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The Appeal Of Btl

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I'm a fully paid up member of the HPC club and all we stand for. In fact, I'd have 'HPC' tatooed on my backside if the Missus would let me.

However, you have to admit that BTL does have it's appeal. For those with a bit of audacity, it hasn't been that hard to leverage into the position of owning 2 or 3 houses. And though of course the yields aren't always brilliant and being a BTL slum-lord has it's downsides, you have to admit that the end game of a £400k pay-off in 20+ years is tempting, achievable, and better than many investments such as pensions or the markets.

I don't want to re-hash a tired old argument here. I just wonder if others on the site can understand why so many were tempted into it, despite the negative consequences for the rest of us?

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I don't want to re-hash a tired old argument here. I just wonder if others on the site can understand why so many were tempted into it, despite the negative consequences for the rest of us?

Ponzi scams always bag gains for the early entrants, that's how they grow. The ones joining at the end are the ones that lose out.

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Ponzi scams always bag gains for the early entrants, that's how they grow. The ones joining at the end are the ones that lose out.

If I was in the BTL game, I'd personally keep my eye on the prize of eventual ownership of 1 or more houses that someone has bought for me, almost regardless of what they are worth at the end. (We can assume a house has a degree of inherent value.)

If you don't over-leverage, manage your risk, and view the repayment period as a stressful and risky period of work, I still see BTL as one of the best investments available to provide a lump sum down the road, and I'm as bearish on property as a bearish mans bearish bits.

The combined opportunity of a) leveraging my money 8 to 1, B) having someone else paying off the leveraged portion via rental income, and c) having an inherent floor under the asset price is a pretty appealing combination of factors unique to housing, no?

Edited by Kyoto

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I'm a fully paid up member of the HPC club and all we stand for. In fact, I'd have 'HPC' tatooed on my backside if the Missus would let me.

However, you have to admit that BTL does have it's appeal. For those with a bit of audacity, it hasn't been that hard to leverage into the position of owning 2 or 3 houses. And though of course the yields aren't always brilliant and being a BTL slum-lord has it's downsides, you have to admit that the end game of a £400k pay-off in 20+ years is tempting, achievable, and better than many investments such as pensions or the markets.

I don't want to re-hash a tired old argument here. I just wonder if others on the site can understand why so many were tempted into it, despite the negative consequences for the rest of us?

it can work when the time is right

probably in about 3 years unless the uk is completely bust

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If I was in the BTL game, I'd personally keep my eye on the prize of eventual ownership of 1 or more houses that someone has bought for me, almost regardless of what they are worth at the end. (We can assume a house has a degree of inherent value.)

If you don't over-leverage, manage your risk, and view the repayment period as a stressful and risky period of work, I still see BTL as one of the best investments available to provide a lump sum down the road, and I'm as bearish on property as a bearish mans bearish bits.

The combined opportunity of a) leveraging my money 8 to 1, B) having someone else paying off the leveraged portion via rental income, and c) having an inherent floor under the asset price is a pretty appealing combination of factors unique to housing, no?

Don't forget the security and benefits of a globally competative labour market! Labour saddled with massive taxes and massively inflated housing costs/debts + taxes have not got a hope in hell of competing on a global scale.

Try explaining a $28K student "loan" to a graduate from China or India.

Then try explaining UK taxation levels + UK Housing costs + Cost of getting to work and avg square FT of a dwelling in the UK and you understand while so many will still risk all to come and work here.......

The lure of a massively overvalued currency!

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Absolutely, the majority do well at this game.

Really ? This has only been a game for the majority for maybe 5 years now. We will only know if most do well out of it in 20 or so years.

We are not talking Landlords here. We are talking BTL. Very different.

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The majority who play this game do well.

What is a Landlord ?

How do you know ? It has only been done by a relatively small number of people until recent years. Now it is being done by a large number. Nobody knows how this landlord/BTL or whatever you want to call it scenario will work out.

The game today is different to previous era's. Every man and their dog are at it. That would be enough to get me worried if I was part of it all.... :rolleyes:

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Ponzi scams always bag gains for the early entrants, that's how they grow. The ones joining at the end are the ones that lose out.

Agree. But I think HPI is more of a Pyramid scheme. A Ponzi scheme usually only has one winner – the perpetrator (or its close family etc like Madoff).

In contrast, in a Pyramid scheme, the top few layers do make money. THAT is why a Pyramid scheme is much more vicious than a Ponzi scheme; and has graver social consequence, because

1. Victims CAN profit from a Pyramid scheme, IF they con enough followers in, making the vicious circle particularly persistent. As ordinary good innocent honest people are either willingly or forced into con other good innocent honest people, so they can get out.

2. The conned ones are usually introduced to the scheme by the ones they know well.

Read this

http://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.htm

A Pyramid scheme can scar a society so deep that you have brothers, families and friends set up against each other. It leaves such a bitter taste to the extent which threats the stability of a nation.

Technically, I would call the UK property market a MLM scheme - a Pyramid scheme got legalised by government policy.

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what does it for me is a nice rye-bread and a bit of extra mayo - the meatiness, lettucey-crispiness and sweet tomatoeyness is just, well, mmmmmmmmmmmmmmmm

oh sorry, I thought you said the appeal of BLT...

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Agreed. Even is you have to subsidise the mortgage to the tune of £100 per month, you can view it as a form of pension contributions. Earnings and rent will eventually rise so as to eliminate the subsidy, so you essentially have someone else buying you a house. And unlike standard defined contribution pensions, you can be pretty confident on what your rental income will be. Oh, and your rents will also be inflation linked.

If I had the cash, I'd buy one right now.

Edited by Turnbull2000

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Really ? This has only been a game for the majority for maybe 5 years now. We will only know if most do well out of it in 20 or so years.

We are not talking Landlords here. We are talking BTL. Very different.

A landlord is a person who buys one or more properties to let them out to tenants.

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The rental income is very poor when you factor in all the real costs of owning and maintaining a property. SO it is only capital appreciation that can make it worthwhile

Gearing gains are what makes it really attractive. HOWEVER you must get in at the right time and have the courage to sell up and pay the CGT on the gain. Wait and then go back in heavily geared.

It is a high risk investment and is really the provence of experienced property professionals. Many are attacted by the numbers and get rich mentality and it is an unsuitable investment for all but a small number

If you consider yourself a property professional and you have been holding investment properties over the last three years....your are not a property professional they all left in 2005/6.

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That doesn't sound that different from a BTL. Maybe ccc knows something we dont.

Any one renting a "Buy To Let" house or flat is, by definition, a landlord.

I've heard people on here before try to make out that there is some other way of categorising "a person who does BTL" differently to "a landlord". There isn't!

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far from them being bad - they are terribly good - providing me a really cheap rental deal, at their short- and long-term loss, and leaving me to pick up the pieces over the next decade

terribly generous of them

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Oh, and your rents will also be inflation linked.

Really? rents round me have gone up less than 20% over the last 10 years. And recently they seem to be more linked to HPI, i.e. negative...

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Buy to Let is technically a type of mortgage.

A BTLer is obviously a landlord as well. But what ccc is on about is this type of loan has only been around since labour came to power. So he is making the distinction from people / organisations who own outright and BTLers who are leveraging up.

As for the original poster's question, I hate the numpty BTLer's who have pushed the market from overpriced to insanely over priced and are happy to make a loss for capital gain. I hope they fry in hell and go bankrupt. Those who bought when prices were reasonable and have made a killing, just make me feel jealous.

I'd be tempted to go "buy to letting" if there is a crash which means you can make money at renting them out again. Especially if the inflation genie is out of the bottle. However, I've heard a few people say they owned a rental property and it was really hard work. Depends what kind of tenants you get I suppose.

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I have been handling the probate for a relative that had bought and sold 4 BTLs in the last 10 years.

They made around £300K in capital gains over the first 8 years and lost almost £200K in the last 2 years. The overall gain was £100K which was achieved on the first BTL bought in 1999 in its first four years. Everything after that was a complete waste of time.

Back in 1999, the first BTL returned a 10% gross yield and was a good investment, the other three bought since (2002/3/5) then produced negative yields after fees, non paying tenants are included. I helped get the last tenant out after 6 months of non payment (mortgages have to be paid).

To invest in BTL, you must understand yield. Since mortgage costs are ~7% for a new BTL mortgage, you need at least 10% gross yield to even attempt to justify the risk.

VMR.

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I have been handling the probate for a relative that had bought and sold 4 BTLs in the last 10 years.

They made around £300K in capital gains over the first 8 years and lost almost £200K in the last 2 years. The overall gain was £100K which was achieved on the first BTL bought in 1999 in its first four years. Everything after that was a complete waste of time.

Back in 1999, the first BTL returned a 10% gross yield and was a good investment, the other three bought since (2002/3/5) then produced negative yields after fees, non paying tenants are included. I helped get the last tenant out after 6 months of non payment (mortgages have to be paid).

To invest in BTL, you must understand yield. Since mortgage costs are ~7% for a new BTL mortgage, you need at least 10% gross yield to even attempt to justify the risk.

VMR.

nicely put. worth a bounce.

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Buy to Let is technically a type of mortgage.

A BTLer is obviously a landlord as well. But what ccc is on about is this type of loan has only been around since labour came to power. So he is making the distinction from people / organisations who own outright and BTLers who are leveraging up.

As for the original poster's question, I hate the numpty BTLer's who have pushed the market from overpriced to insanely over priced and are happy to make a loss for capital gain. I hope they fry in hell and go bankrupt. Those who bought when prices were reasonable and have made a killing, just make me feel jealous.

I'd be tempted to go "buy to letting" if there is a crash which means you can make money at renting them out again. Especially if the inflation genie is out of the bottle. However, I've heard a few people say they owned a rental property and it was really hard work. Depends what kind of tenants you get I suppose.

Yes just trying to make a distinction. In reality there are generally two types of 'Landlord'.

(1) Those that know what they are doing. If you ask them about yield and long term trends, local analysis etc.. they will reel it off the top of their head. These are business people.

(2) Those that don't know what they are doing. They simply got a mortgage for a house other than the one they live in. The fact another person lives in it is merely an annoyance. Until they sell up and take the huge capital gains that have been promised by a myriad of property shows on TV. Ask them about yields ? They won't have a clue what you are talking about.

If other posters want to think a Landlord is a Landlord and that is it ? Fair enough. That is their opinion. However, in the real World, they are taking it at an overly simplistic manner.

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I have been handling the probate for a relative that had bought and sold 4 BTLs in the last 10 years.

They made around £300K in capital gains over the first 8 years and lost almost £200K in the last 2 years. The overall gain was £100K which was achieved on the first BTL bought in 1999 in its first four years. Everything after that was a complete waste of time.

Back in 1999, the first BTL returned a 10% gross yield and was a good investment, the other three bought since (2002/3/5) then produced negative yields after fees, non paying tenants are included. I helped get the last tenant out after 6 months of non payment (mortgages have to be paid).

To invest in BTL, you must understand yield. Since mortgage costs are ~7% for a new BTL mortgage, you need at least 10% gross yield to even attempt to justify the risk.

VMR.

Of course there will be winners and losers depending on when individual BTLers got in and out, but I wonder whether, when this is all over, BTL as a whole will have proven any better than a decent savings account. It certainly seems that the big winners (bought in the late 90s, sold at the peak) have won at the expense of whichever chump rushed in and took it off their hands in 2007. Not exactly a socially beneficial kind of "investment".

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<quite a bit snipped>

Back in 1999, the first BTL returned a 10% gross yield and was a good investment, the other three bought since (2002/3/5) then produced negative yields after fees, non paying tenants are included. I helped get the last tenant out after 6 months of non payment (mortgages have to be paid).

To invest in BTL, you must understand yield. Since mortgage costs are ~7% for a new BTL mortgage, you need at least 10% gross yield to even attempt to justify the risk.

VMR.

Good summation. There are a LOT of complete amateurs who have entered the BTL market since 2003. They have no concept of yield and only see the monthly rent falling into their bank account. They multiply this by 12 then 25 and hit a big number. Trebles all round!

I know 3 people who have a BTL , buying in 2004 and 2006. All their friends "were doing it". One couldn't sell their house for 25% above purchase price, so moved anyway and put the 2nd house in a BTL mortgage and started to rent it out. Today, it is a mill stone around their neck. Unpaid rents and 3 different tenants in 2 years. Flat ransacked by 2nd tenant who did a runner givign decorating costs and void on the mortgage that they had to finance from their own pockets.

For a professional, this is part and parcel of their investment and they will have funds to cover these events. For the majority, they have day jobs that pay average wages and no savings. Hence when it starts to turn sour, they take a massive financial hit.

All 3 have said to me that they wouldn't have got into BTL had they known about the hassle and financial stress that comes with it. They are now in -ve equity and holding out for a moment to sell................

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Of course there will be winners and losers depending on when individual BTLers got in and out, but I wonder whether, when this is all over, BTL as a whole will have proven any better than a decent savings account. It certainly seems that the big winners (bought in the late 90s, sold at the peak) have won at the expense of whichever chump rushed in and took it off their hands in 2007. Not exactly a socially beneficial kind of "investment".

I think, due to the generally un-spread nature of these investors, that there will be as many big losers as winners.

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