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Reluctant Landlords Are Back, Say Agents

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http://www.thisismoney.co.uk/mortgages-and-homes/buy-to-let/article.html?in_article_id=517475&in_page_id=56&ct=5

Reluctant landlords are back, say agents

By Simon Lambert

2 November 2010

Reluctant landlords – homeowners who would like to sell but are forced to opt to rent instead – are back as the property market struggles.

A fresh wave of property owners choosing to rent because they cannot sell has arrived, the Association of Residential Lettings Agents has claimed.

../

Call me old fashioned, but I just can't imagine renting out my precious home to have people stamp cigarette-ends into my £30 a square yard carpets. I wonder what state people think their houses will be in after 5 years of renting out?

Edited by AvidFan

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There will be someone who comes along and states that this is viable as rental rates are rising. :rolleyes:

According to one of my colleagues now is a good time to get into BTL "because no-one can get a mortgage". I haven't asked him how he is planning to fund his BTL empire :rolleyes:

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http://www.thisismoney.co.uk/mortgages-and-homes/buy-to-let/article.html?in_article_id=517475&in_page_id=56&ct=5

Reluctant landlords are back, say agents

By Simon Lambert

2 November 2010

Call me old fashioned, but I just can't imagine renting out my precious home to have people stamp cigarette-ends into my £30 a square yard carpets. I wonder what state people think their houses will be in after 5 years of renting out?

Well, we became 'reluctant Landlords' in Early 2009. What then happened was a change in mindset. We have a large 4 bed detached in Oxfordshire with fittings to match. We realised that to leave it empty was a no starter and that if we rented it out the wear and tear would be substantial. So we mentaly wrote off the Fixtures and fittings and accepted that 18 months rent would cover cost of full replacement. Together with Finance costs it was a 3 year break even game. however I would also be earning more so we decided to do it. I am an ex-landlord of property (flats) which were bought outright so I know how to think. You just have to become hard, accept it is not a home but a quality business and move on.

The reason we did not sell is that I am working overseas and need a base somewhere...and for now that is it! I also declare it to HMRC and pay TAX in the UK!

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There will be someone who comes along and states that this is viable as rental rates are rising. :rolleyes:

Buying equities is good too - as they fall, their dividend yield inreases significantly.

Come to think of it, the same philosophy works with bonds too...

Can you see a hole in my argument?

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Well, we became 'reluctant Landlords' in Early 2009. What then happened was a change in mindset. We have a large 4 bed detached in Oxfordshire with fittings to match. We realised that to leave it empty was a no starter and that if we rented it out the wear and tear would be substantial. So we mentaly wrote off the Fixtures and fittings and accepted that 18 months rent would cover cost of full replacement. Together with Finance costs it was a 3 year break even game. however I would also be earning more so we decided to do it. I am an ex-landlord of property (flats) which were bought outright so I know how to think. You just have to become hard, accept it is not a home but a quality business and move on.

The reason we did not sell is that I am working overseas and need a base somewhere...and for now that is it! I also declare it to HMRC and pay TAX in the UK!

3 years to break even! Mental! A 4 bed detached in Oxfordshire, what say £400k and above? Mental opportunity cost! I may be shooting off the hip here, but it sounds like your change in mindset was not enough. Still sounds like emotional attachment to a property (as a home). Which is fine, but I really do not see it as a non-emotional financial decision.

p.s. do the rentiers go through your post?

p.p.s. reluctant renting is not a "quality business" !!!!

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There will be someone who comes along and states that this is viable as rental rates are rising. :rolleyes:

Well,

My current Rental rate is 33% less than 2 years ago! But yes they are rising now as I put them up every 6 months after taking a huge initial dip (40%). As everyone knows it is the low cost of Finance that makes existing owned stock afforadable to keep it as BTL as my finance is only 33% of the rental so making a decent amount of difference which is written off against improvements when the existing 3 year tennants move out.

For me it is a Zero sum game......I am not profiteering at all!

N.

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Buying equities is good too - as they fall, their dividend yield inreases significantly.

Come to think of it, the same philosophy works with bonds too...

Can you see a hole in my argument?

Preaching to the converted here. Shame the rest of the population are buying (the wrong) bonds, equities, houses etc etc.

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Well,

My current Rental rate is 33% less than 2 years ago! But yes they are rising now as I put them up every 6 months after taking a huge initial dip (40%). As everyone knows it is the low cost of Finance that makes existing owned stock afforadable to keep it as BTL as my finance is only 33% of the rental so making a decent amount of difference which is written off against improvements when the existing 3 year tennants move out.

For me it is a Zero sum game......I am not profiteering at all!

N.

3 year tenants, 6 month increases??

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If it is true, then available rental stock will increase which will help stagnate / possibly even reduce rental prices. On the back of the GDP figures, an increase in interest rates is looking more and more likely. I can see a large number of "reluctant landlords" struggling to break even in the very near future.

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3 year tenants, 6 month increases??

Yep,

They agreed a 3 year deal with a reasonable 6 month review if they started at a big discount. We agreed it was in both of our long term benefit!

both parties win, no one loses IMHO.

BTW, I rent where I live so am a renter as wll so see the other side. I take a 12 month deal with a 6 month increase for a large initial discount. If the initial discount was bigger i would take a longer deal.

N.

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Yep,

They agreed a 3 year deal with a reasonable 6 month review if they started at a big discount. We agreed it was in both of our long term benefit!

both parties win, no one loses IMHO.

BTW, I rent where I live so am a renter as wll so see the other side. I take a 12 month deal with a 6 month increase for a large initial discount. If the initial discount was bigger i would take a longer deal.

N.

how does the renter win?

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how does the renter win?

Er, the landlord has taken on pretty much all the downsides, plus given a hefty discount in return for security of tenancy (something that most family renters crave / fear lack of). I'd rent from Naotorius too, sounds like someone who cares, perhaps just a bit too much. In fact, my current landlord sounds a lot like him/her.

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Er, the landlord has taken on pretty much all the downsides, plus given a hefty discount in return for security of tenancy (something that most family renters crave / fear lack of). I'd rent from Naotorius too, sounds like someone who cares, perhaps just a bit too much. In fact, my current landlord sounds a lot like him/her.

Exactly my thought process, if I look after my tenants, they look after my property! It is a narrow tightrope but this is the european (german) style of being a landlord, not the crappy UK model with 'git' landlords.

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3 years to break even! Mental! A 4 bed detached in Oxfordshire, what say £400k and above? Mental opportunity cost! I may be shooting off the hip here, but it sounds like your change in mindset was not enough. Still sounds like emotional attachment to a property (as a home). Which is fine, but I really do not see it as a non-emotional financial decision.

p.s. do the rentiers go through your post?

ie, your mortgage statement (standard, not btl..natch), that your Croatian postie missed on the redirection sort.....

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Er, the landlord has taken on pretty much all the downsides, plus given a hefty discount in return for security of tenancy (something that most family renters crave / fear lack of). I'd rent from Naotorius too, sounds like someone who cares, perhaps just a bit too much. In fact, my current landlord sounds a lot like him/her.

so, how has this landlord, who didnt sell at peak, win? why the reluctant?....he'd have walked with PEAK cash. earned interest, no liabilities and no risk with a tenant, whom he EXPECTS to make the place unliveable in 3 years.

You see, EXPECTING the tenant to be 100% shit is just typical of landlord attitudes.

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Well, we became 'reluctant Landlords' in Early 2009. What then happened was a change in mindset. We have a large 4 bed detached in Oxfordshire with fittings to match. We realised that to leave it empty was a no starter and that if we rented it out the wear and tear would be substantial. So we mentaly wrote off the Fixtures and fittings and accepted that 18 months rent would cover cost of full replacement. Together with Finance costs it was a 3 year break even game. however I would also be earning more so we decided to do it. I am an ex-landlord of property (flats) which were bought outright so I know how to think. You just have to become hard, accept it is not a home but a quality business and move on.

The reason we did not sell is that I am working overseas and need a base somewhere...and for now that is it! I also declare it to HMRC and pay TAX in the UK!

fixtures & fittings...

Kitchen - £10k?

Bathroom - £5k?

Carpets/flooring throughout - £10k?

Decor throughout - £5k?

Garden - £10k?

Not incluiding if you have furnishings, white goods, etc. to "break even" in three years you're needing an income of £40k, or £1150/month, just for the fixtures & fittings alone.

That then doesn't include for any mortgage payments, voids, repairs, agency costs...

Need I go on?

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To bloo:

The landlord wins as he gets to return to his house, an emotional attachment. He trades away all the things you mentioned and more. An emotional win for considerable financial and time cost / risk.

Whether or not it is worthwhile is all a manner of perspective.

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fixtures & fittings...

Kitchen - £10k?

Bathroom - £5k?

Carpets/flooring throughout - £10k?

Decor throughout - £5k?

Garden - £10k?

Not incluiding if you have furnishings, white goods, etc. to "break even" in three years you're needing an income of £40k, or £1150/month, just for the fixtures & fittings alone.

That then doesn't include for any mortgage payments, voids, repairs, agency costs...

Need I go on?

About the same costs I imagined, (excluding Garden as that is looked after). However we lived in it for 4 years so had already allowed for 50% cost of replacement. So we need to put aside £550 a month so with financing and management fees and Tax we break even.

You are right that in an ideal Investment world we would sell. But at the time My wife wanted to return to our Home. Now she no longer sees it as such we can sell but not for another 12 months (we have it rented). Got about 30% equity in it at a realistic sale price, so wil watch Interest rates and the market and decide when the tenants move out if to sell

We are a reluctant but realistic Landlord! We are doing our best to keep everyone happy without any financial burden. The key is we have savings so can ride out a financial storm (our deposit fund).

It is not a perfect situation, but made manageable by low interest rates. in another 12 months they can rise by up to £550 a month as we will have the full refurb fund. (about 4.5%) Above that and either we will need to input money to make up rent or sell. That is when it gets Interesting!

For the record we never tried to sell because of my wifes emotional attachment. It would have been easy to sell but we did not. Next time it may become a financial decision and that is when i become hard nosed.

We bought in Nov 2004 and got a decent discount off builder so missed peak by about 15-20%! Now valuing it at exactly what we paid which is 12% less than next cheapest on Market and a whopping 28% less than some greedy git wants. Would sell at a loss if we needed to, and a 25% drop will wipe out equity (including sale costs). However as i will buy another property it is all relative! The Nov 2004 price we paid was the same as someone paid in Oct 2003. so now valuing her at Oct 2003 price which I feel is still realistic (so far)

By the way Mortgage statements go direct to current address.

N.

Edited by Nautorius

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Reluctant landlords are almost always in breach of mortgage conditions forbidding them to rent or have lodgers. If they inform the lender, chances are they will be forced into new terms at a higher rate ie. BTL style mortgage.

But none of that legal stuff matters anymore.

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