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Buy To Let Nightmare

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"This is exactly what Abigail Hofman seems to wish she had done. In the FT, she explains how after a career in investment banking she was lured into “the honey trap of buy-to-let.” In the spring, she bought a small flat in Notting Hill as an investment, but the dream has slowly become a nightmare. She envisages a net rental yield of around 4%, but given the average mortgage fixed rate in April was, according to the Council of Mortgage Lenders, 4.99%, “you need to be a magician to make the rental inflow cover the mortgage outflow.” And that’s assuming she can find a tenant in the first place. The best-case scenario as Hoffman sees it? Meagre rental returns and massive stress levels."

Was her career in investment banking hoovering the floors around the trading desks at 10pm, or did she do no due dilligence whatsoever (unforgiveable for an investment banker)?

4% yields, when interest rates are nearer 5.5% for a BTL mortgage, are acceptable if you are confident in quick rises in rent or capital values. In todays market it is pretty damn stupid.

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The intelligence/astuteness of a lot of investment bankers is often overstated.

Correct. I'm in IT and have sat in meetings with the business on the loans side of a bank (a high street bank not an investment bank though) and clearly had a better understanding of the current economy. They seemed genuinely surprised that loans were no longer selling as well, while I was trying to explain to them that the whole market was subdued as a result of MEW collapse, creeping stealth taxes, hidden inflation and increasing utility bills, etc. The just didn't get it. yet it was their job to understand the market and the economy.

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  • 338 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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