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"No doubt your landlord is also happy." Really? Let's hope so.

I presume you mean that his landlord should not be happy because of the much promised but slow to arrive pending crash?

I know its no consolation to people trying to get started on the property ladder, but, once you own a property, the value is not really of much interest. If you can afford it, or own it outright then what is there to discuss? There are more important things in life than the value of the place you live. ie your home.

Its the same for a landlord. This, of course, assumes you have sufficient income to live off. Rents have more or less kept up with inflation for a very long time.

Periodically there are spikes in local areas of shortage such as near a big building project like a power station. There may be adjustments when lots of new build comes on the market but I have seldom met a long term landlord who has actually suffered from falling rents.

Its only a problem if you are highly geared. The current level of loan to price is a very recent development. Only a few years ago, you needed 50% deposit for a bank loan for property. As the market developed that gradually got smaller and smaller. New, less experienced landlords may yet suffer badly from very high loan gearing. The banks used to regard such lending as irresponsible and too risky. When the crunch comes banks protect their sharehollder's profits first. The undercapitalised borrower will take any losses that arise not the banks. That much of history is sure to repeat.

Even under that scenario. Some BTLers will survive if they can keep their tenants and make the payments through the dip. Its a business like any other. To succeed you have to work at it.

Many old timers don't give prices a thought. As long as the tenant is happy, the rent comes in, the repairs and maintenance are done and paid for, the letting agent keeps his eye on the ball. Then the current market price of the property is largely irrelevent.

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Guest magnoliawalls
I notice 'King of the Clowns' tried to post some kind of 'put down' reply to my hastily dashed off explanation as to why rents tend to fall during a HPC.

If you dont agree, 'Clowns, maybe you'd like to tell us where all this extra rental demand is going to come from? No? Can't? What a ferkin surprise u bullcrapping moron.

Do you have a spare millionn wannabe tenants hidden in a bunker under wimbledon common perhaps? Got a few'city types' stuffed up your @rsehole for a 'rainy day'?

Try as u might, u cant fault the logic. If by some miracle you ARE a landlord and not some trolliong EA (like the Swedish Rent Boy) then u can look forward to a further 5 years of worsening rents, rising interest rates, and pain.

Good for you.

Hope that helps.  :P

I wonder if you could be an embittered EA acting as devil’s advocate?

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Just another reason why I'm the landlord & you're the tenant....... :lol:

I'm sorry TTRTR but I just don't believe you are capable of making serious comments. You chastise me for being childish with my comments then come straight back with taunts of your own.

O.k I'll own up and agree with you for once, maybe I was a bit childish...youv'e got me there...but I had had a few drinks last night and was just unwinding, and going for the lighter side. If I were to post the same thread again now I probably woud aim to be a bit more diplomatic.

However, what people on this site need to realise is what possible gratification and rewards you get from posting on this forum?

Your very name suggests that you are a big hot shot Landlord, your own comment "why I'm the landlord & you're the tenant" suggests an arrogance beyond belief.

First looks though can be very deceptive. People are not always what they appear to be, and I think this is the case with yourself.

You may well be a self proclaimed aspiring landlord with an outwardly impressive property portfolio but you are no business man. To be successful in business you need to know current market conditions, change and adapt accordingly, change your product to suit the needs of your customers and maintain an edge, and eliminate the competition.

You on the otherhand are single minded, show no understanding of current market conditions and continualy sound your bugle for others to rally around and follow your example.

Now what possible advantage would you hope to achieve by doing this? This tells me that you have only invested in property very recently, i.e that last couple of years. You have no interest in the rental yield of the properties you now part own with the banks, (that barely covers the mortgages), but have taken glee and prided yourself instead on house price inflation. When you talk to close friends or family about your portfolio you will tot up the so called overall asking prices of what your properties are worth but not dare divulge the mortgages outstanding.

No, the only vested interest you have with the property market is to keep house prices climbing, which in turn will provide you with more equity. I confess this shows shrewd business short term, a bit like stocks and shares, but the good business man will always know when to sell. To hope for a never ending climb is futile. The engine is already coughing and spluttering, you may get a few more kangaroo jumps out of it yet, but it is running on vapours and will shortly stall.

If you were a good business man and had not overstretched and you had invested wisely, you would spend this time taking extra special care of your tennants, then talking the market down, not up, in order to eliminate the competition out there. Once the market has crashed you would then go in a buy a few more properties at realistic prices, concentrating more on the rental yield as opposed to the annual inflation!

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I presume you mean that his landlord should not be happy because of the much promised but slow to arrive pending crash?

I know its no consolation to people trying to get started on the property ladder, but, once you own a property, the value is not really of much interest. If you can afford it, or own it outright then what is there to discuss?  There are more important things in life than the value of the place you live. ie your home.

Its the same for a landlord.  This, of course, assumes you have sufficient income to live off.  Rents have more or less kept up with inflation for a very long time.

Periodically there are spikes in local areas of shortage such as near a big building project like a power station.  There may be  adjustments when lots of new build comes on the market but I have seldom met a long term landlord who has actually suffered from falling rents. 

Its only a problem if you are highly geared.  The current level of loan to price is a very recent development.  Only a few years ago, you needed 50% deposit for a bank loan for property. As the market developed that gradually got smaller and smaller.  New, less experienced landlords may yet suffer badly from very high loan  gearing.  The banks used to regard such lending as irresponsible and too risky.  When the crunch comes banks protect their sharehollder's profits first. The undercapitalised  borrower will take any losses that arise not the banks. That much of history is sure to repeat.

Even under that scenario. Some BTLers will survive if they can keep their tenants and make the payments through the dip.  Its a business like any other. To succeed you have to work at it. 

Many old timers don't give prices a thought. As long as the tenant is happy, the  rent comes in, the repairs and maintenance are done and paid for, the letting agent keeps his eye on the ball. Then the current market price of the property is largely irrelevent.

Hi Bikey,

It is indeed good to hear from a sane landlord (rather than that nonsense KOTC seems to get some kick out of posting).

I think most of what you say makes complete sense.

However, I would dispute the suggestion that landlords (including long-established, experienced ones) should ignore the value of their property.

I agree there are more important things in life than the value of the place you live in... but I'm not sure that attitude works towards an investment. The value of your investment is all-important surely?

For example, if I own an investment property "worth" £1 million today but it it only worth £100k tomorrow then surely this is a material fact I'd be crazy to ignore.

Equally if I know my place that is apparently worth £1m today will only be worth £100k tomorrow surely that should affect my attitude/approach to the investment (I'm not suggesting this will happen, merely highlighting a point with an extreme example).

Hence I would suggest your view on "old-timers", while probably entirely accurate, just suggests that old-timer landlords don't necessarily think rationally about their investments much more than newbie BTL "superheroes".

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I think you will find a tremendous difference between long-term, professional investors, and the recent BTL fools.

If you do some reading on Warren Buffet you will know what he rarely reads stock prices, quite interesting when you consider he's the most successful stock investor around. What does interest him is the income stream that his investments produce. And he will buy investments when he considers the income stream to be sufficient.

Consider an investment as a tree, you should be interested in the fruit that the tree provides, and nurturing that tree to produce the best fruit it can.

The tree is worth the fruit it produces, and this is your return from your investment.

Sure the cost of the investment is very important, but only when you are getting into the market. The biggest mistake the current BTL idiots are making is not making sure the income streams are sufficient. They're hoping their tree will grow bigger and bigger, and forget about the fruit.

The trouble is people are now finding that the fruit from these trees is lousy, and quite soon you won't be able to sell the tree at all. All you're left with is rotting away in your hands...

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Hi Bikey,

It is indeed good to hear from a sane landlord (rather than that nonsense KOTC seems to get some kick out of posting).

I think most of what you say makes complete sense.

However, I would dispute the suggestion that landlords (including long-established, experienced ones) should ignore the value of their property.

I agree there are more important things in life than the value of the place you live in... but I'm not sure that attitude works towards an investment. The value of your investment is all-important surely?

For example, if I own an investment property "worth" £1 million today but it it only worth £100k tomorrow then surely this is a material fact I'd be crazy to ignore.

Equally if I know my place that is apparently worth £1m today will only be worth £100k tomorrow surely that should affect my attitude/approach to the investment (I'm not suggesting this will happen, merely highlighting a point with an extreme example).

Hence I would suggest your view on "old-timers", while probably entirely accurate, just suggests that old-timer landlords don't necessarily think rationally about their investments much more than newbie BTL "superheroes".

Hello London-loser.

You may be right that I am sane but I'm not so sure. :D

You are completely correct in your assertion that it would be crazy to ignore an overnight loss in value of 90%.

But I have never seen anything remotely like that. Even the super bears only talk about a 30% to 50% crash.

What I have seen is falls followed by rises. The long term charts show this clearly. Each peak is higher than the previous one which means that even if you buy at the 'top' inflation and general increases in national wealth will eventually bail you out.

As long as the yield is sufficient, you can literally ignore the market value. Its only significant if you are selling to cash out or trying to use it for more loans. And then, if your property has dropped in value then so has your next target. They all move up and down with the tide.

I once met an even older old-timer who was living his dream lifestyle. He told me. "All my life I have made money out of the fact that when it is raining, people think it will never sunshine again. And when it is sunny they think it will never rain again". At that time he was buying up second hand portable electricity generators because he anticipated a coal strike and electricity cuts to follow. At present, it seems to be 'overcast and unsettled'. Will it rain or will it shine?

As I now live in the sunshine it tends to colour my view of things. Property is a risk business like any other. But, get it right and the rewards far exceed anything else most people can legally do. Get it wrong and nobody dies, nobody gets locked up, no need to lose you health or sanity and you live to do it better next time round.

Good luck to all BTLers and may fortune shine on all FTBers so they may buy the place of their dreams.

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What I have seen is falls followed by rises. The long term charts show this clearly. Each peak is higher than the previous one

Yes, well done, you have grasped the concept of "inflation". (ie a constant rise in the general price level)

even if you buy at the 'top' inflation and general increases in national wealth will eventually bail you out.

Inflation is dead.

My intention is to lock into our policy making system a commitment to consitently low inflation in the long term.

http://www.bankofengland.co.uk/monetarypol...etter050316.pdf

As long as the yield is sufficient, you can literally ignore the market value.

You are speaking as an investor. Most people on this site want to buy homes to live in.

if your property has dropped in value then so has your next target. They all move up and down with the tide.

% falls in value of different types of property (say 3-bed detached vs. bedsit) are not proportional.

Get it wrong and ...no need to lose you health or sanity

I would say those who have been in negative equity for the past 10 years having bought at the peak of the last boom would disagree with you on that.

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"If a HPC is such a dead cert why do the moderators of this forum feel the need to keep removing my non offensive factual posts? If a HPC is a dead cert why do the STR'ers from the forum feel the need to be so active targeting FTB'ers to stay away from the market?"

KOTC

Are you saying that your posts have been censored? If it is true, this disturbs me deeply. Please could you elaborate.

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Hi non-TFBer

As a landlord I am happy to see that both yourself and your landlord are happy with the rent agreed.  Good for you.

Any rent  is a negotiation.  You feel you did well. No doubt your landlord is also happy. I guess you are a good tenant who pays on time and repects the property and your neighbours.

My own properties were paid for years ago and are completely unencumbered so that any rent I receive is income.  Its far more important to me to have 'good steady  tenants' than extra rent. The hassle of dealing with problem tenants far exceeds the benefit of accepting a higher rent from dodgy sources.

Over the years I have seen it all.  Being a landlord is not necessarily easy money. It is a risk business and lots of things can and do go wrong.  Nevertheless, in the medium/ long term it has always been a profitable  thing to do. No doubt that will continue to be the case.

New inexperienced landlords may suffer in the coming correction but that correction is taking a long long time to arrive.  Expect the unexpected.  The correction may yet be a very long drawn out and gentle soft landing.

Time will tell.

Pleased to meet you bikeyb.

And I would hasten to add to my earlier post that I have a lot of respect for professional landlords who deal with their tenants in a polite and professional manner.

I do not have much time for the BTL types of late that have bought property as a pension and see the tenant, maintennance etc as problems that are a pain in the ar5e.

I've had experience of both types of landlord, and there is a stark contrast between them.

I agree that my rent is negotiated with my landlord, and that obviously we have reached a mutual agreement. The sad fact for many people who rent is that some of the recent BTL type landlords do not seem to realise when they need to reduce their rent, causing the tenant to need to move to get a more realistic rental price.

I have had to move earlier this year, as my landlord of the time was trying to raise the rents by £50 pcm just to cover his mortgage payments despite the fact that we had been model tenants for a year and that rents were far lower in the area than when we had originally let the property. We wanted £50 pcm lower not higher. That was about the market value of the property but he either couldn't afford to let at that price, or was too greedy.

We moved out, and it took him 3 months to get a new tenant. This would have wiped out 18 months worth of the discount we were asking for against his price. Bit of an idiot really.

Good luck to you with your business. I know that some tenants can be a pain in the ****, as can some landlords.

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Yes, well done, you have grasped the concept of "inflation". (ie a constant rise in the general price level)

Thanks. I have always struggled with economics.

Inflation is dead.

My old bones tell me that when the chips are down, the government will quietly inflate their way out of electoral trouble. House price crash means lots of pain for the economy. Inflation will be seen as the lesser of the various evils.

http://www.bankofengland.co.uk/monetarypol...etter050316.pdf

You are speaking as an investor. Most people on this site want to buy homes to live in.

Yes, I agree totally. But, my point is that if someone can afford a place then it makes sense to buy it. Have you held off buying a computer for the last ten years for example? The price next year will be lower for sure.

I sympathise with anyone who can't afford to buy anything suitable. They still have choices such as devoting themselves to creating the wealth to do it or find a suitable rental and save, or move somewhere cheaper.

Nothing much has changed over the years. It was always hard to get on the housing ladder. The often quoted ratio of income to prices ignores the fact that at one time most family units only had one wage earner not two.

% falls in value of different types of property (say 3-bed detached vs. bedsit) are not proportional.

True enough.

I would say those who have been in negative equity for the past 10 years having bought at the peak of the last boom would disagree with you on that.

We might have to agree to disagree on that. If they could afford the mortgage payments, (interest rates have fallen for some of that time) What exactly is the problem? They have had somewhere to live and enjoy. Negative equity is a notional loss until you actually sell. Why sell?

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I'm sorry TTRTR but I just don't believe you are capable of making serious comments. You chastise me for being childish with my comments then come straight back with taunts of your own.

O.k I'll own up and agree with you for once, maybe I was a bit childish...youv'e got me there...but I had had a few drinks last night and was just unwinding, and going for the lighter side. If I were to post the same thread again now I probably woud aim to be a bit more diplomatic.

However, what people on this site need to realise is what possible gratification and rewards you get from posting on this forum?

Your very name suggests that you are a big hot shot Landlord, your own comment "why I'm the landlord & you're the tenant" suggests an arrogance beyond belief.

First looks though can be very deceptive. People are not always what they appear to be, and I think this is the case with yourself.

You may well be a self proclaimed aspiring landlord with an outwardly impressive property portfolio but you are no business man. To be successful in business you need to know current market conditions, change and adapt accordingly, change your product to suit the needs of your customers and maintain an edge, and eliminate the competition.

You on the otherhand are single minded, show no understanding of current market conditions and continualy sound your bugle for others to rally around and follow your example.

Now what possible advantage would you hope to achieve by doing this? This tells me that you have only invested in property very recently, i.e that last couple of years. You have no interest in the rental yield of the properties you now part own with the banks, (that barely covers the mortgages), but have taken glee and prided yourself instead on house price inflation. When you talk to close friends or family about your portfolio you will tot up the so called overall asking prices of what your properties are worth but not dare divulge the mortgages outstanding.

No, the only vested interest you have with the property market is to keep house prices climbing, which in turn will provide you with more equity. I confess this shows shrewd business short term, a bit like stocks and shares, but the good business man will always know when to sell. To hope for a never ending climb is futile. The engine is already coughing and spluttering, you may get a few more kangaroo jumps out of it yet, but it is running on vapours and will shortly stall.

If you were a good business man and had not overstretched and you had invested wisely, you would spend this time taking extra special care of your tennants, then talking the market down, not up, in order to eliminate the competition out there. Once the market has crashed you would then go in a buy a few more properties at realistic prices, concentrating more on the rental yield as opposed to the annual inflation!

I especially loved this bit:

To be successful in business you need to know current market conditions, change and adapt accordingly, change your product to suit the needs of your customers and maintain an edge, and eliminate the competition.

Which I think I'm doing with my extentions and loft conversions (ie expanding my product to meet the expanding demand).

But then you followed it with this bit:

You on the otherhand are single minded, show no understanding of current market conditions and continualy sound your bugle for others to rally around and follow your example.

Which is just inconsistent with the prior part. Come on, we either do what we know is right & lead by example, or we rent, which one?

Keep up the good work anyway, at least you didn't swear!

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bikeyb,

I can understand your point of view in ignoring house values, as if you have no gearing whatsoever then you can always exit with some level of returned cash.

The only thing that changes is thefunds you could liquidate by selling your portfolio of properties at some point in time. If you never plan to sell, and will always retain your properties, then it is plainly irrelevant.

Some here do not seem to understand that you might choose to hold onto the properties when they are falling in value when you could sell and then buy back in at a more advantageous point in time (ie post crash).

Personally, I would not object to buying investment property for cash in the future. I would want to buy at a historic low point to ensure best results if I did exit the market, but then would not be too bothered about the market fluctuations afterwards.

The recent BTL crowd seemed to have done the opposite. They have massive gearing, extended time and again to build a portfolio based largely on credit. They have bought at the highest historical peak in the market. They have bought at a time of falling rents (in most areas, albeit mildly IMHO).

So the question is whether these recent BTL types can afford to be 'in it for the long term'?

If their rents do not cover their mortgages (after maintennace, voids etc) then can they afford to subsidise the tenant through a crash and until the market reaches todays levels once more?

If they cannot cover their costs (at a minimum) or cannot subsidise them long-term then surely they will be forced to sell at a loss or become bankrupt..... not a sensible pension strategy in my book! :ph34r:

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bikeyb,

I can understand your point of view in ignoring house values, as if you have no gearing whatsoever then you can always exit with some level of returned cash.

The only thing that changes is thefunds you could liquidate by selling your portfolio of properties at some point in time. If you never plan to sell, and will always retain your properties, then it is plainly irrelevant.

Some here do not seem to understand that you might choose to hold onto the properties when they are falling in value when you could sell and then buy back in at a more advantageous point in time (ie post crash).

Personally, I would not object to buying investment property for cash in the future. I would want to buy at a historic low point to ensure best results if I did exit the market, but then would not be too bothered about the market fluctuations afterwards.

The recent BTL crowd seemed to have done the opposite. They have massive gearing, extended time and again to build a portfolio based largely on credit. They have bought at the highest historical peak in the market. They have bought at a time of falling rents (in most areas, albeit mildly IMHO).

So the question is whether these recent BTL types can afford to be 'in it for the long term'?

If their rents do not cover their mortgages (after maintennace, voids etc) then can they afford to subsidise the tenant through a crash and until the market reaches todays levels once more?

If they cannot cover their costs (at a minimum) or cannot subsidise them long-term then surely they will be forced to sell at a loss or become bankrupt..... not a sensible pension strategy in my book!  :ph34r:

I agree with everything you say.

Its a very tricky thing to call the top or bottom of a market.  Many fortunes have been made and lost doing just that.

Another problem with property is that many people do get emotionally involved with it. If someone buys a run down but  beautiful old house and then puts all their creativity and skill into refurbishing and modernising it. Then its more than just an entry on a balance sheet.  Logic may dictate selling and taking the profit  but many owners prefer to hang on.  Property is like that.  Its hard to sell even if they are only "investments".

I live in another time zone.  Its late here I am signing off.

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especially loved this bit:

QUOTE

To be successful in business you need to know current market conditions, change and adapt accordingly, change your product to suit the needs of your customers and maintain an edge, and eliminate the competition.

Which I think I'm doing with my extentions and loft conversions (ie expanding my product to meet the expanding demand).

But then you followed it with this bit:

QUOTE

You on the otherhand are single minded, show no understanding of current market conditions and continualy sound your bugle for others to rally around and follow your example.

Which is just inconsistent with the prior part. Come on, we either do what we know is right & lead by example, or we rent, which one?

Keep up the good work anyway, at least you didn't swear!

You know, I had you down for 'fairly' intelectual, but you realy havn't thought anything through at all have you? Your latest comments are an excellent example and very indicative of this.

You think that by building extensions and loft conversions you are expanding you product to meet expanding demand. Unless you have tennants that have specificaly requested this work to be undertaken on their behalf and are willing to pay extra then fair comment.

However I doubt that is the case. In your own words "expanding my product to meet the expanding demand" has undertones of 'packing them in like sardines'. There is no expanding demand, you only need to keep up to date with the current media to see that, even if you can't see it happening right now for your self.

The second quote of mine you commented on was far from being inconsistent. If anything you have done more to drive the nail home. You continue to show single mindedness and no understanding what so ever of current market conditions.

You can choose to continue to do what you believe is right, though the saying 'The Blind Leading The Blind' springs aptly to mind and I shall continue on my chosen path, and time will surely tell.

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Hello London-loser.

You may be right that I am sane but I'm not so sure. :D

You are completely correct in your assertion that it would be crazy to ignore an overnight loss in value of 90%.

But I have never seen anything remotely like that.  Even the super bears only talk about a 30% to 50% crash.

What I have seen is falls followed by rises.  The long term charts show this clearly. Each peak is higher than the previous one which means that even if you buy at the 'top'  inflation and general increases in national  wealth will eventually bail you out.

As long as the yield is sufficient, you can literally ignore the market value.  Its only significant if you are selling to cash out or trying to use it for more loans. And then, if your property has dropped in value then so has your next target. They all move up and down with the tide.

I once met an even older old-timer who was living his dream lifestyle.    He told me.  "All my life I have made money out of the fact that when it is raining, people think it will never sunshine again. And when it is sunny they think it will never rain again".  At that time he was buying up second hand portable electricity generators because he anticipated a coal strike and electricity cuts to follow.    At present, it seems to be 'overcast and unsettled'.  Will it rain or will it shine?

As I now live in the sunshine it tends to colour my view of things.  Property is a risk business like any other. But, get it right and the rewards far exceed anything else most people can legally do.  Get it wrong and nobody dies, nobody gets locked up, no need to lose you health or sanity and you live to do it better next time round.

Good luck to all BTLers and may fortune shine on all FTBers so they may buy the place of their dreams.

Hi Bikey,

I largely agree with you again.

I agree that inflation and national wealth increases will EVENTUALLY bail out someone who buys at the top of the market (provided they CAN hold on... not merely WANT to hold on)... but that still does not make it a good/smart investment move!

As long as the yield is sufficient, you can literally ignore the market value.

I would say this is sort of true - the yield is all-important... but by considering the yield you also (albeit indirectly) consider the market value (as you cannot calculate a yield without knowing the value).

I would agree that a landlord who has a good yield on his property can be pretty relaxed about short-term price movements (and probably shouldn't even attempt to time movements in and out of the market). BUT that is all predicated on the yield being good.

As an example, where I live (and MIGHT buy at some point) flats like mine currently offer a yield of about 5% (perhaps just under - after some healthy cuts in asking prices and widening discounts). To me, whether you look at the market value and say "it's too high" or calculate a rental yield and say "it's too low" is essentially two sides of the same coin.

I agree on the contrarian view of the world - a great way to do better than the next man. The HPC view was very much the contrarian story, although this has changed somewhat recently (I still think, personally, there is plenty of time before it will become the accepted wisdom that property is a duff thing to buy).

I also agree about the wonderful returns you CAN make on property, although I think this is a result of the easy ability to gear into it (and the momentum nature of the market) while some BTLs simply seem to believe it is a unique investment (it always goes up etc).

I'd say that gearing and momentum CAN be catastrophic in their effects, especially given pretty much anyone can have a go at it. However, old-timer landlords who can see whether the yield they have is attractive or not will be fine (where I live they'd have sold up some time ago though).

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Hi Bikey,

I would agree that a landlord who has a good yield on his property can be pretty relaxed about short-term price movements (and probably shouldn't even attempt to time movements in and out of the market). BUT that is all predicated on the yield being good.

However, old-timer landlords who can see whether the yield they have is attractive or not will be fine (where I live they'd have sold up some time ago though).

Hello again London,

The earth has spun round yet again and its sunny and warm again here in the Antipodes.

You make some very good points. Perhaps I have been a little sloppy with my language. Its the cash flow that matters. Does it cover costs? Does it give you a living? If so, then once bought, you really can ignore the property price and yield.

This only applies later in the game after inflation, intelligent puchase decisions and helpful refurbs and improvements have their desired effect on the rents obtained. Nothing is free; property management and development requires work like any other business.

A premium property in a good location rarely loses its appeal. Unless something catastrophic happens then it should always be easy to rent or sell.

Regarding selling up. What would you do with the cash? E accounts pay 5%ish gross. The cost of selling and CGT make it an expensive route to take.

The reference by BandWagon to Warren Buffet and the idea of an investment being a fruit tree seems very apt to me. To extend it a little. You can sell the tree and buy fruit from a greengrocer but in the long run I know I would rather own the tree. Not only that, but in the meantime as you nurture the tree you can live in it too (if its property).

To extend the idea even more. Ideally I would like to own both the tree and the premises from which the greengrocer trades.

I know its merely anecdotal but I have met many people living off the fruit of their younger years business endeavours. Some have made money from manufacturing and service industry but most have made it from property. Even when mistakes are made, its usually possible to to recover and try again.

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Hi Bikey,

I would agree that a landlord who has a good yield on his property can be pretty relaxed about short-term price movements (and probably shouldn't even attempt to time movements in and out of the market). BUT that is all predicated on the yield being good.

However, old-timer landlords who can see whether the yield they have is attractive or not will be fine (where I live they'd have sold up some time ago though).

Hello again London,

The earth has spun round yet again and its sunny and warm again here in the Antipodes.

You make some very good points. Perhaps I have been a little sloppy with my language. Its the cash flow that matters. Does it cover costs? Does it give you a living? If so, then once bought, you really can ignore the property price and yield.

This only applies later in the game after inflation, intelligent puchase decisions and helpful refurbs and improvements have their desired effect on the rents obtained. Nothing is free; property management and development requires work like any other business.

A premium property in a good location rarely loses its appeal. Unless something catastrophic happens then it should always be easy to rent or sell.

Regarding selling up. What would you do with the cash? E accounts pay 5%ish gross. The cost of selling and CGT make it an expensive route to take.

The reference by BandWagon to Warren Buffet and the idea of an investment being a fruit tree seems very apt to me. To extend it a little. You can sell the tree and buy fruit from a greengrocer but in the long run I know I would rather own the tree. Not only that, but in the meantime as you nurture the tree you can live in it too (if its property).

To extend the idea even more. Ideally I would like to own both the tree and the premises from which the greengrocer trades.

I know its merely anecdotal but I have met many people living off the fruit of their younger years business endeavours. Some have made money from manufacturing and service industry but most have made it from property. Even when mistakes are made, its usually possible to to recover and try again.

Hi Bikey,

Interesting. And again I think you are largely right.

One of the things about this site is it has a lot of people who believe UK property is significantly overvalued and set for a significant correction... but they do NOT think property is generally a bad investment.

This seems to be the main thing most bullish posters here cannot get their head around - they prefer a very black or white view (bears hate property etc).

I think your points are largely right in all but exceptional circumstances. And I'd agree that costs, CGT considerations etc would mean that selling up is not a very good idea in all but exceptional circumstances.

I personally think the UK property market (and probably several other property markets around the world) are in exceptional circumstances at present with low inflation and VERY high real house prices (in relation to individual earnings, national wealth, rental yields etc).

As an example, going back to my own circumstances (forgive me, I know the world doesn't revolve around my backside) the rental yield is perhaps 5% on my property.

In the UK now base rates are 4.75% (possibly coming down but probably not in any hurry and probably not by much... and also accompanied by a deteriorating economy) so a reasonable borrowing cost might be 5.5% (short-term you might get a slightly better deal).

To me, there is no deal there at the current price and I'd say this doesn't become a sensible investment until the price drops quite significantly.

So the seller is essentially left looking for a landlord who will subsidise the tenants in the hope that things will get better (or there'll be a Greater Fool along shortly) or for a FTB with the ability and willingness to pay a hefty amount for the property.

Trying to think about it logically (rather than emotionally) this all looks rather unstable to me - with the effect that the seller (and estate agent) pretend the place is "worth" £200k or whatever but can't actually find someone to buy it.

It's really quite a strange situation at present. Bulls think buyers will soon start to up their offers, bears think sellers will have to price more realistically. I'm very much in the latter camp.

Older, wiser landlords might decide to just sit it out (and wait for better yields to return when they may look to buy again) but it is the marginal trades that set prices rather than landlords who choose not to sell or people like me who choose not to buy.

Now how will KOTC cope with the concept of a landlord and FTB having a civil, intelligent discussion about property rather than just trying to score points off each other/goad each other instead?

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Now how will KOTC cope with the concept of a landlord and FTB having a civil, intelligent discussion about property rather than just trying to score points off each other/goad each other instead?

He would probably retort with a comment about himself being the perfect landlord and how he is always having intellagable conversations with his tennants, and how much they value and admire him. (Sorry, wasn't trying to score points, its just this nervous twitch i've got...couldn't help myself..!!)

Seriously though, both yourself and bikerb are a fine examples of the way things should be within the property market, a healthy market.

You both have had very valid points of view and I found it made interesting reading, so thank you for contributing to the thread. You show that you are both firmly seated on the center of the see-saw. If the people seated on either end of the see-saw want to experience the ups they must be prepared to feel the downs aswell.

:)

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  • 439 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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