A Goodbye To All That Buy To Let

[Bland Unsight]

Looking forward to future installments

That is massively useful and will inform the road home, which I better continue to work, and thus you will see how I take on board or push back in the coming updates. Thank you for the feedback. You're a good man, and thorough, .

[Bland Unsight]

Hello. Me again

Latest instalment (now with added spreadsheets!): By the numbers

Full rant-phlet thus far: A goodbye to all that buy-to-let

Feedback welcome. It's being constructed on the fly - think of it like a Choose Your Own Adventure book. If we win then bears feast on fish guts.

[libspero]

Enjoyed reading that, thank you. I can just hear property 118 crowd shrieking that there will be no negative carry trade for us, we will just raise the rents, or we will evict, society NEEDS us.

Property 118 crowd have nearly hit 300 pages on their Summer budget call to action thread.. certainly plenty on gnashing of teeth going on, including a guy in one of the later posts who's trying to speak to his MP. Seems the MP isn't tripping over himself to listen to a whining landlord.

[LC1]

Sorry to have to say this, but you have really embarrassed yourself with this latest installment. Snarf was a character in ThunderCats, not Masters of the Universe. It makes me question the validity of the whole piece...

[Neverwhere]

Sorry to have to say this, but you have really embarrassed yourself with this latest installment. Snarf was a character in ThunderCats, not Masters of the Universe. It makes me question the validity of the whole piece...

[goldbug9999]

Sorry to have to say this, but you have really embarrassed yourself with this latest installment. Snarf was a character in ThunderCats, not Masters of the Universe. It makes me question the validity of the whole piece...

Its a toss up as to whether he should be embarrassed for doing that, or you for spotting it :-).

[lastlaugh]

Hello. Me again

Latest instalment (now with added spreadsheets!): By the numbers

Full rant-phlet thus far: A goodbye to all that buy-to-let

Feedback welcome. It's being constructed on the fly - think of it like a Choose Your Own Adventure book. If we win then bears feast on fish guts.

A most excellent read so far, Bland.

I even listened to the Clive Anderson piece in full - I learnt a lot about beatboxing on there.

I particularly liked the vignette about you canvassing in 2010. Which brings me to the my only criticism of your piece. You've been far too kind to Gordon Brown!!

There is a missing part of the jigsaw in your BTL story. And that is how Gordon Brown's tax credit Economic Doomsday Machine pumped steroids into the PRS.

It was one thing for mug investors to get the finance. A totally different thing for the mugs to get the tenants. What should have been a market ie. more homes to rent equals lower rents, was quite the opposite. The housing benefit regime in the noughties acted as a guaranteed rent machine and a device to ratchet up rents across the entire PRS, and amplified the one-way bet experience of the BTL mugs. The BTLers thought it was actually their business savvy which got the tenants through the door, and is why they still think they can simply raise rents.

[Bland Unsight]

A most excellent read so far, Bland.

Thank you. You make an excellent point. I think that should I reach the end, then this would be an excellent Interlude. I remember being absolutely dumbstruck by the feedback mechanism wherein as house prices fed RPI and RPI fed LHA and (obviously) LHA fed the prices BTLers would pay, driving RPI you had such monumental f**kwittery that one hardly knew whether to cry or applaud. Good call, sir.

Right I must get away from this laptop, I have a cheeky little 6,200 words to proof read (as best I can). On we go.

[Bland Unsight]

Sorry to have to say this, but you have really embarrassed yourself with this latest installment. Snarf was a character in ThunderCats, not Masters of the Universe. It makes me question the validity of the whole piece...

<LYING_TO_COVER_EMBARRASSMENT>

Intentional error to check people are still reading!

</LYING_TO_COVER_EMBARRASSMENT>

1. Hopefully you're not contesting that Snarf was irritating
2. I'll add a footnote to celebrate this delight!

[rantnrave]

• Hopefully you're not contesting that Snarf was irritating

Dunno. Was too busy eyeing up Cheetarah.

[LC1]

Dunno. Was too busy eyeing up Cheetarah.

+1

[Venger]

Really enjoying the papers Bland Unsight. Excellent analysis and so much fun to read.

From the main paper:

These two points will drive my analysis but, and hopefully it goes without saying, the Mortgage Market Review is Clint Eastwood in Pale Rider. The Mortgage Market Review is the good guy riding to the rescue. [..]Recall that the Mortgage Market Review is Clint Eastwood. MMR is the good guy.

The attitude of so many of the BTLer 118ers / PTers, reminds me of big property magnate Coy LaHood, trying to run that settlement of good people - claiming they're on his land.

(Mark 118: "Osborne, these tax-changes will cause maximum pain for tenants and investors and the blood will be on your hands").

Coy LaHood: What's your business with those tin pans, Reverend?

Preacher/Gunman: Nothing. They're just friends.

Coy LaHood: You and your friends got 24 hours to pack up and leave or my men will ride through that canyon and run you out! I've been a law-abiding man, but now I'm out of patience. And any blood that gets spilled will be on your hands.

---

There is only one point, in one of the papers, that I feel is open to interpretation. 2008-early/mid 2009 the solvency of the banks acted like MMR. MSE Mortgage Forum was full of threads about being refused a mortgage. Banks only processed applications from those with money to put down, and who passed their other checks (good risks). Some UK banks were scrambling around for money for boosting capital position, including with Qatar. It's how the market began to fall quite steeply, from Autumn 2007 though to mid 2009. So no MMR at that time, but financial situation of lenders acting like MMR, fewer transactions, many would-be buyers denied mortgages, and fewer applicants anyway, with values falling.

[Bland Unsight]

OK - as usual after a long stint of keyboard warrior gun-slinging, I'll post the update then catch up on the thread.

It's a big one today, knocking on 7,000 words

That means the full rant-phlet is now pushing 27,000

Latest instalment: The Scum Line

Full rant-phlet to date: A goodbye to all that buy-to-let

Should be a fun day tomorrow, draft mental title of a short interlude, Jack knows jackshit, then we return to the fall of House of Alexander by explaining how the tax relief change blows the Property118.com clowns, which'll be nice. Well that's the plan, at least.

Enjoy.

[Bland Unsight]

There is only one point, in one of the papers, that I feel is open to interpretation. 2008-early/mid 2009 the solvency of the banks acted like MMR. MSE Mortgage Forum was full of threads about being refused a mortgage. Banks only processed applications from those with money to put down, and who passed their other checks (good risks). Some UK banks were scrambling around for money for boosting capital position, including with Qatar. It's how the market began to fall quite steeply, from Autumn 2007 though to mid 2009. So no MMR at that time, but financial situation of lenders acting like MMR, fewer transactions, many would-be buyers denied mortgages, and fewer applicants anyway, with values falling.

Thanks for the feedback, Venger.

I'll push back that on that if I may. The Hagakure quote is chosen to indicate a key tactical choice; to the extent that the rant-phlet is a discussion of house prices, which is only part of what it is, it serves not to give a complete account but to explain the actual mechanism wherein lending practices set house prices.

The top level argument is to convince aspiring owner-occupiers they should not be competing with existing buy-to-let investors and they should not be jumping into the investors' graves either once softening of prices turns to a rout*. Accordingly too much detail detracts from running the essential argument. Crucially the mechanism you describe was not a regulatory mechanism, it was market pressure on the banks (closing of the money markets to actually and potentially insolvent lenders). There was no regulatory change so once the market pressure was abated by government bailouts the lending ramped straight back up. 2008 was not a crash, it was a crash forestalled.

Anyway, as you might expect, having knocked out 7,000 words, I'm f**ked, so that's all you're getting from me on this for today, but do push back on my answer if it has weaknesses and I'll pick that up once my brain is back on-line!

Edit:

* What they should of course be doing is banging on at their MP about the need to shut down interest-only lending at ridiculously low interest-rates to mug buy-to-let investors immediately. Get that done and it's affordable housing all round then off home for a picnic in the garden consisting of "ham and turkey sandwiches, bags of lettuce, hard-boiled eggs, heaps of tomato, and lashings of ginger beer"

Edited August 13, 2015 by bland unsight

[Bland Unsight]

Dunno. Was too busy eyeing up Cheetarah.

FFS - only on hpc

Are you reading, rantnrave?

[Venger]

[...] The Hagakure quote is chosen to indicate a key tactical choice; to the extent that the rant-phlet is a discussion of house prices, which is only part of what it is, it serves not to give a complete account but to explain the actual mechanism wherein lending practices set house prices.

The top level argument is to convince aspiring owner-occupiers they should not be competing with existing buy-to-let investors and they should not be jumping into the investors' graves either once softening of prices turns to a rout*. Accordingly too much detail detracts from running the essential argument. Crucially the mechanism you describe was not a regulatory mechanism, it was market pressure on the banks (closing of the money markets to actually and potentially insolvent lenders). There was no regulatory change so once the market pressure was abated by government bailouts the lending ramped straight back up. 2008 was not a crash, it was a crash forestalled.

I get it now !! Yes for the top level argument. And absolutely correct.

[Neverwhere]

An infographic homage to 'A goodbye to buy-to-let'

[Bland Unsight]

I must say, and I'm sure I'm not alone in this, I've found the critiques from buy-to-let investors bracing; it's a joy to engage in constructive discourse with such well balanced thinkers, forever determined to bore through the dross. It really is their considered appraisal that is keeping the thread alive. Thanks guys.

I had a thought, and I hope you're reading this Eric. I was proofing today's offering for typos again and something clicked about the Treasury figure in the latest instalment. If you recall I'd pointed out that I couldn't be @rsed to work out who won out of BTLers and liar loan buyers, (and I still can't). However, perhaps the data speaks to who lit the fuse...

Recall that BTL lending standards only weaken slightly in the boom, around 2004, as LTVs offered get larger, but what really drives BTL pricing juice is falling interest rates and the fact the fact that the borrowing is financed on an interest-only basis. However from 2003-2008, the general path of mortgage rates up to is up, and BTL starts off IO and remains IO. Hence BTLers ability to bid up prices weakens post 2003.

This figure can thus be, IMO, interpreted with a fair degree of confidence. In the very beginning of the boom prices move before mortgage servicing costs move because it is BTL which lights the fire. Lenders then weaken underwriting standards so that owner-occupiers can catch up, and then OOers and BTLers can act in concert to chase prices up, (though probably liar loans drive prices). This continues till 2012-2014; during that period OOers are ushered away from the table by the Bank of England as the Bank puts a stop to liar loans. This leaves just the BTLers at the table. Falling fixes from 2013 onwards give us one last push. Those falling fixes are turning now and Osborne has guaranteed the insolvency of the most leveraged unless they exit. Timber! It's on. House price crash.

Edited August 13, 2015 by bland unsight

[Venger]

Latest instalment: The Scum Line

Full rant-phlet to date: A goodbye to all that buy-to-let

Should be a fun day tomorrow, draft mental title of a short interlude, Jack knows jackshit, then we return to the fall of House of Alexander by explaining how the tax relief change blows the Property118.com clowns, which'll be nice. Well that's the plan, at least.

Enjoy.

Whilst I don’t feel quite as strongly about STRers as I do about Louis Walsh, Simon Cowell, buy-to-let mortgages and self-certified interest-only mortgage lending to owner-occupiers, I do feel that it STRing is problematic....

I have no issue with STRers. Was recently discussing with renting friends about a couple I hope will decide to STR. They have an apartment in Manchester (centre area) bought in 2008-09. Although the conclusion was to not try to influence them... silence... let them decide themselves.

Only needs another lunatic scheme (like QE/HTB) to come along to scupper market dynamics again, and I can't take that risk with influencing friends to STR, despite expecting HPC to begin any time from now to 24 months away.

They are already leaning STR way anyway - she wants to get into the suburbs, and be positioned for better housing value. Selling now, they may be able to hive away £40K+ for what they bought apartment for. That, what they've paid down in capital too, and what they've put into savings, could go a long way in a HPC, and the semis in the surburbs currently worth '£400K'. Rent and be positioned.

It's a market - STRs should be welcomed as perhaps a trigger for HPC. For recognising mega bubble and opportunity to cash in.. rent, and position themselves for HPC. My views are very similar to StainlessSteelCat's. Why should I feel any animosity towards a market participant who can recognise the bubble and see opportunity to cash in / sell, at really high values? Especially if they time it just before HPC - if we get it. Bring on some sellers.. STRs are welcome.

I guess the clue is in the name of the site - HPC rather than Priced out or Generation Rent.

STR and first time buyers both want a HPC. Personally, I never had a problem with STR because a] they often contributed valuable insight (including to the buying process) and b] they weren't likely to be buying first time buyer houses.

However, it is true there is hardly any talk of STRing. Maybe Osborne & Carney have wrong footed people into full complacency, so HPC can come with big surprise. It's not like STRs are flooding the market.. if only.

Sky News ‏@SkyNews 11 hours ago

The number of houses for sale is at its lowest level since records began in 1978

http://news.sky.com/story/1535150/housing-shortage-sends-prices-north

[Venger]

I've been having a good laugh at the puerile jibes your gang have been making, the posts give a good insight into your characters. Carry on. You might all grow up one day in the distant future maybe.

Despite your derision I still stand by the results of my investment decision. It has been one, not the only one, or the best one, but one of my most successful.

If you want some numbers to reflect on, let me give you a brief outline of the decision one of my clients is pondering. I'll use Venger's semi literate style so the example I'm advising on isn't to verbose.

Two new builds purchased 2005 Each £150k, 20% deposit, £120k loan. Let immediately, self managed, rental income £750 per month, tracker mortgage BOE base + 0.25 initially. Minimal maintenance costs, mortgage installments £500 per month.

Second mortgage (MEW) of £30k taken on each property in 2006. Effectively they have cost the buyer nothing. Although to be fair there is the capital risk of £150k loan on each, which can be repaid from their other resources if necessary. Financial crisis hits and BOE base rate plummets taking installments down to £200 per month. Rental income increased to current level of £900. Still self managed, over period of ownership void periods total 2 months. Maintenance still minimal. Current market price £240k. Properties in retired wife's name, she is a standard rate taxpayer with only income small occupational pension £3000 per annum and state pension. Letting income has been declared and any income tax due paid on time.

Decision is whether to sell now and release £180k gain less 18% CGT, which can be legitimately avoided but I won't tell you how (I only give that tax avoidance advice to paying clients) or continue letting. This was a similar decision to mine last year, I sold and lost out on the HPI this year. Nevertheless it was still a successful investment.

It's a forum. I find conversationalist style more appropriate. For some reason you find it thrilling to keep bragging on about your HPI and BTL gains on HPC forum. I have noticed you're very active at the moment, and suspiciously grumpy, for someone who claimed to have sold his BTLs.

Take it you've never read the Orwell essay 'Politics and The English Language' then? Never use a long word where a short one will do.

And when Hemingway was criticised by Faulkner for his limited word choice he replied: Poor Faulkner. Does he really think big emotions come from big words? He thinks I don’t know the ten-dollar words. I know them all right. But there are older and simpler and better words, and those are the ones I use.

[Venger]

OK - as usual after a long stint of keyboard warrior gun-slinging, I'll post the update then catch up on the thread.

It's a big one today, knocking on 7,000 words

That means the full rant-phlet is now pushing 27,000

Latest instalment: The Scum Line

Full rant-phlet to date: A goodbye to all that buy-to-let

Should be a fun day tomorrow, draft mental title of a short interlude, Jack knows jackshit, then we return to the fall of House of Alexander by explaining how the tax relief change blows the Property118.com clowns, which'll be nice. Well that's the plan, at least.

Enjoy.

Super-fab latest instalment. Except for some confusion to your point about STRing. (Instalment* Sleepers)

[canbuywontbuy]

Decision is whether to sell now and release £180k gain less 18% CGT, which can be legitimately avoided but I won't tell you how (I only give that tax avoidance advice to paying clients)

LOL - well it seems no other landlord knows this loophole of yours - nobody on 118 or any other forum is talking about legally avoiding CGT without it costing more than simply paying the CGT. But no, you have a way to do it - except you won't share it here to utterly debunk 150+ pages of commentary, despite your itching to prove the HPC crowd wrong. I hope you can afford the CGT - your grumpiness suggests otherwise.

[sleepwello'nights]

It's a forum. I find conversationalist style more appropriate. For some reason you find it thrilling to keep bragging on about your HPI and BTL gains on HPC forum. I have noticed you're very active at the moment, and suspiciously grumpy, for someone who claimed to have sold his BTLs.

Take it you've never read the Orwell essay 'Politics and The English Language' then? Never use a long word where a short one will do.

As always you miss the point and use, what I'm frequently accused of, ad hominem attacks. The words I use are common place, not esoteric or pretentious. If you think otherwise well I guess its because you cannot refute the facts I present. I take the point that was made, on a statistical basis my experience is anecdotal.

I'm not bragging about the gains I made. I'm pointing them out as a counter to the argument that a BTL landlord is an innumerate fool. My decision to release equity from my home was based on an investment decision. It generated a return far higher than expected, better than the precious metals I purchased, better than the equities I purchased, although these have performed well. Sure I lucked in when interest rates fell to historic lows and house prices continued to rise. Even if they hadn't the rental profit still generated a better return than dividend yields. Yes I was lucky; what was my alternative, a leveraged investment on shares. No way. They say there are two types of stock picker, those who know they can't pick stocks and those who haven't found out yet.

I don't see how my replies appear to be grumpy, I certainly don't feel grumpy. I don't like blind prejudice, which is what most of you landlord haters display so obviously. Is it jealousy or envy, or are you altruistic saints?

As regards the accusation that I am making up the CGT loophole, dyor, there is an article about it on a reliable tax website.

If this reply seems grumpy, well you have your own opinion, mistaken for whatever reason your logic suggests.

I've just noticed looking at the last few posts as I type this refreshed from a good nights sleep that your posts are all timed in the very early hours. What's the matter, can't sleep?

Edited August 14, 2015 by sleepwello'nights

[Bland Unsight]

I've just noticed looking at the last few posts as I type this refreshed from a good nights sleep that your posts are all timed in the very early hours. What's the matter, can't sleep?

For any lurkers and guests who wonder who this sleepwello'nights character is, whilst I do not believe he consciously perceives himself as such, he is, from a certain perspective, the forum's tame troll.

People can and should make up their own minds, but my experience of him has led me to conclude that no other interpretation chimes with the facts. A month or so back, sleepwello'nights, his thinking prejudiced by other posters' unevidenced speculations regarding the possibility that I might be a woman, guided by this error and having in addition misinterpreted some intentionally ambiguous replies I made to his posting, convinced himself that I was a woman, (I'm not).

Goaded, presumably, by my earlier evidenced suggestion that he might be something of a bullshItting fool, sleepwello'nights made a sequence of posts suggesting first that I was a tart, later suggesting that the boys I teach might not want to look up my skirt because I was probably a bit "geeky" and reaching a high watermark when he suggested I was a "bunny boiler", (a post which drew a warning from the Moderators). Hilariously, and it's too good not to share, sleepwello'nights, misinterpreted the warning from the Mods and edited a brusque but unobjectionable reply he'd posted to Killer Bunny.

This is the kind of conduct that led Venger further up the thread to assert that sleepwello'nights has no credibility, (an assessment which I endorse).

Clearly, not all buy-to-let investors who post on hpc are thick bigots, but some clearly are. I've never complained about the conduct of sleepwello'nights in the past and have no intention to do so in the future. If he is our tame troll it seems appropriate to humour him or ignore him depending on our inclination, and to occasionally feed him little snacks by pretending that he's part of the conversation and allowing him to imagine that he is credible and that he is making us consider what a wonderful prospect buy to let investment might be and worry about the buy-to-let investors winning forever. (Spoiler alert: they are going to get murdered by the banks that lent them the money.)

I'll not be humouring or indulging him any further on this thread as I have a book to write.

Edited August 14, 2015 by bland unsight

[Limon]

At risk of being a tiresome pedant, there's a minor but initially confusing typo in the first paragraph of By the numbers:

Fortunately, a suitable spreadsheet application with usually do most of the arithmetic for you, (yes, there is a difference).

with -> will

Edited August 14, 2015 by Limon