Jump to content
House Price Crash Forum
Sign in to follow this  
Wouldliketobuy

Btl Worried About Parents

Recommended Posts

My 49 yr old parents have been given some advice to BTL from a friend. Current house is worth £150k. Mortgage is paid off. They are going to take out a £100k, 15 yr mortgage and move to a small terrace, renting out their old house for £600 a month to pay the mortgage on the new one, therefore living rent free and in 15 years time will have 2 properties to sell to fund their old age.

The friend says they cant lose. I have told them a lot could happen between now and then and that its a huge risk, especially if IR go up and HP go down and being a landlord is a huge hastle. Friend says property never loses money and Dad says I dont understand the property market as I am not a homeowner.

I want to help, but fear I am fighting a losing battle as the friend has made a fortune from BTL and they wont listen. They refuse to believe a crash is even a possibility.

Share this post


Link to post
Share on other sites
I want to help, but fear I am fighting a losing battle as the friend has made a fortune from BTL and they wont listen. They refuse to believe a crash is even a possibility.

A lot of people bought dotcom shares in 2000 because their friends had made a fortune. The rest is Geography.

Sorry, I meant History.

Share this post


Link to post
Share on other sites
Current house is worth £150k. Mortgage is paid off.

At the moment they have absolutely no housing costs whatsoever (apart from maintenance, etc blah blah blah).

They are going to take out a £100k, 15 yr mortgage and move to a small terrace, renting out their old house for £600 a month to pay the mortgage on the new one

And what or who is going to pay the £100K mortgage on the old house?

therefore living rent free

They already live rent-free.

I'd heard some stupid ideas in this crazy bubble, but this one takes the biscuit.

Share this post


Link to post
Share on other sites
My 49 yr old parents have been given some advice to BTL from a friend. Current house is worth £150k. Mortgage is paid off. They are going to take out a £100k, 15 yr  mortgage and move to a small terrace, renting out their old house for £600 a month to pay the mortgage on the new one, therefore living rent free and in 15 years time will have 2 properties to sell to fund their old age.

The friend says they cant lose. I have told them a lot could happen between now and then and that its a huge risk, especially if IR go up and HP go down and being a landlord is a huge hastle. Friend says property never loses money and Dad says I dont understand the property market as I am not a homeowner.

I want to help, but fear I am fighting a losing battle as the friend has made a fortune from BTL and they wont listen. They refuse to believe a crash is even a possibility.

I have concerns about my parents financial decisions at the moment but I have resigned myself to the fact that there is nothing I can do. They obviously feel they know what they are doing and have effectively already made up their minds. You can't make decisions for them. In my case I just hope that if things go badly wrong I will, by then, be in a position to offer support to my parents. I just hope it doesn't come to that and our parents somehow get lucky or manage to muddle through. :(

Share this post


Link to post
Share on other sites
Guest Guy_Montag
Friend says property never loses money and Dad says I dont understand the property market as I am not a homeowner.

I want to help, but fear I am fighting a losing battle as the friend has made a fortune from BTL and they wont listen. They refuse to believe a crash is even a possibility.

Have they made any other provision for their retirement?

Point out that, since you are not a homeowner you can be more objective.

Show them some graphs of house price index.

Show them some horror stories about tennants.

Share this post


Link to post
Share on other sites
My 49 yr old parents have been given some advice to BTL from a friend. Current house is worth £150k. Mortgage is paid off. They are going to take out a £100k, 15 yr  mortgage and move to a small terrace, renting out their old house for £600 a month to pay the mortgage on the new one, therefore living rent free and in 15 years time will have 2 properties to sell to fund their old age.

The friend says they cant lose. I have told them a lot could happen between now and then and that its a huge risk, especially if IR go up and HP go down and being a landlord is a huge hastle. Friend says property never loses money and Dad says I dont understand the property market as I am not a homeowner.

I want to help, but fear I am fighting a losing battle as the friend has made a fortune from BTL and they wont listen. They refuse to believe a crash is even a possibility.

IF THEIR RETIREMENT IS OTHERWISE SECURE THEN HEY WHAT THE HELL.

IF NOT - THEY REALLY MUST NOT

THEY WILL BE MAD

IS THE 'FRIEND' A PROFESSIONAL ADVISER?

WILL HE BE LIABLE IF IT F***S UP?

THEY WILL LIKELY BE MAD IF THEY DO IT GIVEN WHAT OTHER INVESTMENT VEHICLES ARE AVAILABLE

Share this post


Link to post
Share on other sites

I'm very confused.

If you look at Charcol's Mortgage Calculator:

Charcol Mortgage Calculator

For a £100k debt to be repaid over 15 years at £600 pcm you need a fixed rate mortgage of 1%... as far as I'm aware these do not exist yet.

Or has your parents' BTL genius pal taught them the joys of interest only mortgages?

If so, they will NOT own the second property after 15 years - they will gain (or lose) the difference in the house's value over 15 years though (which COULD be considerable).

As long as you make sure they are aware of the costs/risks related to buying/selling, maintenance, insurance, potential voids etc not to mention the hassle of being a landlord and the potential for significant capital loss then maybe you should leave them to it.

You might, though, want to point out that £600 pcm on a £150k property is a rental yield of just 4.8% - marginally above the base rate, probably below their cost of borrowing and so it opens them up to a pretty healthy risk of potentially poor/unexciting returns over the next 15 years.

Does their friend have a property to sell them by any chance?

Or am I being TOO cynical now?

Share this post


Link to post
Share on other sites
IS THE 'FRIEND' A PROFESSIONAL ADVISER?

WILL HE BE LIABLE IF IT F***S UP?

Probably not. But then most 'professional' (sic) advisors would be careful enough to grab their commission whilst also not leaving themselves liable. In other words, the 'friends' advise is less likely to be deceptive, as they aren't making any money from it...

Oh, and your CAPS key is stuck.

Nomadd

Share this post


Link to post
Share on other sites
Guest rigsby II
My 49 yr old parents have been given some advice to BTL from a friend.

I want to help, but fear I am fighting a losing battle as the friend has made a fortune from BTL and they wont listen. They refuse to believe a crash is even a possibility.

You speak as if your parents at only 49 are in a persistent vegetative state and unable to think for themselves - hey they've only being adults for the last 28 years - whereas you, with much less life experience, somehow seem have a much better understanding of things.

If my kids ever dared to lecture me about my financial affairs, then on a good day I'd tell them to mind their own business and on a bad one I'd tell them to feck off and give 'em a good hiding at the same time <_<

Share this post


Link to post
Share on other sites
My 49 yr old parents have been given some advice to BTL from a friend. Current house is worth £150k. Mortgage is paid off. They are going to take out a £100k, 15 yr  mortgage and move to a small terrace, renting out their old house for £600 a month to pay the mortgage on the new one, therefore living rent free and in 15 years time will have 2 properties to sell to fund their old age.

The friend says they cant lose. I have told them a lot could happen between now and then and that its a huge risk, especially if IR go up and HP go down and being a landlord is a huge hastle. Friend says property never loses money and Dad says I dont understand the property market as I am not a homeowner.

I want to help, but fear I am fighting a losing battle as the friend has made a fortune from BTL and they wont listen. They refuse to believe a crash is even a possibility.

is this a paper fortune or has he banked some of the profits by selling some of his properties - if so he may be worth listening too. Get them to ask their friend what his strategy is when property prices are falling - my guess is he won't have one and therefore they need to think about whether they should listen to this friend at all regarding investments.

Don't mistake a bull market for brains

Edited by lowrentyieldmakessense(honest!)

Share this post


Link to post
Share on other sites

I'm such a lucky boy!!!!

my mum is as stubborn as a mule when it comes to these sales pitch things!

...fortunately I have a good track record of advising what she ought to buy/sell

...got her to dump railtrack at £14.50.....we all know what happened to that a couple of months later.

....got her to change her crappy cash ISA she got in 2002(on the advice of Bradford+Bingley financial advisor I hasten to add!!), to a share ISA in APR 2003.....done very nicely too thankyou!.....(I changed my pension plan to equities at exactly the same time)

She has today siphoned off a few grand from that and opened a goldline tradeable account!!!!!!..(she's only about a year behind me on commies but it's a good start!)

Share this post


Link to post
Share on other sites
You speak as if your parents at only 49 are in a persistent vegetative state and unable to think for themselves - hey they've only being adults for the last 28 years -  whereas you, with much less life experience, somehow seem have a much better understanding of things.

If my kids ever dared to lecture me about my financial affairs, then on a good day I'd tell them to mind their own business and on a bad one I'd tell them to feck off and give 'em a good hiding at the same time <_<

Yes they are the same sensible parents that have been pressuring me to buy for the past 2 years as my £70 a week rent to the council is dead money and we would be so much better off taking out a £130k mortgage to buy an ex council house on the same street, with all the repair bills to pay as "renting is dead money" and "property always goes up"

Age does not bring wisdom.

Share this post


Link to post
Share on other sites
I'm very confused.

If you look at Charcol's Mortgage Calculator:

Charcol Mortgage Calculator

For a £100k debt to be repaid over 15 years at £600 pcm you need a fixed rate mortgage of 1%... as far as I'm aware these do not exist yet.

Or has your parents' BTL genius pal taught them the joys of interest only mortgages?

This is what I cant understand. The figures dont add up. If they are lucky they will get £600 pcm rent for their old house. It will not cover the £100k mortgage they need for the new place and they will also be paying out for repairs on 2 properties.

Of course the friend has said house prices with treble in 15 yrs, so their money is "safe as houses"

Edited by Wouldliketobuy

Share this post


Link to post
Share on other sites
Probably not. But then most 'professional' (sic) advisors would be careful enough to grab their commission whilst also not leaving themselves liable. In other words, the 'friends' advise is less likely to be deceptive, as they aren't making any money from it...

Oh, and your CAPS key is stuck.

Nomadd

And you can't spell "advice" :lol:

Share this post


Link to post
Share on other sites

Here come the finances:

£100k repayment mortgage for 15 years is (at 5.5%) £830.21. Which is £230.21 more than the £600, so this will have to come from your parents pockets (either savings or income). They will have to subsidise this for 15 years (if the IR stays the same).

For the investment to pay for itself they can only get a mortgage for £72,270. Could they buy a smaller house (in full) for this amount? I doubt it.

You can add in your own maintenance costs and hassel. You can also add in the IR and House Price changes over 15 years.

Share this post


Link to post
Share on other sites
My 49 yr old parents have been given some advice to BTL from a friend. Current house is worth £150k. Mortgage is paid off. They are going to take out a £100k, 15 yr  mortgage and move to a small terrace, renting out their old house for £600 a month to pay the mortgage on the new one, therefore living rent free and in 15 years time will have 2 properties to sell to fund their old age.

The friend says they cant lose. I have told them a lot could happen between now and then and that its a huge risk, especially if IR go up and HP go down and being a landlord is a huge hastle. Friend says property never loses money and Dad says I dont understand the property market as I am not a homeowner.

I want to help, but fear I am fighting a losing battle as the friend has made a fortune from BTL and they wont listen. They refuse to believe a crash is even a possibility.

I would try very hard to talk them out of this

After all it's your inheritance they are about to p*ss up the wall !! B)

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.