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Troubled Waters For Landlords

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It seems like only yesterday that every man and his dog wanted to be a buy-to-let investor. Buying off-plan on the waterfront was a passport to riches and staring off into the horizon all we could see were calm waters offering exponential capital growth and a tidy sum each year from rental profits. As the reality of both over-supply of investor-friendly flats and over-optimistic predictions takes hold, however, the tranquil waters of buy-to-let have taken on a distinctly choppy cast.

Paul Mugmaioni, a director of rental sector investors Quality Street dates the sea change in the newbuild rental market to the interest-rate hike around a year ago. That rate raise, allied to a general cooling in the housing market, precipitated a mass investor exodus from buy-to-let and a climate where the speculators consolidated their positions while looking elsewhere for investment opportunities.

http://property.scotsman.com/news.cfm?id=1836512005

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...the tranquil waters of buy-to-let have taken on a distinctly choppy cast.

So those who didn't "miss the boat" are now onboard and finding it sinking. :D

Nomadd

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An interesting article, predicting the demise of swish

minimalistic apartments - glass bricks and stainless steel fittings -

in favour of solid, traditional comfortable street housing.

All fads and fashions change.

The smart money moves with the times.

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i dont have any 9-5 stress. thats why i can potter about this site passing comment to all and sundry.

here are some of my opinions on vegatables.

carrots and potato i like. not so sure abot sprouts, but i have been akin to parsnips on recent sunday lunch appointments..

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This whole BTL thing escapes me... I let out the 1st house I bought in Cardiff, because i'd moved to London, didn't see the point in selling it. But I bought it in 99, for about 50k. Even with the mortgage of 37.5k the rent NOW barely covers mortgage & maintenance expenses. How the hell houses on the street now going for £150k (massively overpriced) can possibly turn a profit on BTL is a mystery.

Similarly with the flat I live in, the only way the Landlady makes money out of it is that she bought also in 99, so our rent covers the mortgage... now it would only cover 50% of that.

Have I just been exposed to a couple of odd circumstances, or are there just thousands of amateur landlords losing money hand over fist out there?

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This whole BTL thing escapes me...  I let out the 1st house I bought in Cardiff, because i'd moved to London, didn't see the point in selling it. But I bought it in 99, for about 50k. Even with the mortgage of 37.5k the rent NOW barely covers mortgage & maintenance expenses. How the hell houses on the street now going for £150k (massively overpriced) can possibly turn a profit on BTL is a mystery.

Similarly with the flat I live in, the only way the Landlady makes money out of it is that she bought also in 99, so our rent covers the mortgage...  now it would only cover 50% of that.

Have I just been exposed to a couple of odd circumstances, or are there just thousands of amateur landlords losing money hand over fist out there?

But the mortgage on 37.5k assuming capital repayment would be about 235 quid a month over 25 years. Either you have enormous maintenance charges or surely you're renting it out too cheaply?

Even a studio flat rents out for 500pcm where I am.

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Guest Charlie The Tramp

There`s only one guaranteed way to make money on a BTL.

Buying it for cash. :D

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There`s only one guaranteed way to make money on a BTL.

Buying it for cash.  :D

Apart from transaction costs, voids, escalating service charges, maintenance bills, professional fees, insurance, tenants from hell, capital depreciation and last but not least, better opportunities elsewhere.

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This whole BTL thing escapes me...  I let out the 1st house I bought in Cardiff, because i'd moved to London, didn't see the point in selling it. But I bought it in 99, for about 50k. Even with the mortgage of 37.5k the rent NOW barely covers mortgage & maintenance expenses. How the hell houses on the street now going for £150k (massively overpriced) can possibly turn a profit on BTL is a mystery.

Similarly with the flat I live in, the only way the Landlady makes money out of it is that she bought also in 99, so our rent covers the mortgage...  now it would only cover 50% of that.

Have I just been exposed to a couple of odd circumstances, or are there just thousands of amateur landlords losing money hand over fist out there?

I imagine you realise you have made 100k profit? Presumably that's how the BTL thing worked. It won't work now of course.

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The concept of buying a place on a large mortgage then immediately making a profit on it is a very recent one.

Traditionally, landlords were in it for the long term, or amateur landlords sought a "contribution" to their mortgage.

BTL is entirely based on a sharply rising market. Traditional landlords own outright or they wanted to ease the mortgage burden a little.

The hugely irresponsible lending by Building Societies for BTL has completely distorted the market. The vast majority of BTL's were seeking a profit on INFLATION, not on rent, which was an incidental addition. Now the market is at long last adjusting itself to these excesses in un-earned income, BTL's have no interest and are pulling out.

The whole edifice has turned full circle. It is as significant historically as the liberation from Nazi occupation in Northern Europe. There is going to be retribution, albeit in a financial form. Many BTL's are going to be financially crucified. I don't like to see anyone suffer, but I find it hard to sympathise in this case.

VP

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i dont have any 9-5 stress. thats why i can potter about this site passing comment to all and sundry.

here are some of my opinions on vegatables.

carrots and potato i like. not so sure abot sprouts, but i have been akin to parsnips on recent sunday lunch appointments..

Sprouts, it depends how you do them. Par-boiled and finished off in some olive oil with garlic & seseame seeds. Delicious.

Boiled to mush? No thanks.

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But the mortgage on 37.5k assuming capital repayment would be about 235 quid a month over 25 years.  Either you have enormous maintenance charges or surely you're renting it out too cheaply?

Even a studio flat rents out for 500pcm where I am.

Your guess at my mortgage is right, but I was conned into a endowment/interest only mortgage so there's an extra £60 on that. Rent is 525 pcm, which I checked independently is a fair price (can't manage a property in Cardiff from London, plus shockingly they are actually a good agency) & you get £470 pcm, or £175 net income, giving £2100/year. However I was also paying off an extension loan to pay for work to bring it into a fit state of repair for renting, plus there's been endless boiler trouble, the tenants are clueless so never fix anything themselves (some people will fix stuff themselves rather than wait for maintenance men) so my actual income ended up being about £1000 a year. Take 40% off that because of the taxman and I end up with about £600 a year. Which gets eaten by occasional vacany. So I've made approximately sod all.

Buy to let my ****.

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Guest Charlie The Tramp
Traditionally, landlords were in it for the long term, or amateur landlords sought a "contribution" to their mortgage.

BTL is entirely based on a sharply rising market. Traditional landlords own outright or they wanted to ease the mortgage burden a little.

An older post from January, I spoke to my ex customer again a few weeks ago, the young lad is still doing well and has a couple of more long lets. Spending last month in Antigua with his love water ski-ing.

Bumped into an ex customer today on a trip to town. After enquiring how I was enjoying my retirement he invited me to have lunch with him at his brother`s restaurant.

As he was in the process of moving, our discussions turned to the housing market.

He asked if I remembered his neighbour and his family who I had done work for in the late 80s and early 90s. The son who was in his early twenties then, on a visit to his grandmother, was informed she had made her will and his father being her only child, she had divided her estate equally between his father, sister, and himself. On payment of death duties he would receive 400k. She asked him what he would do with his money, and he replied I will never work again. She told him that the money would not last very long, and he replied don`t you believe it.

The grandmother passed away in 1994 and after the procedures he received his inheritance.

On the way home from work he passed a new build of seven two bed flats half built with parking spaces and communal green area in a fair location, enquired of the builder/developer the cost. He was informed they would be selling for around 45k. He offered 45k each for all seven and said he would pay a 10% deposit within seven days and the balance on handover subject to a satisfactory surveyors report. He asked for the freehold as a discount, and his offer was accepted when the builder/developer realised he was genuine. The flats were completed in 1995 and he moved out of his parents home and occupied the best flat. After three months of advertising the six flats were filled with tenants. He attended the local college and done a maintenance course for painting, decorating, plumbing, electrical, and general home maintenance, so he could do all his own servicing. BTW the builder/developer went on to build a similar project six months later a mile away and sold those properties for 47k probably to FTBs.

A few weeks ago my lunch companion saw him when he came to visit his parents.

Asked him how things were going and was he worried about the state of the housing market. No not really he told him my flats are valued at 185k, even if they dropped to 100k I have no intention of selling as my income is still good, I make £550 per month gross from each flat, been saving 1K a month, enjoy all my hobbies, and even if they dropped to 100k would be back to 185k in the next ten years, and I still will be getting my income during this time with an inflationary rent rise annually. Three of his tenants retired people who had STR were given five year leases with a 5% annual rent increase agreed. He went on to say his friend had bought a BTL in June 2004 with a deposit borrowed from his parents and a IO BTL mortgage without his knowledge or advice, is now in trouble desperate to sell as tenants are not around at the rent he must charge and the number of available rental properties increasing. So he himself is only looking at a possible 140k gain on each flat over 20 years having paid cash.

So his gross income is 39.6k and his portfolio £1,295.000.

If this drops to 700k as he expects and returns to present value in the next ten years, taking into consideration he has not paid one penny interest, how can BTL be a good investment on a IO mortgage. Do they believe they will have a good income and gain in 25 years time.

At least it proves cash is king and luck stays with you. He bought low and saw it as early retirement. As I said in a previous post only the few make money on borrowed money and they know what the are doing, the rest have no chance.

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A question for anybody with long term experience in the buy to let market.

What is the minimum yield requirement yon would settle for, to make the BTL a realistic oppurtunity.

Taking into account the long term average base rates, not the current well below average base rate of 4 to 5 %.

I would have thought a very minimum of 10% of the purchase price.

£100,000 property

£10,000 a year in rent

Anything less, well not worth the hassle :o

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A question for anybody with long term experience in the buy to let market.

What is the minimum yield requirement yon would settle for, to make the BTL a realistic oppurtunity.

Taking into account the long term average base rates, not the current well below average base rate of 4 to 5 %.

I would have thought a very minimum of 10% of the purchase price.

£100,000 property

£10,000 a year in rent

Anything less, well not worth the hassle :o

For me a gross yield of at least 14% to give a net yield after mortgage interest, agency fees, voids, service charges, wear & tear, re-dec etc. of at least 8% before tax.

I'm currently getting 5.65% before tax on cash deposit. Hassle free.

If fact by the time you add 1% stamp duty to buy, 1.5%+VAT selling costs, £1,400 for buying & selling solicitors fees, and the fact that house prices are no longer going up, I would then need even more yield to make up for these 'capital' costs.

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http://brooklands.40x40.com/cgi-bin/index....-Detached_House

take for example this house in okayish area of Leeds, on sale for 184,950k,classed as an 'investment opportunity' its split into 3 1bed flats , yet total gross annual income of £12,600,

no good at working out yeilds but doesn't look like a great investment opportunity to me, who's going to buy it at this price, when the yeild is so crap, is it even worth it for a mainly cash buyer?

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Guest Charlie The Tramp
is it even worth it for a mainly cash buyer?

I would think a cash buyer is more selective on location and type of property.

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For me a gross yield of at least 14% to give a net yield after mortgage interest, agency fees, voids, service charges, wear & tear, re-dec etc. of at least 8% before tax.

Bloody Hell :lol:

Theres landlords round my way, just about getting 6% yield, if rates go up they are f@cked, especially with no capital appreciation in the next four to six years.

:lol::lol::lol:

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Guest X-QUORK

IMD

Don't forget that if you sell your property now for say £145k, you've made a tidy £95k profit in six years. That's not bad going!

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  • 301 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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