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Talk Me Out Of Buying A Btl

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Well I have a mortgage free home, no debts and about 100k in the bank earning a paltry rate of interest and I was thinking about buying a BTL property with the money. WIth my budget I could probably afford a 2-bed terrace. As I will not have a mortgage I figure it is a pretty low-risk affair.

Part of me thinks I should wait a year and see what the market does, but the other part of me thinks that is a similar attitude that I took in 2002 that resulted in me waiting for a crash that never seemed to come and not buying a property until 2010 when I could have bought my home for less 8 years earlier.

Personally I can't see house prices falling significantly any time soon. Until the planning system in this country is reformed the gap between demand and supply is going to continue to increase. I see no political will from any of the major parties to do that. The only response we get from our politicians is tokenistic gestures (i.e. build a few houses here and there, get a photo op holding a shovel).

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Well I have a mortgage free home, no debts and about 100k in the bank earning a paltry rate of interest and I was thinking about buying a BTL property with the money. WIth my budget I could probably afford a 2-bed terrace. As I will not have a mortgage I figure it is a pretty low-risk affair.

Part of me thinks I should wait a year and see what the market does, but the other part of me thinks that is a similar attitude that I took in 2002 that resulted in me waiting for a crash that never seemed to come and not buying a property until 2010 when I could have bought my home for less 8 years earlier.

Personally I can't see house prices falling significantly any time soon. Until the planning system in this country is reformed the gap between demand and supply is going to continue to increase. I see no political will from any of the major parties to do that. The only response we get from our politicians is tokenistic gestures (i.e. build a few houses here and there, get a photo op holding a shovel).

Not thought about investing in shares or some sort of passive fund? Possible a better yield over the long term and no dealing with tenants or EA's. Put it into an ISA and no CG tax either!

Maybe you have already filled your ISA for the year and still have 100k left over, good for you! :)

And also I suppose buying shares is very risky, the value could go down! Not like bricks and mortar, which of course is totally risk free! :P

Edited by renting til I die

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The rigmarole of dealing with problem tenants and money grubbing letting agents would put me off straight away. I'd be looking at other investment vehicles which are less of a hassle.

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Yes, leverage up and buy 4.

Yes, everyone loves leverage, apart from when the prices go down. I tried (unsuccessfully) to explain the increased risk and rewards of leverage to a new home buyer the other day. Needless to say, they looked at me blankly and didn't understand the risk side of the ratio!

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Not thought about investing in shares or some sort of passive fund? Possible a better yield over the long term and no dealing with tenants or EA's. Put it into an ISA and no CG tax either!

Maybe you have already filled your ISA for the year and still have 100k left over, good for you! :)

And also I suppose buying shares is very risky, the value could go down! Not like bricks and mortar, which of course is totally risk free! :P

I did consider shares, but residential property has over the long term outperformed the stock market by a substantial margin. Plus I don't fully understand what causes share prices to rise or fall - the behaviour of the market seems incomprehensible to me. Plus I think the British economy may not be in great shape, and if so I think shares will be hit harder than property. If you could give me a good reason why you think share prices will increase in the future then I might be convinced. I can give you reasons why I think property prices will increase.

I think there is less risk with bricks and mortar, as at the end of the day everyone needs somewhere to live, so houses are always going to have some intrinsic value. A lot of the stock market value is based on discretionary spending which gets cut back in hard economic times.

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The rigmarole of dealing with problem tenants and money grubbing letting agents would put me off straight away. I'd be looking at other investment vehicles which are less of a hassle.

Well yes that is an issue, but I think there are steps that can be taken to reduce the hassle, such as choosing a reputable agent (of which I have experience through my years of renting) and having decent Landlord insurance in place to deal with problem tenants.

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The rigmarole of dealing with problem tenants and money grubbing letting agents would put me off straight away. I'd be looking at other investment vehicles which are less of a hassle.

I agree, the only place with yield that looks even close to being worth the hassle is in NI and they did have a real HPC!

The other problems I see with BTL are the beneficial (or from my point of view, plain unfair) tax treatment, which could be changed by the government at any time and the possibly of addition taxes if the government decided to get really tough! Also the difficultly in selling the asset if you needed get rid of it. Seeing as they already have their home paid for, all eggs, one basket, springs to mind!

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I agree, the only place with yield that looks even close to being worth the hassle is in NI and they did have a real HPC!

The other problems I see with BTL are the beneficial (or from my point of view, plain unfair) tax treatment, which could be changed by the government at any time and the possibly of addition taxes if the government decided to get really tough! Also the difficultly in selling the asset if you needed get rid of it. Seeing as they already have their home paid for, all eggs, one basket, springs to mind!

Seems unlikely that the favourable tax treatment of BTL will be changed, particularly seen as a large proportion of MPs are second homeowners and/or BTL landlords.

Plus I don't think that either party would want to precipitate a house price crash by causing a mass sell-off of BTL properties. High house prices benefit both parties. It benefits the Conservatives because many of their voters get rich (most on paper) and it benfits Labour by creating a state dependency where more and more people are reliant on state handouts to make their rent.

Edited by subspace

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I did consider shares, but residential property has over the long term outperformed the stock market by a substantial margin. Plus I don't fully understand what causes share prices to rise or fall - the behaviour of the market seems incomprehensible to me.

That's true but who can tell if that will continue to be the case. Share prices rise and fall for pretty much the same reasons as house prices. Too much money, too little money, current sentiment, future outlook. It just moves a bit faster than the housing market (less costs involved and easier to buy and sell).

I think there is less risk with bricks and mortar, as at the end of the day everyone needs somewhere to live

Yes but not necessary where you buy.

, so houses are always going to have some intrinsic value.

You could say the same thing about some companies. Everyone will always need tyres, or water boilers, or toothpaste!

A lot of the stock market value is based on discretionary spending which gets cut back in hard economic times.

And what do you think that house prices are based on?

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Seems unlikely that the favourable tax treatment of BTL will be changed, particularly seen as a large proportion of MPs are second homeowners and/or BTL landlords.

Plus I don't think that either party would want to precipitate a house price crash by causing a mass sell-off of BTL properties. High house prices benefit both parties. It benefits the Conservatives because many of their voters get rich (most on paper) and it benfits Labour by creating a state dependency where more and more people are reliant on state handouts to make their rent.

Actually, I'm starting to think this will be exactly how the next crash will happen. What events could lead to this, I'm not sure but it will be interesting to watch the unimaginable happen!

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Actually, I'm starting to think this will be exactly how the next crash will happen. What events could lead to this, I'm not sure but it will be interesting to watch the unimaginable happen!

Property price falls lead to sell off's - There are tens of thousands landlords who are waiting in the sidelines and have made a tidy paper profit. They are sitting there thinking shall I sell and take the profit or gamble and keep it going.

Once prices start falling they will be queuing up to sell and cash in, this is exactly the time buyers see prices falling (deflation) and decide to put off buying for a few years.

This is how crashes happen each and every time.

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Property price falls lead to sell off's - There are tens of thousands landlords who are waiting in the sidelines and have made a tidy paper profit. They are sitting there thinking shall I sell and take the profit or gamble and keep it going.

Once prices start falling they will be queuing up to sell and cash in, this is exactly the time buyers see prices falling (deflation) and decide to put off buying for a few years.

This is how crashes happen each and every time.

My landlord contacted me to in April about increasing my rent so he could remortgage.

I've not heard from him since although the washing machine has been fixed in that time. I'm not sure if he's just incredibly disorganised or waiting for a selling opportunity.

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That's true but who can tell if that will continue to be the case. Share prices rise and fall for pretty much the same reasons as house prices. Too much money, too little money, current sentiment, future outlook. It just moves a bit faster than the housing market (less costs involved and easier to buy and sell).

Yes but not necessary where you buy.

You could say the same thing about some companies. Everyone will always need tyres, or water boilers, or toothpaste!

And what do you think that house prices are based on?

I agree that the location of a property is important and needs to be researched e.g. in terms of rental demand.

Everyone needs tyres, boilers etc... but there is proper competition in those markets so price overruns tend to correct themselves. For example, if the price of tyres rises due to a shortage of tyres then more companies will get into the tyre business, the supply will increase and the price will fall again. That cannot happen in the property market due to the stranglehold that the government has on the supply of buildable land.

Houses are not discretionary spending, unless you don't mind sleeping in a shop doorway.

Edited by subspace

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Property price falls lead to sell off's - There are tens of thousands landlords who are waiting in the sidelines and have made a tidy paper profit. They are sitting there thinking shall I sell and take the profit or gamble and keep it going.

Once prices start falling they will be queuing up to sell and cash in, this is exactly the time buyers see prices falling (deflation) and decide to put off buying for a few years.

This is how crashes happen each and every time.

A while ago I would have agreed with you but now I am not so sure. There have been crashes in the past but prices have always recovered and reached new unimaginable highs. I think the sentiment amont the public now is that in the long run "property prices will always go up". If there is a price fall then I think most Landlords will either wait out or treat it as a buying opportunity (isn't that what all you gold bugs say when the price of gold drops).

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Property price falls lead to sell off's - There are tens of thousands landlords who are waiting in the sidelines and have made a tidy paper profit. They are sitting there thinking shall I sell and take the profit or gamble and keep it going.

Once prices start falling they will be queuing up to sell and cash in, this is exactly the time buyers see prices falling (deflation) and decide to put off buying for a few years.

This is how crashes happen each and every time.

Good point, all that is needed is enough of a drop to change sentiment and momentum in the falls will increase. The falls, or new price level, would have to continue over a long enough period though, as a lot of BTL'ers buy for the long term income. Possibly there would have to be falls in rents (I see rents as also being far too high in relation to wages) and a large outflow of people from the UK due to lack of work and cuts in benefits.

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Well I have a mortgage free home, no debts and about 100k in the bank earning a paltry rate of interest and I was thinking about buying a BTL property with the money. WIth my budget I could probably afford a 2-bed terrace. As I will not have a mortgage I figure it is a pretty low-risk affair.

Part of me thinks I should wait a year and see what the market does, but the other part of me thinks that is a similar attitude that I took in 2002 that resulted in me waiting for a crash that never seemed to come and not buying a property until 2010 when I could have bought my home for less 8 years earlier.

Personally I can't see house prices falling significantly any time soon. Until the planning system in this country is reformed the gap between demand and supply is going to continue to increase. I see no political will from any of the major parties to do that. The only response we get from our politicians is tokenistic gestures (i.e. build a few houses here and there, get a photo op holding a shovel).

I think you should buy a BTL. Actually, I think everybody should buy one. We should all be landlord investors and rent to each other.

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I think you should buy a BTL. Actually, I think everybody should buy one. We should all be landlord investors and rent to each other.

Whilst claiming housing benefit.

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Yes!!

House prices would then be determined by what hb rent was available. I think we just solved HPI :)

It's what MPs did to get around the ban on claiming mortgage payments on expenses.

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I did consider shares, but residential property has over the long term outperformed the stock market by a substantial margin. Plus I don't fully understand what causes share prices to rise or fall - the behaviour of the market seems incomprehensible to me. Plus I think the British economy may not be in great shape, and if so I think shares will be hit harder than property. If you could give me a good reason why you think share prices will increase in the future then I might be convinced. I can give you reasons why I think property prices will increase.

I think there is less risk with bricks and mortar, as at the end of the day everyone needs somewhere to live, so houses are always going to have some intrinsic value. A lot of the stock market value is based on discretionary spending which gets cut back in hard economic times.

I agree that the location of a property is important and needs to be researched e.g. in terms of rental demand.

Everyone needs tyres, boilers etc... but there is proper competition in those markets so price overruns tend to correct themselves. For example, if the price of tyres rises due to a shortage of tyres then more companies will get into the tyre business, the supply will increase and the price will fall again. That cannot happen in the property market due to the stranglehold that the government has on the supply of buildable land.

Houses are not discretionary spending, unless you don't mind sleeping in a shop doorway.

Is that your favourite saying? Renters in some areas being subsidised by owners vs cost of buying.

Do what you want to do, with all your reasoning why house prices will probably keep on going up in the future.

Lot of young smart people coming through, worse off than many of the giant softies on hpc with their excuses for recklessness and BTLers. They will gladly walk over your cold overleveraged fantasy house price value corpses in the squeeze.

Well people do find sleeping in doorways to be rather disagreeable.

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You obviously have ignored the house price crash in Northern Ireland where prices dropped over 50% and still are only beginning to stabilise. On MSE NI today a poster was trying to find out how to get a debt write off for the BTL they purchased at 180K which was now worth 120K if they are lucky. Bricks and mortar are not a one way bet.

I don't think you could really compare the housing market of NI to England. NI hasn't had the same demographic pressures as England. All of the migrants who have moved to the UK seem to want to live around London and the South East. The NI property market is strongly influenced by the crash of the housing market in the Irish Republic due to its proximity and shared border. Plus, and no offence to any NI residents here, it just not strike me as being a place that has a strong pull for migrants, due to its comparatively weak economy and history of sectarianism.

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