If you rent, that money can be invested in something else, such as gold, Nazi memorabilia, or one of Grant Schapps how to get rich books.

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Or, to put it another way, the non-interest part of a mortgage payment is invested in a house.

If you rent, that money can be invested in something else, such as gold, Nazi memorabilia, or one of Grant Schapps how to get rich books.

I loved his "make $20,000 in 20 days guaranteed or your money back". I became a politician too.

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Are you new?

Buy to let income barely covers the interest payment on the loan, so similarly if you have a repayment mortgage the proportion of that 'repayment' that is the interest charged on the loan is equivalent to paying rent. Paying rent = paying interest on mortgage

If you are planning to buy anyway you've lost out on the paying down of the debt. If you overpay it amazing how quickly you end up mortgage free.

And I'm not new. Just well on my way to owning my house rather than renting.

Of course you can.

BTL pay maintenance and insurance as the reports said. Owning you also pay those two.

Renting you pay neither, another person does.

Of course you're absolutely right about it being dead money. Get on the ladder now before it's too late. Blah blah blah blah blah :lol:

If you're making a comparison between renting and buying true

However, if you intend to buy at some point in the future then wrong. You're far better buy as soon as you can afford it rather than filling a landlord's pockets.

Or, to put it another way, the non-interest part of a mortgage payment is invested in a house.

If you rent, that money can be invested in something else, such as gold, Nazi memorabilia, or one of Grant Schapps how to get rich books.

However, I do not view my house as an investment rather somewhere to live. Far better to de-risk your life than rent and take a punt on whatever this week's crazy get rich gamble is.

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