I Plan To Buy To Let

[Rave]

O.K., so the title is deliberately misleading. Right now I'm unemployed (applying to become a bus driver FWIW) and I rent a pokey 1-bed flat with my wife. However, I'm not always going to be poor, and whatever happens over the next few years I'll be saving very hard to put a big deposit together so I can try and call the bottom of the housing bear market.

The thing is- I might have a kid (or kids) by that point (my wife is 31, so we can't put it off forever). The ridiculous housing situation in this country has put me through a lot of stress (the more so before I read 'Crash' by Robert Beckman and then found this site), and I'd like to try and make sure my kids don't have to suffer the same way. My plan is simply to buy a BTL property for each child we have, throw all the rental income into paying the mortgage on the property (plus maybe any surplus money we might earn), and then simply hand them a flat or house when they leave home.

Now I'm of the opinion that the current bubble was fuelled almost totally by BTL, and of course I don't want to be part of the problem next time round. Nor, of course, do I want to create a social divide between the property owning class and those doomed to rent by high house prices. Nothing would please me more than for house prices to chug along for years at a constant, affordable level. The point is, as a glance at the graph on the front page of HPC will make abundantly clear, that has never happened in the past and is unlikely to happen in the future. We seem to be stuck with a system of boom and bust.

I'm not a greedy chap. I really don't aspire to great riches; I don't particularly want a Ferrari, I don't want a big yacht, or a 5 bed house in Chislehurst. I wouldn't mind a holiday home in southern Spain, but I'm happy to work and save for it . If I were to BTL I would only buy one house for each kid, I would not be trying to amass a huge portfolio so that in five years I could sit back and count a paper profit in the millions. However- I would still be part of the problem. My thinking is- if I don't do it someone else will. So given that the problem will undoubtedly occur anyway- I might as well be on the winning side- or my kids might as well be.

So am I a git for even considering it?

[Time to raise the rents.]

Good for you mate. You have just started on the road to financial freedom. I started out with similar thinking to yours. Do yourself a favour and buy a book called 'Making Money Made Simple' by Noel Whittaker. The UK version is occasionally available for a steal on Ebay, but the Australian version is still sold from the authors website:

http://www.noelwhittaker.com.au/ie/books.html

This isn't a property book, it's a book that helps to create a plan for getting off the ground to be able to make the decisions you talk about.

Why not have enough places for your kids and enough for you to retire on a modest income that's enough to maintain the properties and maintain your lifestyle as well?

There is nothing to feel guilty about on being a landlord. It is an honest business selling a product that's in demand. As many will agree here, the more landlords there are, the more competetive rents will be which benefits tenants.

[Scipio_Africanus]

Rave,

In my opinion you should forget property as a way to reasonable wealth - at least for the next ten years. While I don't think the property bubble will burst in 2006, it'll perhaps go in 2007. Even if the bubble doesn't burst, the big gains are probably a thing of the past. Indeed particularly if it doesn't burst - because sooner it bursts the sooner the new cycle can big. I get the impression that those that get rich on property tend to start building their property portfolios at the bottom of the cycle. Next bottom, in my opinion, will be 2010 to 2012. And at the bottom getting a mortgage can be quite tough - am I wrong in thinking the higher the price (and the greater the risk risk) the easier it is to borrow the money?

[NJP]

My thinking is- if I don't do it someone else will. So given that the problem will undoubtedly occur anyway- I might as well be on the winning side- or my kids might as well be.

So am I a git for even considering it?

As ar as I'm concerned, it's unfortunate that BTLs have contributed to the rising market, but I can't blame them for taking an opportunity. I'd do the same if I were in their position. No point in cutting off your nose to spite your face.

[newaccount99]

Rave

Wise words there from the other two posters. In summary.

1) Wanting a secure future for yourself and your family in no way makes you a git and it's natural/normal foryouto want toprovide the best for them.

2) property probably just isn't the safe bet it has been for the last 10 years and may not be for another 10....Research well and above all don't land your family a millstone rather than a secure future.

[war]

I am surprised that you are considering BTL as a means of getting rich quickly. If you have been reading HPC, it must be clear that BTL is not an investment at this moment of time. Yes, many made money during the booming years, but new BTL are facing large losses; rents are coming down in many places and may not cover even part of the mortgage. This madness will have to end some time. Think, where is the money to keep the house prices up at such unaffordable levels going to come from? Are the banks to going to play this game forever? I feel you are going to burn your fingers if you enter the BTL business.

[theChuz]

I've had the same type of thoughts myself but without the morality/ethical issues the way i see it...

Look after yourself, your family and when you can your freinds. F*ck everyone else. Within the realms of the law make your money how ever you see fit. If other people chose not to make money that way thats thier lookout.

[the end is a bit nigher]

I might as well be on the winning side

You refer to a cycle of boom and bust - where do you think we are now?

I have no objection to people investing for their future but do you really think you will be on the winning side if you invest now?

[theChuz]

I got the impression that you were thinking of it as a future option not now, if your wanting to go into it now then as an amature with little financial backing you would be a nutcase and armed with the knowledge you have at present i would say that you would actually deserve to get burnt IMHO.

One thing where i think you maybe f*cking up though is when you say "and then simply hand them a flat or house when they leave home." taking that literally i think that would be a mistake, make them work for it and rent / buy it off you. Don't just give them a house/flat you will be robbing them of "life mememories" which build character.

Of course nearer the time you probably wouldnt just *give* them a house/flat anyways, its not always a bad thing to have to work hard and wait for what you want.

Everyone wants the best for thier kids but i think inadvertantly they can end up doing more harm than good by helping them to much.

All IMHO im not a parent or btl'r so i have no experience in these matters, just my take on it.

Summary:

In short yes go into BTL at the right time as a business not a get rich quick and make your kids work for what they get

[Gavin]

Following a crash, I think BTL will be considered as jokeworthy as telling people now that dot.com shares are going to make you a mint.

Following a crash BTL, will be just the same as ANY asset, and should be weighed up on this basis. Who knows what will do well in the future?

In future it could be that geographical position is less important than now as the internet makes everywhere part of the same cyber location. If this happened, remote land to go up in value. I don't know and neither does anyone.

I would only consider BTL if I had the skills to maintain a property on behalf of tennants otherwise I wouldn't touch it. THe trouble that goes with it would not be worth it.

Gold? Renewable energy sources? Nanotechnology? Who knows what would better provide for your kids. Now that the boom is over its no longer a one horse race. There are lots of horse to choose from. BTL is the modern day Shergar. A wonderful memory, but now a dogs dinner.

[Marina]

It would be interesting if everyone in the country tried to buy a BTL each for their kids.

If you are applying for a job as a bus driver, you are taking a job that pays the same as it did 20 years ago.

The only way you will be able to hand a property to your children is if you can repay the mortgages on BTLs in that time. Where I live I estimate that even at interest rates that are still close to 50 year lows, the price of property means that the rent received will only pay about 75% of an interest only mortgage.

Have you got the deposit for the BTLs? And the other in-going costs? And can you stand voids?

Where I live developers are really struggling to sell new build 2 bed flats to investors. All they seem to catch is the odd older couple down sizing.

The housing market in this country is pretty much buggered from an investment point of view, and I think it will be for a generation.

I would take the other advice offered on here and look at other investments.

[Rave]

Thanks for the replies folks.

I have no objection to people investing for their future but do you really think you will be on the winning side if you invest now?

No no no- in case I didn't make it clear, what I mean by 'attempting to call the bottom of the bear market' is that I'll be buying in 5-15 years time. Of course buying now would be lunacy.

I suppose you have a point about making them work for it theChuz- but if I have anything to do with it my kids will grow up sensible and definately not spoilt. I could wait until they're ready to settle down I suppose- or if they end up being stay-at-homes it'd be a good way to get rid of them .

[theChuz]

<cut>

The housing market in this country is pretty much buggered from an investment point of view, and I think it will be for a generation.

That to me is the key statement it is buggered but for how long, it could be a generation it could be that in 15 years time it will repeat itself (at its earliest convienience, i.e in around 15 years when if credit becomes easily availiable again).

In its simplist form its like any other assest its about timing buy low sell high

[Marina]

That to me is the key statement it is buggered but for how long, it could be a generation it could be that in 15 years time it will repeat itself (at its earliest convienience, i.e in around 15 years when if credit becomes easily availiable again).

In its simplist form its like any other assest its about timing buy low sell high

Indeed but I, for one, have never seen it quite like this before. I can't see where the next recovery will come from.

We have a falling birth rate.

We have FTBs buying at a much later age than they used to.

Technology and globalization march on - leading to not much chance of wage inflation.

And all this with IRs still historically very low.

In the future - as this market stabilizes - a lot of the relatively recent entrants to the market have huge mortgages around their necks. I can't see how they will be able to afford to buy up. If prices go down a lot (highly likely) they will be saddled in negative equity for donkey's years. Even if prices stabilise - wages will not rise enough to allow them to take on the even larger mortgage they'll need to buy up.

This, ultimately, is the clincher for me. The 34 year old FTB at the moment clawing his way onto the ladder with a 150k mortgage around his neck, will need a 250k mortgage in 10 years time to buy a 3 bed semi.

Last time round it took 12 years for house prices to (inflation adjusted) recover.

This time I could see it taking twice as long.

[theChuz]

Indeed but I, for one, have never seen it quite like this before. I can't see where the next recovery will come from.

We have a falling birth rate.

We have FTBs buying at a much later age than they used to.

Technology and globalization march on - leading to not much chance of wage inflation.

And all this with IRs still historically very low.

In the future - as this market stabilizes - a lot of the relatively recent entrants to the market have huge mortgages around their necks. I can't see how they will be able to afford to buy up. If prices go down a lot (highly likely) they will be saddled in negative equity for donkey's years. Even if prices stabilise - wages will not rise enough to allow them to take on the even larger mortgage they'll need to buy up.

This, ultimately, is the clincher for me. The 34 year old FTB at the moment clawing his way onto the ladder with a 150k mortgage around his neck, will need a 250k mortgage in 10 years time to buy a 3 bed semi.

Last time round it took 12 years for house prices to (inflation adjusted) recover.

This time I could see it taking twice as long.

What you suggest as things to keep the market subdued i cannot argue with, i know that logically what you have put makes sense and when the rest of society also believe that then i will consider pouring money into housing.

I cannot offer any counter-argument to what you've put it all makes perfectly logical sense but and heres the big but for me, the market isnt logical hence where we are at today, so trying to apply logic and reasoning to it doesnt work but it does stop us p*ssing in the wind to much.

When it all collapses it will overshoot, when it overshoots there will be good logical reason not to buy (otherwise it wouldnt of colapsed in the first place) but i think the trick is to buy then and wait for it to return to normality.

I think we will see what i believe to of happend last time people fall out of love with property so then the price reflects a better investment.

Again i know that all i have said then are i think, i believe, not logical so i know what a pathetic counter to your logical statements that is.

Its not differnt this time and it wont be differnt in the future, how we get there will always change but the final outcome just keeps on repeating itself. Boom and bust who would of thunk it.

Edited January 7, 2006 by theChuz

[IPOD]

I've had the same type of thoughts myself but without the morality/ethical issues the way i see it...

Look after yourself, your family and when you can your freinds. F*ck everyone else.

What a pleasant and charming attitude you have. If most people in the UK feel like this, no wonder the country is in the state it's in.

In its simplist form its like any other assest its about timing buy low sell high

You've certainly changed your tune Fred. From ranting Judean People's Front spokesman a couple of months back to consummate Gordon Gekko-esque speculator, I suppose when one is completely without ethics or morals a consistent moral framework is beyond you.

[theChuz]

What a pleasant and charming attitude you have. If most people in the UK feel like this, no wonder the country is in the state it's in.

You've certainly changed your tune Fred. From ranting Judean People's Front spokesman a couple of months back to consummate Gordon Gekko-esque speculator, I suppose when one is completely without ethics or morals a consistent moral framework is beyond you.

Want me to go into detail about what i mean, you could dredge up a few old posts and it might make things clearer

Btw ive not changed my tune? same old tune - i dont know what the judean peoples front is mind you i dont know what you mean by gordon gekko-esque either, one last thing, my names not fred unless that is reference to something else i dont know about?

You'll have to explain what you mean if you want me to understand you, my stupidity or your vagueness i dun know

EDITED:

http://www.housepricecrash.co.uk/forum/ind...ndpost&p=127475

http://www.housepricecrash.co.uk/forum/ind...ndpost&p=163691

Yup same old me so far.

http://www.housepricecrash.co.uk/forum/ind...ndpost&p=198739

http://www.housepricecrash.co.uk/forum/ind...ndpost&p=185426

http://www.housepricecrash.co.uk/forum/ind...ndpost&p=182629

http://www.housepricecrash.co.uk/forum/ind...ndpost&p=251028

and still the same there

Oh and incase you think my values have changed read this one or if the original post cause you dismay then perhaps you shouldnt.

http://www.housepricecrash.co.uk/forum/ind...ndpost&p=102854

I think you have me confused with someone else?

Edited January 7, 2006 by theChuz

[2005]

O.K., so the title is deliberately misleading. Right now I'm unemployed (applying to become a bus driver FWIW) and I rent a pokey 1-bed flat with my wife. However, I'm not always going to be poor, and whatever happens over the next few years I'll be saving very hard to put a big deposit together so I can try and call the bottom of the housing bear market.

The thing is- I might have a kid (or kids) by that point (my wife is 31, so we can't put it off forever). The ridiculous housing situation in this country has put me through a lot of stress (the more so before I read 'Crash' by Robert Beckman and then found this site), and I'd like to try and make sure my kids don't have to suffer the same way. My plan is simply to buy a BTL property for each child we have, throw all the rental income into paying the mortgage on the property (plus maybe any surplus money we might earn), and then simply hand them a flat or house when they leave home.

Now I'm of the opinion that the current bubble was fuelled almost totally by BTL, and of course I don't want to be part of the problem next time round. Nor, of course, do I want to create a social divide between the property owning class and those doomed to rent by high house prices. Nothing would please me more than for house prices to chug along for years at a constant, affordable level. The point is, as a glance at the graph on the front page of HPC will make abundantly clear, that has never happened in the past and is unlikely to happen in the future. We seem to be stuck with a system of boom and bust.

I'm not a greedy chap. I really don't aspire to great riches; I don't particularly want a Ferrari, I don't want a big yacht, or a 5 bed house in Chislehurst. I wouldn't mind a holiday home in southern Spain, but I'm happy to work and save for it . If I were to BTL I would only buy one house for each kid, I would not be trying to amass a huge portfolio so that in five years I could sit back and count a paper profit in the millions. However- I would still be part of the problem. My thinking is- if I don't do it someone else will. So given that the problem will undoubtedly occur anyway- I might as well be on the winning side- or my kids might as well be.

So am I a git for even considering it?

I would agree with the other post about making your kids working for their own home when they are adults.

Your job...as a parents..is to give them the best start in life so when they grow into adults then can stand on their own two feet. I would personally put your money into giving them the very best opportunity to make it themselves.

If you have spare money or want to invest in your kids future then there are many other areas you can consider that will not spoil them-

Private education - a good education is the best start you can given any child

Private health care - the NHS is only going to get worse - for peace of mind make sure your little ones do not have to wait months to see a specialist in the worst should happen.

Start saving for their university fees - they will increase before your kids are 18 years old. Make sure you can pay their fees and that they have enough to live on so they don't start their adult life in debt.

Make sure they are not denied opportunities because of lack of money. If one of your kids says to you at 18 years that they want to be a doctor or a lawyer what you going to do....say sorry, you can't study for an occupation you love and will help you stand on your own two feet....but I can give you a nice 2 bed flat.

Make sure they have plenty of life expereinces when they are young...travel, expose them to music, art, languages and technology....this all costs money.

Start saving now so that if you or your wife want to take a career break to stay at home while the little tiddlers are still tiddlers you can afford to do so.

Any one of the above would be of much more benefit to your kids future than handing them a flat when they reach 18 years - all IMO

[frugalista]

My plan is simply to buy a BTL property for each child we have, throw all the rental income into paying the mortgage on the property (plus maybe any surplus money we might earn), and then simply hand them a flat or house when they leave home.

You want a secure future for your kids, right? Sounds like you will make a great dad. But, what I don't get is why you are so obsessed with property.

When your kid arrives, why don't you save money for them through a baby bond?

It is a special account for children, a bit like a pension. The way it works is this:

(1) The government gives you a fixed amount when the baby is born. A few hundred I think.

(2) They government gives you additional small amounts every 5 years or so.

(3) You can put in about £1200 a year tax free (so there will be tax relief on your contributions which will also go into the fund).

(4) While the child is growing up, I believe you can choose various investments for the fund, like pensions.

(5) When the child turns 18 (or it might be 21) they get to liquidate the fund without paying any tax and can use it for whatever they like, as a start in life.

frugalista

edit: I think the only "catch" is that control of the fund automatically passes to the child at maturity. Personally I think this is brilliant, but some who don't trust their own kids might not...

Find out more here:

http://society.guardian.co.uk/publicfinanc...,934537,00.html

Edited January 7, 2006 by frugalista

[AgeingBabyBoomer]

You want a secure future for your kids, right? Sounds like you will make a great dad. But, what I don't get is why you are so obsessed with property.

When your kid arrives, why don't you save money for them through a baby bond?

It is a special account for children, a bit like a pension. The way it works is this:

(1) The government gives you a fixed amount when the baby is born. A few hundred I think.

(2) They government gives you additional small amounts every 5 years or so.

(3) You can put in about £1200 a year tax free (so there will be tax relief on your contributions which will also go into the fund).

(4) While the child is growing up, I believe you can choose various investments for the fund, like pensions.

(5) When the child turns 18 (or it might be 21) they get to liquidate the fund without paying any tax and can use it for whatever they like, as a start in life.

frugalista

edit: I think the only "catch" is that control of the fund automatically passes to the child at maturity. Personally I think this is brilliant, but some who don't trust their own kids might not...

Find out more here:

http://society.guardian.co.uk/publicfinanc...,934537,00.html

That looks like avery good idea, frugalista, but we would need to be confident

that governments over the next 21 years will keep their side of the deal.

Given their recent handwashing over state pension provision

(all the money mysteriously disappeared from the pot),

I am wary.

(20 years ago, I thought they were 'safe')

ABB

[frugalista]

That looks like avery good idea, frugalista, but we would need to be confident

that governments over the next 21 years will keep their side of the deal.

Given their recent handwashing over state pension provision

(all the money mysteriously disappeared from the pot),

I am wary.

(20 years ago, I thought they were 'safe')

ABB

I don't think the payout is provided by the state, like the state pensions you mention. Your money is invested in private sector mutual funds, exactly like private pension plans. So they are as safe as private pensions, however safe you think that is.

frugalista

[AgeingBabyBoomer]

I don't think the payout is provided by the state, like the state pensions you mention. Your money is invested in private sector mutual funds, exactly like private pension plans. So they are as safe as private pensions, however safe you think that is.

frugalista

Looking at my own private pension, and the recent antics of the bigcorps, I would say not safe at

all.

Don't forget that the pension funds gambled alot on the dot com boom, and lost.

The real problem is how to transmit today's wealth to the future.

I'm beginning to think the best way to do that os to buy a big lump of gold

when the price is low, and bury it in the garden...

ABB

[Marina]

What you suggest as things to keep the market subdued i cannot argue with, i know that logically what you have put makes sense and when the rest of society also believe that then i will consider pouring money into housing.

I cannot offer any counter-argument to what you've put it all makes perfectly logical sense but and heres the big but for me, the market isnt logical hence where we are at today, so trying to apply logic and reasoning to it doesnt work but it does stop us p*ssing in the wind to much.

When it all collapses it will overshoot, when it overshoots there will be good logical reason not to buy (otherwise it wouldnt of colapsed in the first place) but i think the trick is to buy then and wait for it to return to normality.

I think we will see what i believe to of happend last time people fall out of love with property so then the price reflects a better investment.

Again i know that all i have said then are i think, i believe, not logical so i know what a pathetic counter to your logical statements that is.

Its not differnt this time and it wont be differnt in the future, how we get there will always change but the final outcome just keeps on repeating itself. Boom and bust who would of thunk it.

My observation is that markets can defy logic and reason - for a while - but never indefinitely. This housing boom has tried its best to defy logic and reason. Even when, by any sensible standards, property had become unaffordable - still it went up. But it staggers uphill under an ever-increasing load of logic and reason. And when, at last, it can stagger on no longer - it falls. Markets don't stop. They never stop. They either rise or fall.

I feel the same way about the UK stock market at the moment. It struggles on gamely - because, the logic and reason that says we can no longer compete in the global marketplace very effectively - the logic and reason that says we don't create any real weath any more - just borrowed, illusory, property wealth - has not yet filtered through to enough people.

We have rising UNemployment. Rising bankruptcies. Falling consumer demand. Retail businesses going broke. Plenty of real evidence to provide the logic and reason for the market to go down. But, not enough people have the message yet. Car sales at a 5 year low. More sales than you can shake a stick at. This is a healthy economy?

[DRS]

Though it may not be the time for an amateur btler there are always oppurtunities for the more canny. The op was pertaining to investment for his kids, so thats a 18+ year outlook, perfect for property. You can also consider commercial property as its cycle differs to residential and involves less work.

Lastly, my own personal humble opinion is that when there is a correction it will reverse quickly. The reason? People are sat there waiting for the prices to drop so they can jump in and buy. Owner occupiers and investors also. The mind set of bricks and mortar as an investment will never go away now.

[Rave]

2005 you make some good points, duly noted. I'm not so sure about the private education- as a former public schoolboy myself my feelings on the subject are mixed. Yes I got a great education and a clutch of GCSEs and A-Levels, but I think I was left rather ill-prepared for life beyond school, which is why I flunked out of university. Maybe I just wasn't suited to it- perhaps my kids will be. I could try and send them to Grammar school- if the crash is really serious, I might be able to afford a move into the St Olave's catchment area- then I've just got to hope that the kids inherit some brains off their parents rather than all our various failings . But anyway- I'm not going to neglect my responsibility to try and give them a happy childhood and a bright future because I'm squirelling all my money away into a house for them. Would kid of defeat the object a bit .

You want a secure future for your kids, right? Sounds like you will make a great dad. But, what I don't get is why you are so obsessed with property.

Well- because I myself have been (I feel) disadvantaged by an overheating property market. The high rents round here meant that when I was working a huge chunk of my salary was eaten up every month, to the extent that even saving up for our annual holiday meant living a fairly spartan lifestyle for a few months. If I owned my own home (or a large chunk of it, so my mortgage payments were low) I'd have been able to enjoy my 20s a bit more and still save up for our future plans. My plan is not that my kids will be able to spend their 20s blowing all their salaries on booze, drugs and partying (or worse, MEW money to that end ), it's that they'll be able to get on with their lives without having to worry about having a decent place to live.

The 'investment' is not really about the money at all. I'm investing in a place for my kids to live. I couldn't really care less if other investments outperform property over the time I own the houses- because I'd have no intention of selling them. As a financial noob I could have my terminology wrong here, but I'm basically trying to hedge against a rise in house prices which would see my kids priced out of the market. If the value of the property I buy falls, so what- as long as I can get enough in rental income to cover the repayments on the mortgage I'm not going to lose much. The value of (say) a share really can dwindle away to nothing but I don't believe that we will ever see a point in this country where housing is worth next to nothing. The 'people will always need somewhere to live' argument is a crap one when you're ramping but a reasonably good one for calling the bottom of the the market if you ask me.

Edited January 8, 2006 by Rave