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Btl Will Lose Money In 91% Of Regions By 2021

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Bearishness from The Telegraph?

Mapped: how buy-to-let will lose money in 91pc of regions by 2021

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Buy-to-let investors purchasing mortgaged properties today are set to lose money within five years almost regardless of where in Britain they invest, analysis by Telegraph Money has found.

Using current house price, rental and mortgage rate data, the calculations suggest landlords who borrow a typical 75pc of a property price today will be losing money each month by 2021 in ten out of 11 British regions, including London.

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The assumptions behind the calculations

The Landlord...

  • ... is a higher-rate taxpayer. with a 75 per cent mortgage
  • He buys the averagely priced buy-to-let property now with a two year fixed rate mortgage charging 2.54pc, rising to 4.8 per cent thereafter

The data

  • Regional house price and rental data from Your Move and Reeds Rains Buy to Let Index for November 2015
  • Buy-to-let hotspot data from HSBC rental yield review, May 2015
  • Rents are assumed to remain level. No landlord costs are included apart from mortgage interest rates

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How about a third "profit" column - implementation of Basel III?

Publication of this data was delayed first by the difficulties associated with fitting the required enormous negative numbers* on the page and then by a shortage of red ink, ;)

* A journalist suggested using standard form, but the editor argued that BTLers only do numbers with fridge magnets or brightly coloured crayons

Edited by Bland Unsight

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Forgot to consider differing voids around the respond

Nevertheless Olivia Rudgard, whoever you are, you dark horse...

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* A journalist suggested using standard form, but the editor argued that BTLers only do numbers with fridge magnets or brightly coloured crayons

Or different size toy cars or fruit

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If any buy-to-let investors are looking for a way to avoid this tide of red ink I will be offering seminars covering my new Sell Now, Sell Everything investment plan. The course will cover

  • Waking up
  • Smelling coffee
  • Offering property for sale
  • Understanding that the offers that come in represent the market price
  • Accepting offers that are lower than you had hoped
  • Declining offers to trade cows (cash) for magic beans (shit BTL properties)

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2% increase in IR`s and Lancashire and Cumbria are the only places left with a profit ... :o

There need to be far more "don`t do it you morons " articles like this, the myth needs busting big time

BCBS risk-weights will give you that 2% on BTL mortgage rates comfortably before 2021, even if the base rate and other relevant market rates stay right where they are today until the end of time.

The thing is, until Osborne's tax changes, these investments did wash their faces, hence there was no myth. The BTL investments didn't make losses, provided interest rates remained low and stable it was basically wired in by the 125% rental cover on the loaned amount. Because the BTL investor is, in general, thick and ignorant, they ignore the opportunity costs of tying up the deposit and the downside risk from a softening asset price. Provided the rent covers expenses you hope that what the net cash flows will not provide (i.e. jam today) will be made up for by HPI and capital gains eventually (i.e. jam tomorrow).

This forum was about the only place I could find where there was a sustained narrative about those risks, and when I joined in it immediately became abundantly clear to me that there are many, many posters who see the matter the other way and are here because they love their BTL mad gainz and they love going on about them.

We here, six months later, are familiar with the reality of what Osborne did, and the ever problematic Richard Dyson was actually very good at pointing out the impact in the changes in July and August last year, but essentially nobody else was particularly interested.

Look at this from Paragon's The Landlord publication in November 2015

We asked landlords in a recent survey what action they are likely to take following the news of these changes to tax relief, and 57% said they expected to increase rents to cover all or some of the additional cost. Whilst some landlords may also take the decision to purchase less rental property in the future, it is unlikely these changes will mean we will see a surge of landlords exiting the buy-to-let market. The UK’s PRS is now home to 4.9 million people, having doubled in size since 2001 and more people than ever before are actively choosing to live in the sector because of the choice and flexibility it affords. Research by PwC predicts that by 2025 just under 25% of housing will be in the PRS. So with this continued growing demand from tenants for good quality rental homes, landlords are likely to see ongoing opportunities for investment in the sector.

Source

This is the context. People didn't understand how BTL worked when it worked, and they don't understand why it's now f**ked. However, the incentives emerging from the personal taxation framework are now very different and eventually word will get around that BTL is a money pit not a pension. This will happen because leverage landlordism really is f**ked. It's over, regardless any insistence by vested interests to the contrary.

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The thing is, until Osborne's tax changes, these investments did wash their faces, hence there was no myth.
didn't make losses, provided interest rates remained low and stable

Very true, but that's not what most would call a good investment ,especially when BTL has been portrayed as a surefire way of becoming rich when it`s been nothing more than a leveraged bet on HPI

For the last decade in large parts of the country BTL has done nothing more than washed it`s face, and those same large parts of the country have seen little to no HPI in those ten years...yet one lot who seen the light have been bailed out by the next wave of believers ...how many more are left is the big question ?

The more i`ts portrayed in the MSM as an investment with more than significant risk the better

Edited by long time lurking

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I really like the article but does it just assume buying at current prices? There may still be profit for landlords who bought let's say 5 years ago...

One thing is very clear, one would have to be mad to decide to become BTLeech or expand portfolio now.

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I really like the article but does it just assume buying at current prices? There may still be profit for landlords who bought let's say 5 years ago...

One thing is very clear, one would have to be mad to decide to become BTLeech or expand portfolio now.

We started renting off a new BTLer (only property) in mid November. According to the agent they have a two year BTL deal. If we're still here in late 2017 the renegotiation could be interesting....

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I really like the article but does it just assume buying at current prices? There may still be profit for landlords who bought let's say 5 years ago...

One thing is very clear, one would have to be mad to decide to become BTLeech or expand portfolio now.

Depends on where you are ...Manchester would have been there or there abouts the same price ten years ago wouldn't it ? (BTL type palaces )

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I think some BTL are actually buying. I think those with 10 propertieshave looked at their options of either selling (be bankrupt) or getting over the magical 15 property line.

in a market with such low volume for sale plenty of BTL will be buying what they can.

then that's it for buyers from April onwards. Done.

the buyers will return at FTB affordable levels so 20% price falls in the regions.

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I have to admit I'm a bit conflicted about this article. If it was ramping property Id be appalled, but given the current situation it's easy for me to look the other way...

Conversely it wouldn't surprise me if it was used as (deeply flawed) 'feel sorry for us' propaganda by the btl brigade.

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I think some BTL are actually buying. I think those with 10 propertieshave looked at their options of either selling (be bankrupt) or getting over the magical 15 property line.

in a market with such low volume for sale plenty of BTL will be buying what they can.

then that's it for buyers from April onwards. Done.

the buyers will return at FTB affordable levels so 20% price falls in the regions.

The tax changes to how finance costs for individual landlords are treated apply regardless of portfolio size.

The consultation on the 3% SDLT surcharge is currently discussing the possibility of an exemption for 15+ properties purchased in a single transaction (which it seems to favour) or for portfolios of 15+ properties (which may or may not be limited to corporate landlords), neither of which will help with monthly running costs.

Then again BTL landlords do seem to like their magical thinking so you may well be right. ;)

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I think that this is about pulling up the drawbridge to new entrants.

Not necessarily a bad thing and will hopefully bring about an end to the amateur BTL types.

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I think that this is about pulling up the drawbridge to new entrants.

Not necessarily a bad thing and will hopefully bring about an end to the amateur BTL types.

Pulling up drawbridge to new entrants.

Pushing the old entrants into the moat.

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Why is Scottish property MORE profitable after a rate rise?

Even at "current profit" levels is it really worth it? The responsibility, the time and effort not to mention the opportunity costs for a few grand?

All about the hope of HPI....

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Why is Scottish property MORE profitable after a rate rise?

Looks like a typo. Note another typo: no £ sign next to West Midlands after rate rise.

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Even at "current profit" levels is it really worth it? The responsibility, the time and effort not to mention the opportunity costs for a few grand?

All about the hope of HPI....

Agree. Particularly if this is profit for average property in each region. What's average now in London? £500k? So the profit is 1% with almost no upside potential and a massive downside risk? Game over.

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