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Cannot Sell It - So Rent It!

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We've just moved to a larger rental property and looked at five different large houses before choosing one. I thought you'be interested in what I discovered when talking to the landlords/letting agents...

Property 1 - 5 bed black/white cottage style house out in the hills in Worcestershire. Only 5 yrs old. Fantastic detailing. On market for £575k - but massively overpriced IMO. Owner has had it on the market since April and no offers so has decided to rent it out (he owns another property in Birmingham). Got rental down to £1250 pm (nominal 2.6% gross ROI).

Property 2 - 4 bed town house part of a converted 'stately home' with 150 acres of communal grounds. Owner living overseas has had property on market since Oct 2004 - started at £475k and was down to £395k before EA's lettings team took over. I was offered it for £1100 pm with alll services included. (nominal 3.3% ROI at last price).

Property 3 - large 5 bed victorian villa. On market for £600k since July/August and owner ('property developer') has also decided to try to let it out. Needs a lot of tidying. Lettings agent tells me the rent is low to reflect the work required which the landlord does not want to fund (cannot fund perhaps?). Anyway that was offered to me for £1100 pm. (nominal 2.2% gross ROI).

Property 4 - large barn conversion in north Worcestershire. 5 beds. 1 acre garden. On market for £595k (not too sure how long) but has been empty for six months and pretty horrid throughout - last tenants seemed to have ripped lots of stuff out and given it a very hard time. Agents says owner 'not prepared to redecorate and make repairs but has agreed low rental to compensate' and again seems that owner would prefer to sell but cannot do so. This was offered to me for £900 pm (but reckon it needs £5-10k spent to make it worth living in!) (nominal 1.8% gross ROI).

Property 5 - Very large (3800') modern 5 bed with all mod cons. Small garden but on market for £495k. Been on market since June 2004. Owner told me she was 'fed up' waiting for it to sell - she's remarried so has another home to go to. This is the property we went for - by far the tidiest and nothing for us to do. Paying £1350 pm (nominal 3.3% gross ROI).

In all cases the owner will have agency fees etc. to pay on top. In each case the owner would prefer to sell - but cannot do so and thus resorts (forced?) to rent it out. Fortunately the rental market seems quite strong as I think most of the above (but not the ones needing repairs) have now found a tenant - but personally I'd rather sell and stick the cash in the bank - and get a far better return. Having STR I know for a fact that the cash from my previous property easily covers the rent on this one... if anything it shows that things are out of kilter as the relationship between sale and rental values is surely broken.

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Fascinating post. Thank you.

Presumably the landlords have o/s mortgages on these properties which unless they are on average below 50% LTV they must be losing money month on month. Interesting that they chose not to reduce the price sufficiently to sell it. I wonder if the selling agents mentioned that or was the estate agent under 30 and therefore unable to grasp that concept?

The irony is of course that even the best-behaved tenants generate wear-and-tear and are reluctant to conduct repairs and often ignore faults that owners would address. In effect the stock will be less valuable when the assured shorthold comes up for renewal.

Lesson is that the first cut is the kindest.

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Great anecdote. No better evidence that these places are overvalued than that they rent for so little. Note that your ROI figures exclude costs not only for depreciation and management but also for maintenance and voids!

Presumably the landlords have o/s mortgages on these properties which unless they are on average below 50% LTV they must be losing money month on month. Interesting that they chose not to reduce the price sufficiently to sell it. I wonder if the selling agents mentioned that or was the estate agent under 30 and therefore unable to grasp that concept?

Undoubtedly the owners have low mortgages and make the argument that the small income justifies the capital upside, an irrational argument IMO.

frugalista

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I am looking to move up to London pretty soon just to rent a room. Just been looking on a number of sites and wow, there are a lot of places and at prices better than I thought. There is a lot more at £100/week than I thought and a lot at £125/week (including util). I was expecting to have to pay close to £600 per month than £500. To buy a place with two rooms that you can rent at these prices costs £270k or so. It really wouldn't be worth me buying a two bed and renting out a room at this return.

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In my local Northamptonshire evening paper, property night.

An advert from an estate agent:

"Still unsold?

Why not consider renting your home

especially if it is currently vacant.

You could be earning a considerable sum of money during the cold

winter months".

As Kate Bush sings in King of the Mountain.

"The wind is whistling

The wind is whistling through the house".

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It's the same in West Suffolk. A number of houses with asking prices in the range £400-450K are also available to rent for £1200-1350pcm.

Yields of around 3.5% are now the norm around here. The market has 'impending correction' written all over it.

Can't sell? No problem, just borrow a whole load of new cash at 5% and get a return of 3.5% on the extra you had to borrow while you watch your assets depreciate.

It doesn't take a genius to work out what the end result will be.

I live in Wandsworth and the average yield is about 15-20%

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I live in Wandsworth and the average yield is about 15-20%

Right, so you're saying that a 2-bed flat in Wandsworth valued at £200k say, would rent for between £2,500 and £3,330.

I don't think so.

frugalista

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Right, so you're saying that a 2-bed flat in Wandsworth valued at £200k say, would rent for between £2,500 and £3,330.

I don't think so.

frugalista

More importantly, if you could why on earth would you be here instead of scraping round to get as much money as you can to buy as many as you could.

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I live in Hertfordshire and this senario is becoming very common, infact the house we rent now was originally up for sale and we got a huge reduction on the rental asking price (originally £1200pcm, we rent for £800pcm). Usually, you will see the properties on the market for anything from a month or two to over a year, then they will advertise it to rent as well, the rent always works out much cheaper than the mortgage.

There's a bit of a glut of both places available to buy and rent at the moment, so these properties usually stay advertised for months until the owner either gives up completely or drastically drops the price (for both rental and sale). There are an awful lot of people around here looking to retire to a cheaper part of the country, so it generally makes no difference to them if they sell or rent their Herts property.

Edited by laughing_goat

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I have seen a substantial amount of property in my area exchange a for sale sign for a to let...

And with no sold signs inbetween suggesting BTL...

So either there are cash buyers looking to rent them out..

Or there are houses not selling and being rented out..

Too many properties in Devon for the people who want to live in them..

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Speak for your own area why don't you..... <_<

I found the same situation in the West Midlands--just south of Birmingham. Renting a very nice bungalow in a large walled garden that the EA valued conservatively at £450,000. Rent= £750 p.c.m. I am seeing more houses with For Sale/Let which seems to be a sign of increasing desparation. Especially if the owner has to move due to job/divorce/emigration etc.

I am also seeing increasing numbers of homes that have not sold go multiple listing with 2 EAs attempting the impossible instead of the usual 1. Anyone else seeing this? I was here during the last crash and it seems like history is indeed repeating itself. IMHO the dual agency thing is the clearest sign of a market in trouble.

Edited by Realistbear

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This is exactly the case for my current place. I found out from the neighbours that my landlady has tried and tried to sell the house and hasn't been able to sell it for her (presumably absurd) asking price. So now she's forced, by circumstance, to rent it out. It was either that or a forced sale at a low price. She's obviously watched far too many property programs for advice on how to get rid of it too - the ol' wood-effect flooring is all over the place, fancy paint methods attempted in the living room, "industrial" style bathroom. Alas it's a bit shoddily done...

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I live in Wandsworth and the average yield is about 15-20%

Examples of that I'd love to see - show us the money! Give us Rightmove links.

You cannot make a factual statement unless you can back it up.

Property 5 - Very large (3800') modern 5 bed with all mod cons. Small garden but on market for £495k. Been on market since June 2004. Owner told me she was 'fed up' waiting for it to sell - she's remarried so has another home to go to. This is the property we went for - by far the tidiest and nothing for us to do. Paying £1350 pm (nominal 3.3% gross ROI).

Good man.

I trust you got a 2 year lease with no break clause... ;)

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I live in Wandsworth and the average yield is about 15-20%

Wandworth is next to Merton & I don't think yields are anything like that. gross yields here around 5-10%

Maybe you are calciulating based on the amount someone has invested? as opposed to the nominal value of the property.

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I am visiting my in-laws in Surrey (I live in the West Midlands) and having a look round at the property prices in the most expensive area of Britain outside London itself. I am finding rents substantially lower than a year ago. Here is a good e.g.:

http://www.findaproperty.com/agent.aspx?ag...prop&pid=167578

A nice semi for £850 p.c.m. and you know they are open to offers as there are 73 for sale and 41 for rent in this small commuter town! Last year we were looking at a rabbit hutch for this much but moved to the West Midlands instead. A semi that nice would have sold for well in excess of £400,000 at the peak which means the return on investment is poor and dropping.

Go to http://www.findaproperty.com/coun0002.html and you will see that there are hundreds of properties for let and many houses with dual agency signs up.

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Live in Eastborne at the moment.

Rentals aplenty and coming down fast.

Can now pick up a good semi for 700 and the appartments on the marina development which sell for over 250k can be had for less than 650. Some properties for rent for over 8 months now.

Developer also releasing a large number of sea fronted appartments for rent because can't sell them.

Am moving in January so will put some low offers in just before Christmas, desperation should really begin to bite by then.

The next few months are going to be very interesting.

Edited by Lord Lucan

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Is Wandsworth in North London now?

A 2 bed flat worth 200k would cost 30-40k per annum? Don't think so. Try again.

Have people got their Sarcastic monitors turned off? Thought TTRTR had most of his flats around wandsworth but maybe I'm wrong....

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We've just moved to a larger rental property and looked at five different large houses before choosing one. I thought you'be interested in what I discovered when talking to the landlords/letting agents...

Property 1 - 5 bed black/white cottage style house out in the hills in Worcestershire. Only 5 yrs old. Fantastic detailing. On market for £575k - but massively overpriced IMO. Owner has had it on the market since April and no offers so has decided to rent it out (he owns another property in Birmingham). Got rental down to £1250 pm (nominal 2.6% gross ROI).

Property 2 - 4 bed town house part of a converted 'stately home' with 150 acres of communal grounds. Owner living overseas has had property on market since Oct 2004 - started at £475k and was down to £395k before EA's lettings team took over. I was offered it for £1100 pm with alll services included. (nominal 3.3% ROI at last price).

Property 3 - large 5 bed victorian villa. On market for £600k since July/August and owner ('property developer') has also decided to try to let it out. Needs a lot of tidying. Lettings agent tells me the rent is low to reflect the work required which the landlord does not want to fund (cannot fund perhaps?). Anyway that was offered to me for £1100 pm. (nominal 2.2% gross ROI).

Property 4 - large barn conversion in north Worcestershire. 5 beds. 1 acre garden. On market for £595k (not too sure how long) but has been empty for six months and pretty horrid throughout - last tenants seemed to have ripped lots of stuff out and given it a very hard time. Agents says owner 'not prepared to redecorate and make repairs but has agreed low rental to compensate' and again seems that owner would prefer to sell but cannot do so. This was offered to me for £900 pm (but reckon it needs £5-10k spent to make it worth living in!) (nominal 1.8% gross ROI).

Property 5 - Very large (3800') modern 5 bed with all mod cons. Small garden but on market for £495k. Been on market since June 2004. Owner told me she was 'fed up' waiting for it to sell - she's remarried so has another home to go to. This is the property we went for - by far the tidiest and nothing for us to do. Paying £1350 pm (nominal 3.3% gross ROI).

In all cases the owner will have agency fees etc. to pay on top. In each case the owner would prefer to sell - but cannot do so and thus resorts (forced?) to rent it out. Fortunately the rental market seems quite strong as I think most of the above (but not the ones needing repairs) have now found a tenant - but personally I'd rather sell and stick the cash in the bank - and get a far better return. Having STR I know for a fact that the cash from my previous property easily covers the rent on this one... if anything it shows that things are out of kilter as the relationship between sale and rental values is surely broken.

Very good post isv: As I have said countless times for many many months now on this site -- I know and know of literally HUNDREDS of people who CANNOT sell their properties - and MANY have tried to for OVER a year!!!!! Conclusion:?? Er........ duhr...... Prices are too high..... market headingfor a big fall.... er.....

duhr.... All you potential FTB's out there take note: To buy now or anytime soon would be financial suicide.....

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Thanks Eric...

Unbeleivable looking at the market.. But I sometimes need to step back..

Get a good clear picture...

Devon... 200%-300% rises in five years.. no ones buying and no one is coping with the debt..

and there was no reason...

Take a step back.. forget the impact it has on you .. Take a step back and look at the market..

If you don't start giggling you are not looking hard enough..

Some things are obvious.. Don't eat lead.. Thats obvious..

The market was just a boom/bust...

It does this.. all the time... and when it hits bottom.... it will climb.. Boom again.. then bust...then climb... etc..

IT IS ALL THE HOUSING MARKET HAS EVER DONE>> MY GOD... CAN'T YOU SEE...

ITS ONLY BEEN RUNNING THROUGH THIS CYCLE SINCE BEFORE THE WAR...

UP AND DOWN.. UP AND DOWN..

MKY GOD... LOOK AT IT.. DUH... MORRONS...... GARRRRGH...

I thank you.

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I'm usually pretty sceptical about whether we're entering a recession right at the moment, at least from what I can see in East Berks, but for the first time ever in this area I'm seeing lots of 'to let' signs outside family homes. I've only really seen these outside flats before. Also there are very few 'for sale' signs up, except outside newbuild flats :lol: . People giving up on the idea of selling before Xmas?

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  • 302 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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