Wednesday, Oct 24, 2007
I feel sorry for the BTL'ers...
AboutProperty: Buy-to-let investments not covered by rent
They are really in deep s..t. Restructuring their mortgages is only way forward now that is clear that capital appreciation is history
Posted by confused76 @ 03:30 PM (879 views) Add Comment
11 Comments
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1. su said...
"Up to 33 per cent of investors say the rental yields they receive on a property only just cover the cost of a mortgage, while a further ten per cent say they do not receive enough money."
I would have thought it would have been quite a bit higher than 10%.
2. pecker said...
Are they accounting for service charges, R&R etc etc? Do we believe the BTLers questioned are actually being honest? Can they actually use a calculator???
3. maddison said...
I also wonder if they know that a 99 year lease on a flat is actually a depreciating asset. I suspect the shortening of leases will come to light more when alot of the victorian conversions that were done in the late eighties are getting to 80 years and less. Some lenders will get a bit twitchy below 80 years.
4. Techieman said...
it really depends which BTLs they talk to. If the BTLs have had their "portfolio" for a while (and have not geared up by using the equity to fund more purchases) then clearly the yeilds might be ok. The problem is the growth of the BTLs is skewed towards more johny come latleys - and those that bought relatively recently will be in trouble. In short it depends which 200 you asked!!
I love that comment "Many will have built up piecemeal mortgage arrangements for each new property and not considered how they could restructure their overall portfolio financing far more cost-effectively". What by cashing in the old mortgages and re-mortgaging at new rates???
5. su said...
I don't understand why they have a title "Buy to let investments not covered by rent" when they claim just 10% are in this position.
The article goes on to say "the picture is not so severe if the capital gains element of property ownership is considered" because prices "are expected to continue to rise in the long-term."
Its just the same old stuff aimed at trying to reassure BTLer that as long as they see their investment as long-term it will be OK. But what if they can't hold on that long?
6. An Bearin Bui said...
I feel sorry for people who get mugged. I don't feel sorry for people who walk into a bank and gladly sign up to stupid mortgages they can't really afford because someone on TV said BTL is a good investment. Don't these people "do the math"? Anyone who can calculate basic percentages should see that BTL doesn't make financial sense right now. Why would anyone feel sorry for idiots who make bad investments? (Unless the OP was being sarcastic)...
7. Ian said...
Quote: "Many will have built up piecemeal mortgage arrangements for each new property and not considered how they could restructure their overall portfolio financing far more cost-effectively". Sure, just pop down the bank and ask for a new mortgage at a lower interest rate. But first think of how you are going to answer the bank manager when he says he thinks lending money to BTL is now a high risk business. I think the bank will say no at best, and at worst will start to raise interest rates on the existing loans! It sounds like BTL have been sleeping during the Credit Crunch!
8. confused76 said...
http://news.google.com/news?sourceid=navclient-ff&ie=UTF-8&rlz=1B2RNFA_enGB242&tab=wn&ncl=1122599196&hl=en
one in three say they are making no money through rent after paying mortgage interests (which means they are losing money if you consider the forgone interests on their equity)
one in ten say they lose money every month. Su, I bet these are the ones that have bought in 2007 (which is approx. one in 10 btls)
9. enuii said...
Yeah but 43% are really in it for the gains in property capital, the rent is not important. So I guess if house prices start to inexorably fall they will be doubly peeved.
10. Dave The Box said...
My girlfriend rents her property since she moved in with me. Her mortgage is less than half her property value and the rent still does not cover the monthly mortgage. I just can't understand how BTLosers actually make it work they must have much higher than 50% mortgages....
11. su said...
confused76
So these 10% won't be seeing much in the way of capital gains then.