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Talking a relative out of BTL

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Oh the horror. Had an email from my sister last night saying she wants to get into BTL.

She's mid 30s, rents in NW19, has very little pension, no savings, unmarried, no kids, works in customer services.  An inheritance means she now has a lump sum (big enough for a 20% deposit on average UK house)... obviously burning a hole in her pocket.

Sheesh ... where to start.

I have explained:

1. BTL going down the pan due to higher tax, stricter lending criteria, increasing supply of rentals as BTL merchants try and off load

2. BTL very hard to make profitable, could even be loss making

3. Stress and expense of maintaining the property, finding tennants

4. House prices will come down at some point (already have in london) so rental demand will go down and she will end up in negative equity on a property she can't rent out or sell.

5. If she buys now she is buying at peak prices

Edited by Guest

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36 minutes ago, Bradbury Robinson said:

Don't bother, you won't get any thanks either way. She's seen HUTH and that's enough for her to make her decision!

+1

 

She may well lord it over you too once the purchase is made.

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Some of the big BTLers have slightly awoken to the real world, although many are indulging in victimhood.. conspiracies against their pure goodness BTLing, in a tight and expensive housing market.  From 100 properties, or "wouldn't mind being a penny behind Mr Wilson" HPI/BTL chasing, to now surprised people still buying into BTL.

Gov can't be blamed for happy HPIers and BTLers who are either too busy living a paradise life, or in a coma, to have made themselves aware about S24.   It has been widely reported.   A visit to a specialist chartered accountant/tax accountant might give a would-be BTLer a shakeup... but that might mean spending £100-£200+ fee which many BTLers ('understand property' would think a waste of money, and which could go into property.   Perhaps you could offer to pay the fee for her?   (I personally doubt you would get any thanks even if the numbers give her a lot to step back from).   Whether they claim to be BTL 'businesses' or the property investors... BTLers should know.  Market needs to find them out.  Housing and debt is not some big game of innocence.

In 2011 one hpcer tried to explain some issues re BTL (buying at price point beyond would-be OOs) to his parents but with no luck.  They bought 3 of them.  Although many in my area all such BTL-heads would be sitting on another 25%-50% mad-gainz since 2011 as renting professional workers continue to kick up the rent for them 'providing a home' - and I still await this HPC against 8 years of so much concerned 'buyer victimhood' discussion, and prices doubling or more in that time in some areas.

Quote

 

dislexic_landlord 4 Aug at 05:46

Angela I remmember your Blog about the Death of BTL the poems was first class

I think you and I were some of the first to relise the true impact early of S24

I have tried my best to inform every Tradesman and Landlords of the major issues ahead

Most just shrug there shoulders and brush it off

I have freinds who are still buying in there own name and they just dont relise the issues

Maybe I am Panicking and over reacting or am I parnoid ????

But the S24 Tidal Wave is on its way its far out to see but its building and getting stronger every day

Landords need to adapt and change If they dont they could be swept away by the HMRC.

 

Angela Bryant to dislexic_landlord 4 Aug at 07:05

Thanks Elaine,

It's astonishing that you know people who are still buying in their own names - with mortgages I presume too!

Didn't they read my poem?!

There's no helping some people:- (

Angela:- )

 

dislexic_landlord to Angela Bryant 4 Aug at 07:27

yes wth mortgages and one is a manageing agent of BTL

 

Other guy

~Clause or now section 24 has been completely unreported and not understood so the main impact of this will hit the market like a tsunami in the future  as Vanessa has said. The uninformed landlords, letting agents and  politicians who remain unaware of this will be educated only at the time of the catastrophe unless we can make a breakthrough by educating them ASAP.

http://www.propertytribes.com/clause-24-not-brexit-t-127625981.html

 

 

 

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If you wre numerate and understand the risk of leverage then youd not touch io btl.

Youd have to get your dister numerate and give her an understanding of business risk.

With a 20% deposit (40k?) the new btl ltvs 50%, and interest cover will stop her getting into btl.

Just mumble something about 'Lets see what happens with brexit and the migrants'

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42 minutes ago, Venger said:

Some of the big BTLers have slightly awoken to the real world, although many are indulging in victimhood.. conspiracies against their pure goodness BTLing, in a tight and expensive housing market.  From 100 properties, or "wouldn't mind being a penny behind Mr Wilson" HPI/BTL chasing, to now surprised people still buying into BTL.

Gov can't be blamed for happy HPIers and BTLers who are either too busy living a paradise life, or in a coma, to have made themselves aware about S24.   It has been widely reported.   A visit to a specialist chartered accountant/tax accountant might give a would-be BTLer a shakeup... but that might mean spending £100-£200+ fee which many BTLers ('understand property' would think a waste of money, and which could go into property.   Perhaps you could offer to pay the fee for her?   (I personally doubt you would get any thanks even if the numbers give her a lot to step back from).   Whether they claim to be BTL 'businesses' or the property investors... BTLers should know.  Market needs to find them out.  Housing and debt is not some big game of innocence.

In 2011 one hpcer tried to explain some issues re BTL (buying at price point beyond would-be OOs) to his parents but with no luck.  They bought 3 of them.  Although many in my area all such BTL-heads would be sitting on another 25%-50% mad-gainz since 2011 as renting professional workers continue to kick up the rent for them 'providing a home' - and I still await this HPC against 8 years of so much concerned 'buyer victimhood' discussion, and prices doubling or more in that time in some areas.

 

 

I disagree with the 4 years gentle ramp up quoted in the 118.

It hits hard next tax year and starts getting worse. The PRA rules theres nowhere to run or remortgage.  A leveraged LL either has to sell now or prepare to be taxed on most rental income.

And that assumes the timetable is not accelerated or ramped up, both of which i think are guaranteed.

Edited by spyguy

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If she hasn't obtained a BTL mortgage in principle and viewed properties then it's just idle chat and will likely go nowhere. Seen this with relatives of mine.

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1 hour ago, GARCH said:

Why doesn't she want to buy her own place to live in?

40k deposit and single income is worthless in London property terms.

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1 hour ago, GARCH said:

Why doesn't she want to buy her own place to live in?

Perhaps an attraction to the idea of someone else paying your mortgage and a free house at the end of it. An owner occupier is disadvantaged by default to the tune of having to actually buy their own house. Everything is twisted.

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1 hour ago, GARCH said:

Why doesn't she want to buy her own place to live in?

Perhaps an attraction to the idea of someone else paying your mortgage and a free house at the end of it. An owner occupier is disadvantaged by default to the tune of having to actually buy their own house. Everything is twisted.

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2 hours ago, spyguy said:

I disagree with the 4 years gentle ramp up quoted in the 118.

It hits hard next tax year and starts getting worse. The PRA rules theres nowhere to run or remortgage.  A leveraged LL either has to sell now or prepare to be taxed on most rental income.

And that assumes the timetable is not accelerated or ramped up, both of which i think are guaranteed.

Hope so.  Lot more beginning to weigh down on the BTL lovers and dreamers. 

A BTLer below recognises that, although not happy about it. 

Still I think we're along way from Happy Shiny People society, where HPI infatuation and Love-of-BTL is scapegoated as purely the fault of media/banks/gov.  We're all part of the market and we make our choices.  

Even if Dorkins relatives didn't go into BTL, millions of people so warm to idea of buying, forever HPI, and sticking in a silly renter to give them mad-gainz.  'All about me'.  A rebalance is required, and some on the renting side have already paid hard for HPI/BTL fever in others.

Quote

Fiscal Policies of the UK Government as written by friends of the ex Chancellor , leave funding to be obtained from new sources not limited to Crowd Funding and the Bank of Mum and Dad to support the UK economy. It is evident that the UK Government will in 2017 be taking money away from the landlord in two ways namely, the availability of funds as well as the intended S.24 rules. To date, MP’s nor the Bank of England has not appeared to be astute enough to question the Government on these rules. Long live the Queen !

 

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And you have to realuse that 70% of UK adults are functionally innumerate i.e cant do percentages.

My mumand sisters pitch property related idea - morebandb holiday lets. I go ok, what the loans going to cost you, what costs are there.

 

Apparrently my maths stops then from being rich. Both sisters have been laughed out of a bank, which even now takes some doing. So - you work parttime and earn NMW, have z mortgagd and personal loans, and you want to borros 500k.. lets see what the computer says.....

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27 minutes ago, Venger said:

Hope so.  Lot more beginning to weigh down on the BTL lovers and dreamers. 

A BTLer below recognises that, although not happy about it. 

Still I think we're along way from Happy Shiny People society, where HPI infatuation and Love-of-BTL is scapegoated as purely the fault of media/banks/gov.  We're all part of the market and we make our choices.  

Even if Dorkins relatives didn't go into BTL, millions of people so warm to idea of buying, forever HPI, and sticking in a silly renter to give them mad-gainz.  'All about me'.  A rebalance is required, and some on the renting side have already paid hard for HPI/BTL fever in others.

 

That btl quote is fcking nuts.

Gidiots has the same input to the chancellor as i gave  - fckall.

Fiscal is spending. Btlers are being hit by revenue raising/closing tax loopholes.

Btlers ard welcome to access lendimg. Its just going yo requird much higherdeposits and  a much higher IR due to basel 3.

The BoE has blotted its copybook for the forseeable futre, having most uk banks go bust under its watch and going along with brown and gidiots loon ideas.

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People piled into BTL because of historically low interest rates coupled with inflation that reduced the buying power of cash - hate it or love it, but BTL has been a very good investment; now it isn't she needs to be shown that past performance is no indication of... blah  blah blah

 

Simply show her an alternative asset to park her money in that will return 4%+ per annum and have capital appreciation - which is what BTL (in certain areas) was giving - that boat has sailed. Given her circumstances, she simply wants to make money and doesn't know how to - other than btl which she thinks she understands

 

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Seriously, leave her to it. Maybe point out that it's not a one way dead cert, but do it gently, do it once, and leave it at that.

The problem us bears have is that in the eyes of normal people, we have a piss poor track record of calling property investment. To them it makes no difference that the whole thing has been kept alive on life support since 2008, it makes no difference that the entire global economy is looking like a Jenga stack in the later stages of the game. All they see is other people apparently making easy money, and from there they'll ignore anything, moral or practical, that stands between them and their little pot of gold.

And nobody ever thank you for pointing out their mistake to them before they go ahead and made it anyway.

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Don't bother.

If house prices go up they'll hate you.

If house prices go down they'll hate you at first, then forget completely about everything you said, but keep hating you for some reason they can't remember.

If prices remain static but they don't make money because of the tax changes, they'll hate you for somehow actually introducing the changes.

If you keep quiet about it then they'll love you for you deep sympathy to their plight as prices go down, your faithful listening as they say how so much of their money goes into tax.

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7 hours ago, hiace_drifter said:

Oh the horror. Had an email from my sister last night saying she wants to get into BTL.

She's mid 30s, rents in NW19, has very little pension, no savings, unmarried, no kids, works in customer services.  An inheritance means she now has a lump sum (big enough for a 20% deposit on average UK house)... obviously burning a hole in her pocket.

Sheesh ... where to start.

...

I think you should be safe on this one, as previously suggested. She'll probably find it difficult to get a mortgage at all. Interest coverage ratio rules will price her out of London and the South East and restrain her LTV; probably the worst that can happen is that she'll simply lose all the money. I don't think that there's too much danger of losing more than she invested, given the leverage she'll likely be able to employ.

 

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10 minutes ago, Bland Unsight said:

I think you should be safe on this one, as previously suggested. She'll probably find it difficult to get a mortgage at all. Interest coverage ratio rules will price her out of London and the South East and restrain her LTV; probably the worst that can happen is that she'll simply lose all the money. I don't think that there's too much danger of losing more than she invested, given the leverage she'll likely be able to employ.

 

I agree on that.I was looking through Lloyds results and they only have 10% of mortgages above 80% LTV (though their LTV might be off a bit) and the average LTV of the book is around 48%.Seems to me the big mortgage banks are mostly in a position where they will be fine with a mass of repos and selling into 40%+ falls.They might only be looking at 2/3% of their book under LTV default,and then perhaps the losses will be 1% of the mortgage book.Its the deposits and equity that are going to be wiped out it seems.You could argue a crash now would suit the mortgage banks.They make nothing out of peoples deposits and equity,so wiping it out isnt a problem for them

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11 minutes ago, GARCH said:

Why doesn't she want to buy her own place to live in?

Well she's priced out but doesn't want to leave London. I believe the plan is to move into the BTL property once she retires (by which point it'll be owned outright).

I have encountered radio silence since I suggested she faces years of stress and  probably financial hardship.

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Don't give financial advice. 

Maybe explain the ethical problems, and ask if they are really willing to throw people onto the street if they can't pay; if they've just lost their job, or if they are seriously ill. 

The trouble with 'investing' is that, like all gambles, correct decisions can lose and incorrect decisions can come good.

In 2007-2008 I was asked whether investing in banking shares was a good idea, and without thinking I said 'hell no'.

And I was dead right - several big banks disappeared and others collapsed in price.  What they remember on the other hand is that some of the survivors shot up in price from the lows and therefore they 'lost a fortune'.

I don't know how these people live with themselves given that, in hindsight, they lost billions not buying call options on Apple, not betting their house on Leicester City, not shorting the pound into Brexit and so on.

 

 

 

Edited by BuyToLeech

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12 minutes ago, hiace_drifter said:

Well she's priced out but doesn't want to leave London. I believe the plan is to move into the BTL property once she retires (by which point it'll be owned outright).

I have encountered radio silence since I suggested she faces years of stress and  probably financial hardship.

I think that the difficult thing is that people want to think that there is a road home, a way to get to the end of their working lives at some point and retire with a modest amount of financial security. However, at present, for many households in London and the South East, there isn't. With 30%-40% of the money coming in immediately going out as rent, anaemic wage inflation and only meagre employer contributions to a pension, the situation is in fact terribly grim.

The danger for a HPC poster talking to family about BTL, particularly siblings who are up against it, is that the message "BTL is not going to give you the happy ending you wish for" is going to get translated into "You are not going to get the happy ending you wish for" and you're going to end up being resented for delivering the second message and the fact that you've made them aware of significant risks attendant to BTL right now is going to be completely overlooked.

Part of the allure of the BTL magic beans investment strategy is that given where they are starting from, people need magic beans - normal beans won't get the job done.

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5 hours ago, spyguy said:

I disagree with the 4 years gentle ramp up quoted in the 118.

It hits hard next tax year and starts getting worse. The PRA rules theres nowhere to run or remortgage.  A leveraged LL either has to sell now or prepare to be taxed on most rental income.

And that assumes the timetable is not accelerated or ramped up, both of which i think are guaranteed.

For people with three or more properties-and there are loads of them-the first year will see a massive change.A fair few of my acquaintance seem completely unaware of what's coming,to the point where they've said when I've asked that it will make no material difference to their position.These people are a special breed with absolute faith in HPI,student numbers being maintained, ZIRP being the norm etc etc

A couple of the more switched on ones are selling.Most BTLers in my experience have reasonably playing jobs alongside.

Anyone on £25k p.a. and with three properties is going to get smashed next year

Edited by Sancho Panza

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