Thursday, Feb 22, 2007
More tosh from a VI
London Stock Exchange: Investors attracted by rising property prices
With many investors considering their BTL properties part of their pension fund, a number of people are attracted to the market by rising house prices, it has been claimed.
Philip Davies, CEO of the Linden Homes, said: "Many are concerned only with covering the costs through rental income rather than making an immediate profit, in the knowledge that the property is gaining value which can be realised in the future."
Lee Tillcock, editor of business at Moneyfacts, recently stated that investors should remember that the current base rate of interest remains close to "historic lows" and that the buy-to-let market can provide a "sound" long-term investment.
Posted by little professor @ 06:27 PM (155 views) Add Comment
7 Comments
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1. Rimmer said...
Well he is technically correct but i doubt it is how many view BTL, if your happy to put in lots of the work, cover at least 1/2 the mortgage personally then as a long term investment it MAY produce a better return than other products.
Howvere it is nearly 100% seen as a money for old rope, i have done the figures before but without a high rental yield it may well cost you more money than many imagine
2. george monsoon said...
madness!!!
Its all going to end in tears.. hopefully not mine!
3. Rimmer said...
Lets do the figures ourselves
200 K mortgage for a 2 bed place = https://ib02.npbs.co.uk/netmastergoldmortgagecalculator/MortgageCalculator_Results.asp
Well that's £1300 per month ( actually £1350 ish but giving the benifit here )
Rental income on a 2 bed place is maybe £800 Month tops,
So lets call it 9 month average rental at £800/month = £7200 PA, minus agent fees lets say 15% ( £1100 ) leaving £6100 PA, upkeep and renovation costs must be £1000PA leaving £5100, insurances and council tax / bills etc for the months not occupied lets be kind and say £700, that leaves about £4400 PA, should all be tax free if you have a good accountant ( at a fee ) otherwise its taxable.
So mortgage costs PA = £15600 from your pocket.
Rental return = £ 4400.
That means your BTL "ONLY" costs you £11200 PA , if and its a big if house prices go up 5% you will have made £10000
If you had invested your money ( £11200 ) carefully bearing in mind its compounded across the year you should have somewhere around £12500 .
Now if house prices had gone down and you cant sell a house at the press of a button things would be very different, also i know very well which one is safest.
Which would you rather do?
4. bidin'matime said...
>Lee Tillcock, editor of business at Moneyfacts, recently stated that investors should remember that the current base rate of interest remains close to "historic lows" and that the buy-to-let market can provide a "sound" long-term investment.<
Eh?? Any GCSE economics student can work out that, if interest rates are close to historic lows, prices could be close to historic highs!
5. paul said...
yeah I wondered about that one.
You'd think that with a statement like "close to historic lows" there would follow a warning. Not here though.
I think the other Paul (?) the editor of firstrung (who has been known to frequent these boards) has mentioned that because of syndication, it's fairly easy to get an article carried by the LSE site.
6. inbreda said...
"a number of people are attracted to the market by rising house prices, it has been claimed."
as opposed to those people that are attracted to investments with falling prices.
Geez - with investment nouse like that, it's got to be a safe bet.
7. monty said...
Now Rimmer, why would you use a 100% repayment mortgage on your BTL if you're only going to be selling it after the year is up? You neglect to include the amount repaid as profit (you're expensing the entire payment amount.) Your benchmark 10k investment is made at the beginning of the year and then compounding it monthly. That's not apples and apples is it now?
An 85% IOL will cost £9418 to service over the year. So even using your costs, you're only 5k out of pocket when you sell up which means 5k profit which is a 16% return on the initial £30k. The same 30k would only fetch £1534 compounding monthly at 5%.