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ska_mna

"just Renting It Out Instead"

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There's been threads on here about this before, but just struck me this morning how this phrase...

"just renting it out instead"

...is more and more prevalent. Sellers who can see the market is dire aren't selling so renting instead. The people renting are those that, under any sane market, would be the first time buyers who would be buying those same houses.

My point is therefore that FTB'ers are propping up the ponzi market whether we buy (thereby validating the stupid asking prices) or rent (paying the mortgage of someone who is letting out rather than lower their price). In other words, damned if we do, damned if we don't.

Was "just rent it out instead" a phrase that was familiar in the last crash? I'm concerned that this time round "it's different" because it's so much easier to become an amateur landlord. De facto landlord status just shouldn't be this simple: it's exacerbating the monopoly nature of our housing market. It shouldn't be financially possible.

Anecdotally, two properties on my estate have gone from owner occupied to rented to FTB-age folks for these very reasons the last two months alone.

So is the "just rent it out" phenomenon a big issue standing in the way of a HPC? And if so, how much longer can it be sustained? Until interest rates rise I guess (thereby turning rent yields negative).

Thoughts?

Edited by ska_mna

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There's been threads on here about this before, but just struck me this morning how this phrase...

"just renting it out instead"

...is more and more prevalent. Sellers who can see the market is dire aren't selling so renting instead. The people renting are those that, under any sane market, would be the first time buyers who would be buying those same houses.

My point is therefore that FTB'ers are propping up the ponzi market whether we buy (thereby validating the stupid asking prices) or rent (paying the mortgage of someone who is letting out rather than lower their price). In other words, damned if we do, damned if we don't.

Was "just rent it out instead" a phrase that was familiar in the last crash? I'm concerned that this time round "it's different" because it's so much easier to become an amateur landlord. De facto landlord status just shouldn't be this simple: it's exacerbating the monopoly nature of our housing market. It shouldn't be financially possible.

Anecdotally, two properties on my estate have gone from owner occupied to rented to FTB-age folks for these very reasons the last two months alone.

So is the "just rent it out" phenomenon a big issue standing in the way of a HPC? And if so, how much longer can it be sustained? Until interest rates rise I guess (thereby turning rent yields negative).

Thoughts?

the difference is two fold, firstly interest rate levels and secondly the experience of witnessing the 90s bull trap (and subsequent recovery is exactly what was required to foster the idea that property will always recover) The 90s correction is actually therefore the main reason for this belief

Im not sure why people keep bothering to compare it to the 90s like for like, which was in a completely different part of the economic cycle to today. The 90s happened outside of peak debt and was a blip in the 30 year interest rate cycle decline

Clearly completely different to the current situation of zirp and nearing the nominal end of that interest rate cycle that naturally has pushed up all asset prices over the time that debt servicing cost has reduced.

How long it takes for this long term interest rate cycle/bond bull market to bottom out is anyones guess, it could be another 5+ years, but when it does the West will likely move into a long term increasing rate cycle with blips down, the inverse of the last 30/40 years

Edited by Tamara De Lempicka

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Contrary to many posters here, I think the ability to rent out instead merely shows the overall demand for housing is high and that not enough homes are available in total.

I agree. The demand for a roof to start a family under is just as high as it ever was. I guess that probably goes without saying though! (whether you buy or rent that roof is the question)

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I avoid renting them. The 'owners' preference is to sell, they will be ignorant of their responsibilities as a landlord and the rights of a tenant, they will usually keep them on the market to sell meaning you will be harassed by an estate agent wanting to do viewings on a regular basis. They are usually the sort who think it perfectly acceptable to store their belongings in YOUR home, and still think it is their home, with all the access rights that entails. Plus you are more likely to be given your notice if they find a buyer.

These places should never be considered as a possible rental. I avoid them completely, it is simply not worth the pain. If we all did this, they wont be able to sell at a stupid price OR rent, forcing sales at prices people can afford.

Avoid them, they don't deserve your hard earned money.

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I avoid renting them. The 'owners' preference is to sell, they will be ignorant of their responsibilities as a landlord and the rights of a tenant, they will usually keep them on the market to sell meaning you will be harassed by an estate agent wanting to do viewings on a regular basis. They are usually the sort who think it perfectly acceptable to store their belongings in YOUR home, and still think it is their home, with all the access rights that entails. Plus you are more likely to be given your notice if they find a buyer.

These places should never be considered as a possible rental. I avoid them completely, it is simply not worth the pain. If we all did this, they wont be able to sell at a stupid price OR rent, forcing sales at prices people can afford.

Avoid them, they don't deserve your hard earned money.

Agree entirely. If you must rent a place from a reluctant landlord make sure you have a conversation with them before you sign anything about the issues above. "How often will you come round" is a good question as it invites them to reveal their views on storing things/buyer viewings etc and of course only "Never" or "When I've agreed an inspection appointment with you in advance" are acceptable answers.

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There's been threads on here about this before, but just struck me this morning how this phrase...

"just renting it out instead"

...is more and more prevalent. Sellers who can see the market is dire aren't selling so renting instead. The people renting are those that, under any sane market, would be the first time buyers who would be buying those same houses.

My point is therefore that FTB'ers are propping up the ponzi market whether we buy (thereby validating the stupid asking prices) or rent (paying the mortgage of someone who is letting out rather than lower their price). In other words, damned if we do, damned if we don't.

Was "just rent it out instead" a phrase that was familiar in the last crash? I'm concerned that this time round "it's different" because it's so much easier to become an amateur landlord. De facto landlord status just shouldn't be this simple: it's exacerbating the monopoly nature of our housing market. It shouldn't be financially possible.

Anecdotally, two properties on my estate have gone from owner occupied to rented to FTB-age folks for these very reasons the last two months alone.

So is the "just rent it out" phenomenon a big issue standing in the way of a HPC? And if so, how much longer can it be sustained? Until interest rates rise I guess (thereby turning rent yields negative).

Thoughts?

No this is not in the way of a HPC this is a feature of a HPC.

If people cannot sell their property so they rent it out but they incur costs in doing so.

Secondly they still have the liability of the mortgage on the house, that never goes away.

Thirdly, because they cannot sell their house they cannot raise extravagant sums to purchase a new house. Their plans get scuppered too.

Finally, they need somewhere to live too so they must either buy (and spread their liability across two properties, only having control and use of one) or else they too must rent because they cannot afford to buy, not having sold.

Not being able to sell is a major cause of chains collapsing in the market.

Renting out a house therefore causes the market to collapse further.

As these people wait until 'prices come back' other forced sales - such as divorces, repossessions and deaths continue to flood the market.

As these houses usually sell at lower prices the average price for property actually sold - in the absence of 'proper' sales - starts to collapse rapidly. All they are doing is holding on to their property as prices decline further.

Renting out a property you cant sell does not solve any of these problems, it only defers the inevitable.

In my area, 'normal' sales have collapsed and the only progressions are repos and estate sales; as a result prices are starting to fall hard.

I saw this coming in 2004-05 and I thought it would be bad.

However, the attempts to defer the inevitable had made it worse by several orders of magnitude; the banks and financial system nearly fell.

An outside event, such as further European deterioration (a Greek default, for example) or a downgrade of UK rating will do this.

If they continue to defy reality and attempt to spend public money propping up property prices I fear the whole economy will collapse.

We are very, very exposed at the moment. Renting might be the safest financial option.

And I dont say that lightly.

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It's the rational thing to do if you need to move and don't have time to wait for it to sell.

The rationale is that your mortgage should be covered, you get to keep the investment and you can always give the tenant notice and tart the place up again when the market picks up.

The problem stems from having a housing market that is way overvalued in terms of the proportion of income it takes to buy one in relation to average income levels and availability of good quality houses.

Rents seem to have stayed pretty static for over a decade. This tells me that the rental market is also being artificially propped up by something. I imagine it's housing benefit. I see housing benefit in the rental sector as being analogous to mortgage credit in the real estate market.

Edited by Pindar

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How long it takes for this long term interest rate cycle/bond bull market to bottom out is anyones guess, it could be another 5+ years, but when it does the West will likely move into a long term increasing rate cycle with blips down, the inverse of the last 30/40 years

5+ years now?

What about your:

In homage to CGNAO by Mid 2013

Halifax Index 164K to 100K

FTSE 5890 to 2500

Dow 11420 to 4000

Gold 1394 to 500

Silver 2673 to 850

GBP/USD 1.62 to Sub Parity

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I avoid renting them. The 'owners' preference is to sell, they will be ignorant of their responsibilities as a landlord and the rights of a tenant, they will usually keep them on the market to sell meaning you will be harassed by an estate agent wanting to do viewings on a regular basis. They are usually the sort who think it perfectly acceptable to store their belongings in YOUR home, and still think it is their home, with all the access rights that entails. Plus you are more likely to be given your notice if they find a buyer.

These places should never be considered as a possible rental. I avoid them completely, it is simply not worth the pain. If we all did this, they wont be able to sell at a stupid price OR rent, forcing sales at prices people can afford.

Avoid them, they don't deserve your hard earned money.

Agree completely. The problem is there are plenty of people who do rent them.

I imagine these 'Accidental Landlords' (ridiculous phrase if ever there was one) are the worst landlords. Imagine if you rent one, its the 20th December and your boiler packs up. The LL will have to fork out big bucks to get it replaced. Not only will you probably have a fight on your hands to get it sorted (as I assume they are largely unaware of their responsibilities) but will they even have any kind of savings or contingency fund to actually get it sorted? Chances are they have bought another place and have very little money they can get hold of, let alone £4k for a replacement boiler to be installed in the week leading up to Christmas.

I've seen a lot of properties hanging about for sale on RM for a year or so and then crop up to let, usually letting within weeks. As long as they continue to do so, people will keep doing it.

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I would say there is a lot of 'will rent it out instead' in London but without the 'instead' bit.....this has changed the whole demographics of previously 100% owner occupied streets/areas.....

..for example a 2 or 3 bed small nothing special family home that once was purchased by a FTBer 30 years ago for 3.5 times largest income are being rented out... because the owners have not believed their luck on how much free money was made and they are reluctant to cash in their fortune because they believe there is still more free money to make from it....so what do they do they remortgage it, move away and put that so called 'free money' down on a better property in a better area taking out a larger mortgage, at a good rate of interest and LTV that the rent from their former home pays for.

Then you wonder 'what went wrong'.....some now can't buy one when others have more than one. ;)

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5+ years now?

What about your:

In homage to CGNAO by Mid 2013

Halifax Index 164K to 100K

FTSE 5890 to 2500

Dow 11420 to 4000

Gold 1394 to 500

Silver 2673 to 850

GBP/USD 1.62 to Sub Parity

im talking about the interest rate cycle/bond market turning, the above doesnt need a rate cycle turn, it just needs a recession and destruction of credit money which the view is unchanged that one will happen lasting thru to the mid/ end of 2013, this bust could well last into the 2020s before it ends of which there will likely be more phases of inflation/deflation as there have been the last decade

Edited by Tamara De Lempicka

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It's a symptom of record low interest rates. It can make financial sense to let a property out.

Selling such a property is incredibly problematic though. Many would be buyers wouldn't go near a property with tennants in it for all the obvious reasons. And leaving the property empty whilst you sell it means you are paying two mortgages for months.

This time around, there are a lot of reluctant landlords who don't feel so unhappy because of the low interest payments.

That could change quickly and it's something you have no control over.

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There's been threads on here about this before, but just struck me this morning how this phrase...

"just renting it out instead"

...is more and more prevalent.

Normally follows on from another phrase "we aren't giving it away, so we're...."

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It's a symptom of record low interest rates. It can make financial sense to let a property out.

Selling such a property is incredibly problematic though. Many would be buyers wouldn't go near a property with tennants in it for all the obvious reasons. And leaving the property empty whilst you sell it means you are paying two mortgages for months.

This time around, there are a lot of reluctant landlords who don't feel so unhappy because of the low interest payments.

That could change quickly and it's something you have no control over.

Not necessarily, we were looking to hedge our bets if you like, we need a bigger house and need prices to drop accordingly but what to do in the meantime, the only logical conclusion is to rent yours out and then rent a bigger property. If the shit hits the fan with interest rates then you move back into the original property and if that causes you a problem ie the tennants won't get out then you pass the problem up the chain and you won't move out either.

Sure it's a heck of a lot of hassle all round but having blinked first and sold a house too cheaply the last time everything was supposed to be crashing in 2005 I won't be making that mistake again.

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It's not as easy that. Two properties I drive past on the way to work changed from to let to for sale recently. They are expensive 5 bed detached. So it appears the high end rental market is dead here. Similarly with flats although not as bad. Lots to let and more supply than demand for the low end. Although the 3 bed family home there is very high demand for rentals. I suppose because this is the only area where they forced to rent somewhere ie if you have 2 kids but can't afford a mortgage you have no choice whereas young couples can stay with the parents. (like I am, just keep out of the market totally is best currently IMO)

Hopefully at some point the extra rentals coming to market will push rents down to a level at which it's not viable for owners to let. I think this is prolonging the HPC but won't prevent it. Often its a zero sum game anyway as the owner rents theirs out then rents elsewhere.

Edited by Pent Up

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It is all very well disillusioned house sellers becoming 'reluctant landlords' and waiting until the value of their house go up to a level they think it is really worth ( ;) ). However, if they did that, wouldn't the next property they wanted to buy also go up in price by roughly the same percentage? :unsure:

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It is all very well disillusioned house sellers becoming 'reluctant landlords' and waiting until the value of their house go up to a level they think it is really worth ( ;) ). However, if they did that, wouldn't the next property they wanted to buy also go up in price by roughly the same percentage? :unsure:

Theyre aren't that clever unfortunately and for many their deposit is thier equity. No or little equity, no deposit for next house.

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There's been threads on here about this before, but just struck me this morning how this phrase...

"just renting it out instead"

...is more and more prevalent. Sellers who can see the market is dire aren't selling so renting instead. The people renting are those that, under any sane market, would be the first time buyers who would be buying those same houses.

.......

Thoughts?

I know someone who did this - they wanted to upsize from a 3 bed semi to a 4 bed det and simply converted their 3 bed mort to a BTL basis. They got tenants straight away to. I guess the banks see this sort of thing as a way of generating new business in a very slow market (south yorks) and aren't really bothered either way if the smaller property goes BTL or to a FTB. The older, smaller, mort can probably be serviced from housing benefits if push comes to shove.

Their plan btw is to build up a 10 property BTL portfolio as 'it's going to be their pension' (they are early 30s), and collecting rent beats working for a living.

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im talking about the interest rate cycle/bond market turning, the above doesnt need a rate cycle turn, it just needs a recession and destruction of credit money which the view is unchanged that one will happen lasting thru to the mid/ end of 2013, this bust could well last into the 2020s before it ends of which there will likely be more phases of inflation/deflation as there have been the last decade

So despite all that our glorious leaders are doing, more QE expected Oct or Nov etc, you still think UK property stinks?

In the late 2010 original thread I think you suggested to someone 1/2 PMs & 1/2 USD - does that still stand?

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So despite all that our glorious leaders are doing, more QE expected Oct or Nov etc, you still think UK property stinks?

In the late 2010 original thread I think you suggested to someone 1/2 PMs & 1/2 USD - does that still stand?

Firstly its just an opinion among many and as likely to be as incorrect as any other, yes i think UK property stinks and will be 50% lower in price nominally at some point in the next decade, that to me is a bad investment. Others have diiferent views and needs, it may not be such a bad purchase in 2 to 3 years if there is a recession for those wanting somewhere to actually live and get away from the comically skewed landlord market in the UK but even then it will still be a likely sht medium term investment.(10 years)

But my view on property as an investment may be skewed, i live in a country with zero Capital gains on investment (except housing), 12% corp tax and where owning a property you are still liable for 50% of the imputed rent in tax anyway. I see the UK as a bad long term investment as far as property goes because i think the entire UK tax structure will be very different in 10 years time (specifically getting much harsher on rentierism as the economy goes down the toilet further because of it) and that uncertainty alone makes it dangerous to have an illiquid asset thats thrived partly from said untaxed rentierism there.

Regarding gold/$ it wasnt advice as id never offer that, you live and die by your own sword i was simply highlighting that a spread of both protects against both deflation and inflation if there is uncertainty as to whats happening, i think it would probably be prudent to have a bit of both in a diversified portfolio

Edited by Tamara De Lempicka

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Firstly its just an opinion among many and as likely to be as incorrect as any other, yes i think UK property stinks and will be 50% lower in price nominally at some point in the next decade, that to me is a bad investment. Others have diiferent views and needs, it may not be such a bad purchase in 2 to 3 years if there is a recession for those wanting somewhere to actually live and get away from the comically skewed landlord market in the UK but even then it will still be a likely sht medium term investment.(10 years)

But my view on property as an investment may be skewed, i live in a country with zero Capital gains on investment (except housing), 12% corp tax and where owning a property you are still liable for 50% of the imputed rent in tax anyway. I see the UK as a bad long term investment as far as property goes because i think the entire UK tax structure will be very different in 10 years time (specifically getting much harsher on rentierism as the economy goes down the toilet further) and that uncertainty alone makes it dangerous to have an illiquid asset there.

Regarding gold/$ it wasnt advice as id never offer that, you live and die by your own sword i was simply highlighting that a spread of both protects against both deflation and inflation if there is uncertainty as to whats happening, i think it would probably be prudent to have a bit of both in a diversified portfolio

I think rentiers could be in for a taxation shock. The corporations have the government in their hip pocket and what is going to happen is that REITs will get better tax breaks for residential property. Then to help them, their competition, smaller scale BTL landlords will have to be crushed to shake them out of their properties.

Re gold$ it was someone asking you about what to do with their STR fund for your scenario, the return would be about +12% since then.

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Renting out a property you cant sell does not solve any of these problems, it only defers the inevitable.

Its worse than a delay -by not selling the are leveraging a capital loss.

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Its worse than a delay -by not selling the are leveraging a capital loss.

The table titanic is turning....everything is coming together...tying the loose ends together. ;)

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Contrary to many posters here, I think the ability to rent out instead merely shows the overall demand for housing is high and that not enough homes are available in total.

that is a generational anomaly tho - the late baby boomers are only just past peak property demand age, this will reduce with time now, as well as housing benefits reducing at the same time

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the difference is two fold, firstly interest rate levels and secondly the experience of witnessing the 90s bull trap (and subsequent recovery is exactly what was required to foster the idea that property will always recover) The 90s correction is actually therefore the main reason for this belief

Im not sure why people keep bothering to compare it to the 90s like for like, which was in a completely different part of the economic cycle to today. The 90s happened outside of peak debt and was a blip in the 30 year interest rate cycle decline

Clearly completely different to the current situation of zirp and nearing the nominal end of that interest rate cycle that naturally has pushed up all asset prices over the time that debt servicing cost has reduced.

How long it takes for this long term interest rate cycle/bond bull market to bottom out is anyones guess, it could be another 5+ years, but when it does the West will likely move into a long term increasing rate cycle with blips down, the inverse of the last 30/40 years

good post

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  • 285 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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