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Frank Hovis

Help Needed With A Paper On Rentals

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I'm putting together a paper in an attempt to kill off a major venture into BTL / rentals agency. If this goes ahead it will in a minor way slow the correction in the housing market (locally - south west - not nationally, it's not that major) and IMHO lose money whilst doing it.

My major themes are:

  • Observed decline in rental values (+any predictions)
  • Oversupply through expansion of BTL properties over last five years (identified by BTL mortgages)
  • Pent up supply through current unsold newbuilds designed for rent (luxury flats)
  • Disproportionate decline in new build prices / lower mortgage deals -> lower yields reqd -> lower rents
  • Lower demand through increased unmployment
  • Rise in accidental landlords - unsuccessful developers, people with two properties who can't sell one

Specific regional factors

  • Second homes being dumped onto the market
  • Holiday lets being dumped onto the market because of the change in tax rules from the end of this financial year.

All of which do either:

Reduce demand (either numerically or in available cash to pay), or

Increase supply

And I will throw in one of those classic bubble graphs (showing that we are now at the bull trap phase) to point out that house prices will keep dropping, though as capital gain is not the intention this will be a by the way. If you have a good one please post.

Now as somebody who has done a lot of research on the net I know how long it takes to find more than a couple of things, so I was after a hand in sourcing this.

What I really want (this is surprisingly a non-expert audience) are punchy articles and graphs that have an impact as anything lengthy and detailed will probably be skipped.

All help gratefully accepted. And if somebody can turn those Flash CML BTL graphs into copiable images I will be very grateful. Ideally paste into the reply and supply a link (I always give credits to the author) to save me having to click into it.

I really want a killer paper here, so that this proposal dies now and does not rise again for several years and people will be left wondering what the hell they were thinking in even considering this.

Ta in advance

Francis :)

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I'm putting together a paper in an attempt to kill off a major venture into BTL / rentals agency. If this goes ahead it will in a minor way slow the correction in the housing market (locally - south west - not nationally, it's not that major) and IMHO lose money whilst doing it.

Um ....

Who is contemplating the major venture you want to kill off? Who is your audience?

In particular, is this someone with a pot of public money to pour into propping up the market?

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Discuss council housing rents. And why the huge demand for cheaper rents and security of tenure.

And why low rents make a better economy.

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Interestingly property has, in my lifetime, been regarded as a worthwhile industry to make a living. I don't see why the work involved in constructing buildings or putting together a property based business is held in such poor regard by a number of posters on this forum.

Even when the construction stage is finished there is a lot of work involved in administering tenancies, addressing tenant's needs, complying with legislation and the minutiae of running a business. Because despite anything else it is a business. Even the recent influx of landlords and accidental landlords may have changed the volume of suppliers renting out property But it is a business. It carries risk, work and reward.

Why is it wrong?

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  • Observed decline in rental values (+any predictions)

  • Oversupply through expansion of BTL properties over last five years (identified by BTL mortgages)

  • Pent up supply through current unsold newbuilds designed for rent (luxury flats)

  • Disproportionate decline in new build prices / lower mortgage deals -> lower yields reqd -> lower rents

  • Lower demand through increased unmployment

  • Rise in accidental landlords - unsuccessful developers, people with two properties who can't sell one

you missed out probably the two main reasons why house prices have been kept artificially high for decades:

  • 'welfare' rents

  • mortgages

these are now coming to an end because:

  • gov't is flat broke

  • banking system is flat broke

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Interestingly property has, in my lifetime, been regarded as a worthwhile industry to make a living. I don't see why the work involved in constructing buildings or putting together a property based business is held in such poor regard by a number of posters on this forum.

Even when the construction stage is finished there is a lot of work involved in administering tenancies, addressing tenant's needs, complying with legislation and the minutiae of running a business. Because despite anything else it is a business. Even the recent influx of landlords and accidental landlords may have changed the volume of suppliers renting out property But it is a business. It carries risk, work and reward.

Why is it wrong?

Because many amateurs (landlords)are dealing with peoples homes and their security........its not right. Hoping to make money and profit from the one most basic need and right....a roof over someones head.

There has to be a limit to speculation and how much,money one makes,when it`s security you are dealing with.

It all boils down to how much money is made from the supply of homes and construction....the last ten years and periods before has been obscene and just plain wrong..it creates a jaundiced system,that is geared to profit at almost any cost in human stress,and hardship...

Edited by tiggerthetiger

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Because many amateurs (landlords)are dealing with peoples homes and their security....... [chop]

He's trolling this thread.

His first ever post to HPC was on exactly the same subject, and provoked a much more reasonable discussion without hijacking someone else's thread. Here's his thread. Can I suggest if you have more to add, post there rather than here?

(he was even civil to me in that discussion - I guess the aggression in this thread is a sign of something).

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Hmm, not quite the response I was after. Google it is then.

Discuss council housing rents. And why the huge demand for cheaper rents and security of tenure.

And why low rents make a better economy.

I don't disagree Sarah but this venture is primarily to make money, I can't really use the morality of economics.

you missed out probably the two main reasons why house prices have been kept artificially high for decades:
  • 'welfare' rents
  • mortgages

these are now coming to an end because:

  • gov't is flat broke
  • banking system is flat broke

Will refer to that IRS but it's not really core, rent's the thing and the LHA has actually increased welfare rents.

This site maybe useful for some information

http://www.insidehousing.co.uk/story.aspx?storycode=6501770

200,000 buy-to-let investors lose up to 90% of their cash http://www.dailymail.co.uk/news/article-10...se-90-cash.html

Regular reader of IH Geoff, but it has a vested interest in talking up property prices (= greater demand for affordable housing, which is what they do). The Daily Mail one I'd forgotten about, it's a nice headline so I will use it.

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His first ever post to HPC was on exactly the same subject, and provoked a much more reasonable discussion without hijacking someone else's thread. Here's his thread. Can I suggest if you have more to add, post there rather than here?

(he was even civil to me in that discussion - I guess the aggression in this thread is a sign of something).

Because I hold a consistent view and belief, why does that make me a troll?

It seemed obvious to me that the OP was trying to gather facts to show that ownership of property by individuals to rent to others is wrong. I posted on this thread to challenge his opinion. I don't see that as "hijacking a thread". In fact I see it as very relevant, going straight to the point of the issue being that he was objecting to.

Your poor attempt to silence me by claiming that I was raising an unrelated point angered me. Of course your tactic is the same as used by left wing politicians since the mid 19C. Communists, socialists and fascists have always tried to silence dissenters so they can manipulate popular opinion far more easily. Anyway why would someone whose pseudonym is a mild Italian derogatory phrase be concerned if someone is rude to him?

The point I make is that it is far more beneficial for tenants if the ownership base of property is widely spread. The alternative is state ownership, which in my view would be far more detrimental. Monopolies always tend to wrest power away from the population as a whole and give control to a few. Something I whole heartedly detest. Going slightly off the point one of the main beliefs of a majority of posters on this site is that the banks have too much control. The reason is they are a cartel, the sector has seen lots of consolidation in my lifetime. Power is now concentrated in a handful of main banks globally. Perhaps one of the reasons why the asset price bubble could happen. If there were more smaller banks arguably this economic situation may not have come about.

You have only to look at what is happening to the private sector rental market in the UK to see that it is a good thing for tenants that property is owned by a multitude of Landlords. You may argue that Housing Associations and Local Councils charge lower rents, but I for one would absolutely hate to live in the environment that a lot of these estates and tower blocks have degenerated into. I would prefer to pay a higher rent and not be afraid to leave my house in case it was broken into, not be afraid to walk in the street without being accosted by feral teenagers, not be disturbed by stolen cars being raced through the streets.

Lets not forget that tenants have choices. Some rent out of choice, for the ease of mobility, some for the cost saving (it's currently cheaper to rent than buy). If a tenant needs to move there is a wide choice of houses and landlords to choose from. I remember the days of council housing, if you wanted to move you had to find someone to swap tenancies with. Was that better than we have now?

Edited by sleepwello'nights

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Because I hold a consistent view and belief, why does that make me a troll?

It seemed obvious to me that the OP was trying to gather facts to show that ownership of property by individuals to rent to others is wrong. I posted on this thread to challenge his opinion. I don't see that as "hijacking a thread". In fact I see it as very relevant, going straight to the point of the issue being that he was objecting to.

I can see how you interpreted it that way, but that isn't what I'm trying to do.

I don't see it as wrong per se as there is always a need for private rented property (I've rented a lot myself); what I object to in the rental sector is the poor amateur landlord who has no relationship with their tenants and does nothing to help them out if they have a problem.

A good landlord will live on or near the premises and keep in touch.

The rise of BTL over the last decade has meant that there are now a lot of bad landlords about.

My motivation is that I think the venture is ill-timed and will lose money and that is what I want to demonstrate.

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I can see how you interpreted it that way, but that isn't what I'm trying to do.

I did indeed read your OP trying to garner facts to oppose the concept and wrongly assumed you were not in favour of a private rented sector.

One of the strengths of having a large number of private landlords is that competition will weed out the bad landlords. I haven't got a source of statistics to help you demonstrate your view, nor any punchy graphs or relevant analyses.

Although I'm not sure about opposing a new letting agency; it might be a good thing if they can counter some of the poor letting agents that we hear about.

All I can say is that your financial case setting out assumptions on rental yields at current interest rates; with a sensitivity analysis to higher interest rates; occupancy and voids, and management and repair and maintenance costs will have to be decisive. But if it's a letting agency the risk is borne by the owners, the agent takes their percentage come what may, even a fee for inspecting the property during a void period.

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I did indeed read your OP trying to garner facts to oppose the concept and wrongly assumed you were not in favour of a private rented sector.

I'm in favour of having such a sector, though I do aspects of it in the UK deeply offensive (for detail, see my response to you in the other thread).

I didn't jump to any such conclusions about the OP, which is why in my first post I tried to ask for clarification.

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I have a fair few stats from the Edinburgh market. Scotland Sub Forum - look in the Edinburgh facts and figures thread.

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I don't disagree Sarah but this venture is primarily to make money, I can't really use the morality of economics.

You can if you find ht argument that LHA is dropping and will continue to drop AND should drop.

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