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DonnieDarker

Should I Become A Btl Landlord?!

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In other posts I have indicated that whilst I ceased looking to buy (we started June 2004 and gave up in Jan 2005) I don't think we can wait much longer than June 2007 before we buy.

Now, my gut feeling is that that will be too early to catch the trough (if there is one) and increasingly I see posters on here refer to 2009-10 as the likley time of the market bottoming out.

My question is this:

accepting that I buy the place I live in in 2007 and accepting that I and my partner have a large amount of savings for FTB's I am wondering what to do with the money that is left after the deposit for the 1st property has been spent.

I am tempted to buy our 'home' in 2007 and then wait until the the market bottoms out before buying a BTL circa 2009-10.

I know I am not going to get it "100% right" with the 1st purchase but having saved like a demon for what will then be 6 years I fancy having a second bite of the cherry with some of the savings that are left over.

What do you think?

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Guest prudence
In other posts I have indicated that whilst I ceased looking to buy (we started June 2004 and gave up in Jan 2005) I don't think we can wait much longer than June 2007 before we buy.

Now, my gut feeling is that that will be too early to catch the trough (if there is one) and increasingly I see posters on here refer to 2009-10 as the likley time of the market bottoming out.

My question is this:

accepting that I buy the place I live in in 2007 and accepting that I and my partner have a large amount of savings for FTB's I am wondering what to do with the money that is left after the deposit for the 1st property has been spent.

I am tempted to buy our 'home' in 2007 and then wait until the the market bottoms out before buying a BTL circa 2009-10.

I know I am not going to get it "100% right" with the 1st purchase but having saved like a demon for what will then be 6 years I fancy having a second bite of the cherry with some of the savings that are left over.

What do you think?

How do you know what the world's going to be like in five years time?

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I don't. That's the point of this post!

My anxiety is that I cant be arsed/want to wait much longer than 2007 before I buy but I am concerend that prices could dip some way after that for 2-3 years.

I've been made a fool out of by the house market by not being born 5 years earlier. Nothing I can do about that.

What I don't want to happen is to be made a fool of a second time by not taking advantage of a market trough when the whole point of me saving for years was to get enough equity for deposit(s).

Obviously the moset "sensible" thing to do would be wait until the market bottomns out and starts rising properly but that may be 5 years away! :angry:

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Guest prudence
I don't. That's the point of this post!

My anxiety is that I cant be arsed/want to wait much longer than 2007 before I buy but I am concerend that prices could dip some way after that for 2-3 years.

I've been made a fool out of by the house market by not being born 5 years earlier. Nothing I can do about that.

What I don't want to happen is to be made a fool of a second time by not taking advantage of a market trough when the whole point of me saving for years was to get enough equity for deposit(s).

Obviously the moset "sensible" thing to do would be wait until the market bottomns out and starts rising properly but that may be 5 years away! :angry:

The point I was trying to make was that you seem confident that you should invest your spare money in property. There might be much better alternative capital opportunities then.

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The point I was trying to make was that you seem confident that you should invest your spare money in property.  There might be much better alternative capital opportunities then.

Ah. You could be right.

But as I am pretty ignorant of other markets this had not occured to me.

Food for thought I guess.

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If it were me (and I may well be in a similar situation soon) I'd buy your home. With the money left over split it into two groups: (1) low risk, (2) high risk with good return. I'd put the low risk money into a bank earning interest. The rest I'd put in some other form of investment such as shares, gold or other commodities. If/when property shows signs of bottoming out then switch it into that. But this way it is flexible and still earning money.

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I don't. That's the point of this post!

My anxiety is that I cant be arsed/want to wait much longer than 2007 before I buy but I am concerend that prices could dip some way after that for 2-3 years.

I've been made a fool out of by the house market by not being born 5 years earlier. Nothing I can do about that.

What I don't want to happen is to be made a fool of a second time by not taking advantage of a market trough when the whole point of me saving for years was to get enough equity for deposit(s).

Obviously the moset "sensible" thing to do would be wait until the market bottomns out and starts rising properly but that may be 5 years away! :angry:

I think your strategy sounds about right. Buy a home when prices are a bit more sensible than they are now, then try and wait for the nadir before buying a BTL as an investment.

After all, who knows when you could be hit by a falling aircraft (if indeed you haven't been already) ;).

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I live about 2 miles from my local Uni. All the landlords, most with siezable portfolios of students houses, sold up between 2001 and Spring 2004. All have made huge cash profits and, I suspect, many are waiting for the crash to buy back into the market.

Let's face it, if you can sell a house that you bought for 50K or 60K for 185K or 250K you're going to do it aren't you.

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You raise an interesting point.

In many ways there is a good justification for buying before the market troughs because like it or not there will be the specualtors you mention who have made millions from the last boom who will stampede when prices bottom out.

That will make it hard to buy the property you really want - and as this would be a 'home' that could be quite stressful.

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BTL.

Superb investment.

If your outgoing are covered by rent and you can assure tennancy then your mortgage gets paid for you.

Currently its not so good as 10% of BTL properties stand empty and current prices cannot be recovered from rent.

I.E a £350,000 mortgage at 5% would require about £1500 in rent to meet only an interest only mortgage. No capital repayment.

and that assumes that it is full.

The interest only mortgage would be £1250 ish a month and you don't want that standing empty for 10% of your year.

So say the average landlord can get £1000 a month, cost is say £1400 a month.

that is a loss of £4800 a year, assuming full paying tennants are in place.

Drop one month and that goes up to £5,800 and don't forget no capital is paying of.

You also have to bare in mind that you will always have £350,000 of debt.

and house prices may change.

The head of the Bank of England stated that "Debt is real but house prices are a matter of opinion" and you can ignore that at your perril.

personally why people want to take that much of a risk at such a high cost is beyond me..

Essentially current prices are too high for BTL to work, or FTB's to enter the market.

Which means that House Prices can have no substance.

Essentially beinf swapped between people in massive debt telling each other how rich they are while the rest of us watch on a little bemused by it all.

Bemused and impatient to be honest..

But bemused..

"I have a lovely little place and £350,000 worth of debt.." says the Property investor..

"Really .. that must be nice for you.. now do you mind if I rent it from you vastly below what it is costing you..?" says the renter...

"Of course.. in times of high prices I would love to subsidise your living expenses right up to the point my own financies go crunch.. at which time you will be able to buy it anyway... well.. who in their right minds would buy it at current prices...?" Says the BTL Landlord..

"That is very nice of you.. you are a good egg..." says the renter..

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In other posts I have indicated that whilst I ceased looking to buy (we started June 2004 and gave up in Jan 2005) I don't think we can wait much longer than June 2007 before we buy.

Now, my gut feeling is that that will be too early to catch the trough (if there is one) and increasingly I see posters on here refer to 2009-10 as the likley time of the market bottoming out.

My question is this:

accepting that I buy the place I live in in 2007 and accepting that I and my partner have a large amount of savings for FTB's I am wondering what to do with the money that is left after the deposit for the 1st property has been spent.

I am tempted to buy our 'home' in 2007 and then wait until the the market bottoms out before buying a BTL circa 2009-10.

I know I am not going to get it "100% right" with the 1st purchase but having saved like a demon for what will then be 6 years I fancy having a second bite of the cherry with some of the savings that are left over.

What do you think?

why not use most of the cash as your deposit on the first place and go for a much shorter mortgage term, 10 or 15 yrs ??

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Guest Guy_Montag

I'm in a similar position, but was planning to wait a little longer than you, after all who knows where the bottom is.

My plan was to pay a 50% deposit, so hopefully we'll have paid off the house in 10 years not 25. Then I'll have £300 a month extra to play with, that is 2 good holidays or a small yacht every year.

Any thoughts?

tia

GM

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To paraphrase the words of St Paul “yes but not now”

BTL is like any other investment but with one difference you borrow part of your stake money. This leverage is good in a rising market but bloody frightening in a falling market.

You have done the right thing by saving a good deposit don’t blow it buying into BTL just as all the smart money is out.

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BTL.

Superb investment.

If your outgoing are covered by rent and you can assure tennancy then your mortgage gets paid for you.

Currently its not so good as 10% of BTL properties stand empty and current prices cannot be recovered from rent.

I.E a £350,000 mortgage at 5% would require about £1500 in rent to meet only an interest only mortgage. No capital repayment.

and that assumes that it is full.

The interest only mortgage would be £1250 ish a month and you don't want that standing empty for 10% of your year.

So say the average landlord can get £1000 a month, cost is say £1400 a month.

that is a loss of £4800 a year, assuming full paying tennants are in place.

Drop one month and that goes up to £5,800 and don't forget no capital is paying of.

You also have to bare in mind that you will always have £350,000 of debt.

and house prices may change.

The head of the Bank of England stated that "Debt is real but house prices are a matter of opinion" and you can ignore that at your perril.

personally why people want to take that much of a risk at such a high cost is beyond me..

Essentially current prices are too high for BTL to work, or FTB's to enter the market.

Which means that House Prices can have no substance.

Essentially beinf swapped between people in massive debt telling each other how rich they are while the rest of us watch on a little bemused by it all.

Bemused and impatient to be honest..

But bemused..

"I have a lovely little place and £350,000 worth of debt.." says the Property investor..

"Really .. that must be nice for you.. now do you mind if I rent it from you vastly below what it is costing you..?" says the renter...

"Of course.. in times of high prices I would love to subsidise your living expenses right up to the point my own financies go crunch.. at which time you will be able to buy it anyway... well.. who in their right minds would buy it at current prices...?" Says the BTL Landlord..

"That is very nice of you.. you are a good egg..." says the renter..

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why not use most of the cash as your deposit on the first place and go for a much shorter mortgage term, 10 or 15 yrs ??

I'd never thought of that!?

Do you think it would be the most intelligent use of the money though?

Giving it away to the bank rather than trying to invest it myself?

Reducing the mortage to 20 years would be an option though...don't have enough savings to manage 15.

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To paraphrase the words of St Paul “yes but not now”

BTL is like any other investment but with one difference you borrow part of your stake money. This leverage is good in a rising market but bloody frightening in  a falling market.

You have done the right thing by saving a good deposit don’t blow it buying into BTL just as all the smart money is out.

Couldn't agree more. I wouldn't advise anyone to BTL now, there's nothing to be gained from it. Invest in a good portfolio, spread over high and low risk returns. You'll be laughing all the way to your comfy retirement.

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Which is why I was sayig BTL might be an option 2010+.

I've thought about the reduced mortgage option and am rejecting it on the basis that when we buy the flat I don't think the market will have bottomned out (2007ish) so throwing more money at it in terms of a deposit would be a little foolish.

I'd rather keep hold of the cash and invest that elsewhere (maybe in a BTL)...worst case scenario would mean overpaying the mortgage with chunks of it I guess.

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I'd never thought of that!?

Do you think it would be the most intelligent use of the money though?

Giving it away to the bank rather than trying to invest it myself?

Reducing the mortage to 20 years would be an option though...don't have enough savings to manage 15.

You won't be giving it to the bank.

You will be using it to buy "more" of your house outright..

and borrowing less from the bank.

The house will be more yours.

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Hm.

This will have to be considered I think.

I suppose the mortgage repayments would be less and we could always re-mortgage if a BTL opportunity came up.

In plain figures we would be talking about either putting down £40K deposit or putting down as much as £80K deposit on a place costing approx £250K.

What worries me a bit is that extra £40K would only reduce the monthly repayments by:

1434.67 (210k mortgage)

to

1161.40 (170k mortgage)

(Based on 6.5% rate.)

Although, I could reduce the length of the mortgage to 16 years from 25 and pay

1450.34.

Paying the same rate but reducing the mortgage length by 9 years sounds quite appealing!

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Guest Guy_Montag
Hm.

This will have to be considered I think.

I suppose the mortgage repayments would be less and we could always re-mortgage if a BTL opportunity came up.

In plain figures we would be talking about either putting down £40K deposit or putting down as much as £80K deposit on a place costing approx £250K.

What worries me a bit is that extra £40K would only reduce the monthly repayments by:

1434.67 (210k mortgage)

to

1161.40 (170k mortgage)

(Based on 6.5% rate.)

Although, I could reduce the length of the mortgage to 16 years from 25 and pay

1450.34.

Paying the same rate but reducing the mortgage length by 9 years sounds quite appealing!

1434*12*25 = 430,200

1450*12*16 = 278,400

difference = 151,800

I know which option I would go for.

Or have I got this wrong?

Edited by Guy_Montag

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This will have to be considered I think.

A shorter mortgage term would be my option.

The maths will be a bit tricky, but consider your scenarios carefully. Make sure that you consider over 25 years:

1) How much you pay out IN TOTAL on you mortgage

2) What profit you can earn from your btl venture

3) If you have a shorter term mortgage, how much extra cash you have form not paying off a mortgage.

My gut feeling is that if you were to consider the above factors, a shorter term mortgage would leave you more prosperous. Being out of debt is a wonderful thing!

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I'd never thought of that!?

Do you think it would be the most intelligent use of the money though?

Giving it away to the bank rather than trying to invest it myself?

Reducing the mortage to 20 years would be an option though...don't have enough savings to manage 15.

You won't be giving it to the bank !!

You will be saving yourself literally thousands of pounds even if you take just five years off the term of your mortgage.

I think if you do the sums, you would need a fairly high risk investment to equal what you'll save.

Read this link it'll make you realise how much your house really costs to buy, not just what you borrowed.

http://www.nodebtever.com/debt-help/Shave-...G-20050621.html

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OK. I'm persuaded!

This is all very reminiscent of the Alvin Hall school of debt management which is one that I subsribe too.

Essentially he says if you are used to paying £X on a debt each month then once that debt is paid pay the £x into savings or against a new debt. Don't treat the money as a gift because you have already proved you don't 'need' it.

Same here. If you can afford £1400 in repayments each month then pay that amount but reduce the length of the mortgage rather than sitting on the extra £300 a month and spending that on holidays etc. that you might have by putting a larger deposit down.

It may be boring but it is pretty effective.

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OK. I'm persuaded!

This is all very reminiscent of the Alvin Hall school of debt management which is one that I subsribe too.

Essentially he says if you are used to paying £X on a debt each month then once that debt is paid pay the £x into savings or against a new debt. Don't treat the money as a gift because you have already proved you don't 'need' it.

Same here. If you can afford £1400 in repayments each month then pay that amount but reduce the length of the mortgage rather than sitting on the extra £300 a month and spending that on holidays etc. that you might have by putting a larger deposit down.

It may be boring but it is pretty effective.

It's also a good policy to treat any salary increases in a similar way.

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It's also a good policy to treat any salary increases in a similar way.

My salary went up by 10% last year and I put all the extra into overpaying my mortgage. It is amazing how big a difference this makes and how many years you can save. I'd definitely advise doing this - and this way another FTB might be able to buy the house you'd have bought to rent out.

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  • 335 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% +
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      • Even
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      • up 5%



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