Topher Bear Update

[Topher Bear]

Hi all,

just wanted to let you know that we have finally found a place to move to and we should be in there in a about a months time, so give me a couple of months and I should be back on line on a more permanent basis!

This place is a temporary place however, its smaller and not quite where we want to be, but its cheap and gets us into the area so that we are "on the ground" for all the letting agents...should make it easier!

Out of Interest. I did look into mortgages. We were finding it really hard to find a rental place that we liked, as there was so much less around. What I did discover was a bit of an eye opener!

The place we are going to rent is a modern small 3 bed semi for £575 a month. Looking around the sales I reckon that it would be on the market for around £155K -£160K. Assuming it sells for about £150K, we use our £10K deposit, a standard repayement mortgage at current interest rates (about 5.75%) would cost about £900 a month. On interest Only that is still £670 a month. even IO costs £100 a month MORE!!!! At this level house prices need to rise by nearly 1.5% annually (or 0.1% monthly) to make buying a better option than renting. Last time I check on this level it was around falls of 0.5% a month!

Looking at another example, a place that the EA had said to put up at £165K, was being rented out at £700 a month (a 3 bed victorian mid-terrace very very nicely done, great size kitchen a beautiful bathroom with roll top bath and sperate shower unit!! - but no garden short of small courtyard!). Working these figures through, the IO cost is £700 a month, which makes them the same, but still requires about a 0.5% increase in price annually.

When renting becomes cheaper than having an IO mortgage, the system is seriously screwed!

Be back soon

Tpoher Bear

[JBeau]

Hi all,

just wanted to let you know that we have finally found a place to move to and we should be in there in a about a months time, so give me a couple of months and I should be back on line on a more permanent basis!

This place is a temporary place however, its smaller and not quite where we want to be, but its cheap and gets us into the area so that we are "on the ground" for all the letting agents...should make it easier!

Out of Interest. I did look into mortgages. We were finding it really hard to find a rental place that we liked, as there was so much less around.  What I did discover was a bit of an eye opener!

The place we are going to rent is a modern small 3 bed semi for £575 a month.  Looking around the sales I reckon that it would be on the market for around £155K -£160K.  Assuming it sells for about £150K, we use our £10K deposit, a standard repayement mortgage at current interest rates (about 5.75%) would cost about £900 a month.  On interest Only that is still £670 a month.  even IO costs £100 a month MORE!!!!  At this level house prices need to rise by nearly 1.5% annually (or 0.1% monthly) to make buying a better option than renting.  Last time I check on this level it was around falls of 0.5% a month!

Looking at another example, a place that the EA had said to put up at £165K, was being rented out at £700 a month (a 3 bed victorian mid-terrace very very nicely done, great size kitchen a beautiful bathroom with roll top bath and sperate shower unit!! - but no garden short of small courtyard!). Working these figures through, the IO cost is £700 a month, which makes them the same, but still requires about a    0.5% increase in price annually.

When renting becomes cheaper than having an IO mortgage, the system is seriously screwed!

Be back soon

Tpoher Bear

<{POST_SNAPBACK}>

I hope you and Mrs TB will be very happy. It's time for some quality comments on this site

[The Masked Tulip]

Very interesting - glad you have found a place also.

Yes, when you do the figures now on property, be it IO or repayment, you really do begin to see how over-priced UK property is.

I still believe we are going to see 40 to 50 percent average UK falls with many areas seeing much greater falls.

I was talknig to a chap yesterday who is thinking of buying a 2 up 2 down terrace that is reduced from 190K to 170K. He knows the owner is desperate so is going to offer 150K which he thinks is a good deal. I pointed out that 3 years ago that house was for sale for about 65K.

[Catch22]

Be back soon

Tpoher Bear

<{POST_SNAPBACK}>

Good luck with the move

[Nomadd]

Hi all,

just wanted to let you know that we have finally found a place to move to and we should be in there in a about a months time, so give me a couple of months and I should be back on line on a more permanent basis!

This place is a temporary place however, its smaller and not quite where we want to be, but its cheap and gets us into the area so that we are "on the ground" for all the letting agents...should make it easier!

Out of Interest. I did look into mortgages. We were finding it really hard to find a rental place that we liked, as there was so much less around.  What I did discover was a bit of an eye opener!

The place we are going to rent is a modern small 3 bed semi for £575 a month.  Looking around the sales I reckon that it would be on the market for around £155K -£160K.  Assuming it sells for about £150K, we use our £10K deposit, a standard repayement mortgage at current interest rates (about 5.75%) would cost about £900 a month.  On interest Only that is still £670 a month.  even IO costs £100 a month MORE!!!!  At this level house prices need to rise by nearly 1.5% annually (or 0.1% monthly) to make buying a better option than renting.  Last time I check on this level it was around falls of 0.5% a month!

Looking at another example, a place that the EA had said to put up at £165K, was being rented out at £700 a month (a 3 bed victorian mid-terrace very very nicely done, great size kitchen a beautiful bathroom with roll top bath and sperate shower unit!! - but no garden short of small courtyard!). Working these figures through, the IO cost is £700 a month, which makes them the same, but still requires about a    0.5% increase in price annually.

When renting becomes cheaper than having an IO mortgage, the system is seriously screwed!

Be back soon

Tpoher Bear

<{POST_SNAPBACK}>

Sorry, but this can't be true. Without_a_Paddle keeps telling me that RENTING IS DEAD MONEY! Be prepared to defned yourself!

In my area (North London), prices are more than double what you've quoted above, and we are flooded with property for rental, so buying just makes even less sense. And the house prices here are falling even faster, so buying makes even less less sense.

You're right: the system is seriously screwed. Still why should you - or me - care. Just sit back and enjoy your new place, safe in the knowledge that not only are you saving money, but you also aren't losing it every month. It's nice not to have the property millstone around your neck, isn't it.

Nomadd

[Time to raise the rents.]

2 things to say Topher:

1/ Renting should be cheaper than buying. It has been an anomolly that this country has in the past been cheaper to buy in than to rent in. IMO that has changed permanently, as long as the rule book isn't re-written by the politicians again.

2/ How will your calculations look when IR reductions produce an IO calculation cheaper than renting? Will that make you a buyer? Will you line up & bid prices up with the others who can also operate a calculator?

No offence intended, but it isn't the only way to make this judgement.

[HappierDreams]

2 things to say Topher:

1/ Renting should be cheaper than buying. It has been an anomolly that this country has in the past been cheaper to buy in than to rent in. IMO that has changed permanently, as long as the rule book isn't re-written by the politicians again.

<{POST_SNAPBACK}>

So, where does that leave BTL? Will it never make sense to be a landlord again?

[Guest wrongmove]

2/ How will your calculations look when IR reductions produce an IO calculation cheaper than renting? Will that make you a buyer? Will you line up & bid prices up with the others who can also operate a calculator?

<{POST_SNAPBACK}>

Change "when" to "if" and this is a sensible question.

You say that renting should be cheaper than buying, but without Oz style negative gearing, this hasn't been the case in UK. How do you obtain a BTL mortgage when your rent doesn't cover the interest on your loan ?

Even assuming you are correct and we are now in a new paradigm with permanently higher prices, the big price hike has happened, and HPI will now track wages, albeit at a higher multiple. Therefore, for new entrants to BTL, subsidising tenants can no longer be written off to massive capital gains. Again, how would this stack up as an investment when voids, risk and maintaince are considered ?

Your respectfully, wm

[Time to raise the rents.]

So, where does that leave BTL?  Will it never make sense to be a landlord again?

<{POST_SNAPBACK}>

Change "when" to "if" and this is a sensible question.

You say that renting should be cheaper than buying, but without Oz style negative gearing, this hasn't been the case in UK. How do you obtain a BTL mortgage when your rent doesn't cover the interest on your loan ?

Even assuming you are correct and we are now in a new paradigm with permanently higher prices, the big price hike has happened, and HPI will now track wages, albeit at a higher multiple. Therefore, for new entrants to BTL, subsidising tenants can no longer be written off to massive capital gains. Again, how would this stack up as an investment when voids, risk and maintaince are considered ?

Your respectfully, wm

<{POST_SNAPBACK}>

The answer to both your questions is that existing landlords can easily expand whilst new landlords will find it not as easy as it was in the past.

[Guest wrongmove]

The answer to both your questions is that existing landlords can easily expand whilst new landlords will find it not as easy as it was in the past.

<{POST_SNAPBACK}>

An honest answer, but where is the future then ? Once existing LLs have maxed out their lines of credit, it all grinds to a halt. No BTL, no FTB. Where is the demand going to come from that can even maintain nominal prices, let alone index link them. And with rents not even covering an IO mortage.........

Doesn't look sustainable to me.

[Time to raise the rents.]

There are always pockets of overvaluation in a booming market. Yes there are places where IO isn't covered by rent, but not where I operate, so plenty of room for even new landlords.

What does that say about the renting option?

[Guest wrongmove]

There are always pockets of overvaluation in a booming market. Yes there are places where IO isn't covered by rent, but not where I operate, so plenty of room for even new landlords.

What does that say about the renting option?

<{POST_SNAPBACK}>

Yes, but you are HMO. This only proves that people who want to club together and buy are in a good position. But these people will always choose to rent for the flexibility.

Are you buying 1 bed or 2 bed flats, or small family terraces/semis ? Could you even cover your IO on these ?

And without another burst of mega inflation an IO mortgage will mean that the house will basically go back to the bank anyway. A big inflow of money needs yeilds to be good (to raise finance) AND capital appreciation to justify subsidising the tenant as you suggest (rent should be cheaper than buying above)