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Cornish Agents Targeting Btl

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Agents giving up with first time buyers in West Cornwall instead targeting retired boomers to pile their savings into BTL . But hey 4.7% yield its all going to be worth it right?:rolleyes:

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Agents giving up with first time buyers in West Cornwall instead targeting retired boomers to pile their savings into BTL . But hey 4.7% yield its all going to be worth it right?:rolleyes:

Taking your scenario of a retired boomer with a pot of savings with which to fund a pension, what are their other options and how would that compare with the 4.7% BTL yield that you quote?

1. A share portfolio and live off the dividends, that would give anywhere from about 3% for a tracker to about 5% if they went for a high yielding portfolio. Problem is the FTSE is currently lower than it was eleven years ago, personally i think that makes shares a buying opportunity, but the fact is that equities scare the pants off most people.

2. Fixed interest, ie stick it in the bank, at the moment that'll deliver bugger all, but assuming a modest increase in bank rate they might get say 3 or 4% in a year or two.

3. An annuity. Widely varying rates depending on assumptions, but an annuity that increases by a fixed 3% every year would currently yield about 4.8% for a 65 year old, sole life, non smoker. Most people hate the thought that when they die there's nothing left.

4. Buy a big bag of sovereigns, zero yield, so they'd have to sell off maybe 3-5% of their holdings each year and hope this sees them out and it doesn't get stolen in the meantime.

I could add many other options, but I'm sure you get the point. I don't personally believe BTL is a smart retirement option, but I can certainly see how the bricks and mortar infatuated population might conclude that a 4.7% BTL yield works for them.

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I don't get BTL. Ive seen an house near me advertised as a perfect investment opportunity. They tried to sell it last year for £120k (iirc) then stuck in an auction guide price £100k didn't sell. They then let it for 6 months for £600 per month. It's now back in another auction guide £95k (although who knows what the reserve is. £120k?)

Anyway 7.6% yeild. Right? Well I done a few calculations assuming I bought it (not that i ever would!!) with the minimum BTL deposit of 25%. (all figures are rough)

Purchase price £95,000

Deposit: £23,250 + £2000 fees. £25,250

I'd have to use a letting agent so I'll assume they take 10% (I remember some used to charge 15% not sure about lately)

600/month less letting fee is £540/mont. Assume 1 month a year void (is this realistic?) gives you £5940pa gross.

I'd have to have a fixed mortgage to feel safe. Especially when the trackers are BR+ 2.5%+!! So I'm thinking a five year fix will be about 6%(?)

so ££71,750 over 25 years IO is £356/month. £4272pa.

Add on £150 insurance and £1000pa (?) maintenance.

Gives total cost of £5422. So £5940 - £5422 gives a gross yearly profit of £518 giving a return on your £25,250 of 2.05% before tax. Or 1.64% after tax (for lower rate taxpayer)

I'd be happy for someone to show if I've made and error or assumed wrong anywhere but gping by that youre better off with your money in the bank even with today's atrocious IRs. Is BTL all about capital gains?

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I don't get BTL. Ive seen an house near me advertised as a perfect investment opportunity. They tried to sell it last year for £120k (iirc) then stuck in an auction guide price £100k didn't sell. They then let it for 6 months for £600 per month. It's now back in another auction guide £95k (although who knows what the reserve is. £120k?)

Anyway 7.6% yeild. Right? Well I done a few calculations assuming I bought it (not that i ever would!!) with the minimum BTL deposit of 25%. (all figures are rough)

Purchase price £95,000

Deposit: £23,250 + £2000 fees. £25,250

I'd have to use a letting agent so I'll assume they take 10% (I remember some used to charge 15% not sure about lately)

600/month less letting fee is £540/mont. Assume 1 month a year void (is this realistic?) gives you £5940pa gross.

I'd have to have a fixed mortgage to feel safe. Especially when the trackers are BR+ 2.5%+!! So I'm thinking a five year fix will be about 6%(?)

so ££71,750 over 25 years IO is £356/month. £4272pa.

Add on £150 insurance and £1000pa (?) maintenance.

Gives total cost of £5422. So £5940 - £5422 gives a gross yearly profit of £518 giving a return on your £25,250 of 2.05% before tax. Or 1.64% after tax (for lower rate taxpayer)

I'd be happy for someone to show if I've made and error or assumed wrong anywhere but gping by that youre better off with your money in the bank even with today's atrocious IRs. Is BTL all about capital gains?

From what I can gather the attraction of BTL is in the capital appreciation of the value of the property. Many BTLers run at a loss of a couple of hundred quid a month but see it as worthwhile as a rise in house prices over time will easily offset that. If house prices stay flat then in my opinion the exsiting BTL model is broken. If house prices go down, then some amateur landlords are going to have real problems.

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http://www.rightmove.co.uk/property-for-sale/find.html?searchType=SALE&locationIdentifier=REGION^61294&insId=1&radius=0.0&displayPropertyType=&minBedrooms=&maxBedrooms=&minPrice=&maxPrice=&retirement=&partBuyPartRent=&maxDaysSinceAdded=&_includeSSTC=on&x=39&y=4&sortByPriceDescending=&primaryDisplayPropertyType=&secondaryDisplayPropertyType=&oldDisplayPropertyType=&oldPrimaryDisplayPropertyType=&newHome=&auction=false

1.An enchanting agricultural, residential & commercial estate situated in a picturesque area. Principal house used as offices, restaurant and shop, 10 houses and cottages, 7 farms, woodland, in all 723 acres

2. same place

3.A large family home with a two bedroom anne

4. Manor House plus Pair Of Semi Detached Cottages plus land.

5. Commercial property for sale - Fish & Chip and Pizza Takeaway Pasty Underground Commercial Let 2 Residential Apartments 3 Holiday Apartments

6. Whole hamlet - Trefanny Hill is a beautiful hamlet situated in Cornish countryside and consists of 19 properties and three additional buildings

7. has Secondary accommodation

8. house with boat house with dormitory above

9. Just a house.

10. 5 Star ETC mixed site, near South coast 18 acres (tbc), 75 statics (av. 6 yrs), 22 touring, 10 apartments

So out of the top 10 properties most expensive in Cornwall, only one is just a house.

Edited by SarahBell

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From what I can gather the attraction of BTL is in the capital appreciation of the value of the property. Many BTLers run at a loss of a couple of hundred quid a month but see it as worthwhile as a rise in house prices over time will easily offset that. If house prices stay flat then in my opinion the exsiting BTL model is broken. If house prices go down, then some amateur landlords are going to have real problems.

Look at the figures I gave above, they're straight yields, no capital appreciation in any of them. BTL still looks attractive at the 4.7% yield quoted by the OP. I'm not defending the BTL model, BTL doesn't form any part of my own pension planning and personally I'm using equities plus company pension schemes plus AVC's/annuities, but I can see why BTL would appeal to many people.

The risks I see with BTL are,

-future legislation that switches the balance from landlords towards tenants

-captial declines

-reducing real incomes and living standards restricting future rent increases

But on a straight yield versus other alternatives approach I have to concede it's superficially attractive for some people.

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Is BTL all about capital gains?

Basically, yes. Even without a mortgage, the return is less than 5% before tax.

£1000 per year might just about keep an already good condition house in reasonable order but after a few years big bills kick in like new boilers, bathrooms, kitchens, windows, appliances etc. Tenants rarely do the garden, so, you'll need to pay a gardener as well. I reckon a gross return of 7 - 10 % is required to begin to make it worthwhile and that is with decent tenants.

Modest house price falls and mortgage interest rate rises would wipe out most recent BTLers. An Merv knows this.

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Taking your scenario of a retired boomer with a pot of savings with which to fund a pension, what are their other options and how would that compare with the 4.7% BTL yield that you quote?

1. A share portfolio and live off the dividends, that would give anywhere from about 3% for a tracker to about 5% if they went for a high yielding portfolio. Problem is the FTSE is currently lower than it was eleven years ago, personally i think that makes shares a buying opportunity, but the fact is that equities scare the pants off most people.

2. Fixed interest, ie stick it in the bank, at the moment that'll deliver bugger all, but assuming a modest increase in bank rate they might get say 3 or 4% in a year or two.

3. An annuity. Widely varying rates depending on assumptions, but an annuity that increases by a fixed 3% every year would currently yield about 4.8% for a 65 year old, sole life, non smoker. Most people hate the thought that when they die there's nothing left.

4. Buy a big bag of sovereigns, zero yield, so they'd have to sell off maybe 3-5% of their holdings each year and hope this sees them out and it doesn't get stolen in the meantime.

I could add many other options, but I'm sure you get the point. I don't personally believe BTL is a smart retirement option, but I can certainly see how the bricks and mortar infatuated population might conclude that a 4.7% BTL yield works for them.

Retired boomer here :).

Why on Earth would I pull cash out of NS&I that's safe and returning 3.9% to buy a BTL that may, or may not yield 4.7% but with hassle? Then there's the small matter of having ones capital tied up in a illiquid, depreciating asset.

Our (early) retirement is funded by an modest annuity (7.2% no index linking) that will cover our everyday living expenses until our state pensions eventually kick in and cash in the bank from savings, sale of business and sale of our house.

No Buy to Lets, no worries :D.

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Is BTL all about capital gains?

That depends. I see two groups moving into BTL.

The first group are under 50's, without final salary pension schemes, who realise that if they want to retire before the age of 70 they'll have to do something about it. But they either can't afford to save, or don't want to compromise their current maxed out living standards, so they kid themselves that BTL offers a route to a comfortable retirement. The great majority of this group are absolutely depending on capital gains.

But there is a second group, which the OP alluded to. Over 50's with a pot of savings looking for an investment to see them through retirement. For this group it'smainly about yield rather than capital gains. And, even though I personally don't think BTL is the right solution, I can at least see how BTL yields, superficially at least, stack up pretty well with the realistic alternatives.

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Retired boomer here :).

Why on Earth would I pull cash out of NS&I that's safe and returning 3.9% to buy a BTL that may, or may not yield 4.7% but with hassle? Then there's the small matter of having ones capital tied up in a illiquid, depreciating asset.

Our (early) retirement is funded by an modest annuity (7.2% no index linking) that will cover our everyday living expenses until our state pensions eventually kick in and cash in the bank from savings, sale of business and sale of our house.

No Buy to Lets, no worries :D.

You and I think alike, so you're preaching to the converted. But stand back and look at the wider population, as a trustee of our company's pension scheme I talk to many, many people who think and act differently from you and I. The fact is I'm seeing lots of people with a savings pot in the 100's of thousands, and/or strong credit scores and the ability to borrow, deciding that BTL will form all or part of their retirement planning. My view, your view, and the default view of this forum are otherwise, but the majority view out there is that current house prices represent (or soon will represent) a BTL buying opportunity.

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As an aside, think about the level of trust that the general public now has in the financial community and the government (who love raiding pensions as much as maxwells do). Would you rather hand your savings over to these people, or buy something tangible that you can see/touch/feel?

I agree with your comment on the level of trust. There seems to be no mainstream, trust worthy investments any more that are not meddled with or or somehow rigged or supported by stimulus programmes. This is why people like houses. They are very easy for even thick people to understand ( prices only ever go up, don't ya know).

As well as houses being an illiquid, depreciating asset ( Thanks BB), they are very, very easy for governments to tax. Granted, not a vote winner but...

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http://www.rightmove.co.uk/property-for-sale/find.html?searchType=SALE&locationIdentifier=REGION^61294&insId=1&radius=0.0&displayPropertyType=&minBedrooms=&maxBedrooms=&minPrice=&maxPrice=&retirement=&partBuyPartRent=&maxDaysSinceAdded=&_includeSSTC=on&x=39&y=4&sortByPriceDescending=&primaryDisplayPropertyType=&secondaryDisplayPropertyType=&oldDisplayPropertyType=&oldPrimaryDisplayPropertyType=&newHome=&auction=false

1.An enchanting agricultural, residential & commercial estate situated in a picturesque area. Principal house used as offices, restaurant and shop, 10 houses and cottages, 7 farms, woodland, in all 723 acres

2. same place

3.A large family home with a two bedroom anne

4. Manor House plus Pair Of Semi Detached Cottages plus land.

5. Commercial property for sale - Fish & Chip and Pizza Takeaway Pasty Underground Commercial Let 2 Residential Apartments 3 Holiday Apartments

6. Whole hamlet - Trefanny Hill is a beautiful hamlet situated in Cornish countryside and consists of 19 properties and three additional buildings

7. has Secondary accommodation

8. house with boat house with dormitory above

9. Just a house.

10. 5 Star ETC mixed site, near South coast 18 acres (tbc), 75 statics (av. 6 yrs), 22 touring, 10 apartments

So out of the top 10 properties most expensive in Cornwall, only one is just a house.

That place is Trevano. It's quite pretty and the 700 or so acres will be worth a third or more of the asking price. The rest of the business is probably pretty poor. No way does it have the visitor numbers of Heligan and the other gardens near the Helford. Can't see the place, less the land being worth £6m+ . Not interesting enough for the National Trust. Difficult sell.

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  • 309 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
      • up 2.5%
      • up 5%



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