The greatest thread of all...The BTL running for the exit thread

[TheCountOfNowhere]

1 hour ago, Houdini said:

Any greater fool

They've not realized yet then....

[Diver Dan]

4 hours ago, TheCountOfNowhere said:

Sell...to whom.

The marginal buyer, whoever he or she turns out to be.

A lot of renters who are in well-paid/steady employment but can't get an adequate deposit for a decent LTV ratio are probably finding their levels of adequacy increasing with every passing month.

[Locke]

On 1/14/2018 at 5:51 PM, jiltedjen said:

could see a dynamic where rents shoot up as banks try and keep housing restricted in local area to make the loan book look less poo.  

Only possible if real interest rates remain low.

[Houdini]

23 hours ago, Diver Dan said:

The marginal buyer, whoever he or she turns out to be.

A lot of renters who are in well-paid/steady employment but can't get an adequate deposit for a decent LTV ratio are probably finding their levels of adequacy increasing with every passing month.

The issue will be that most marginal buyer won't be able to pay enough to ensure the outstanding IO mortgage on the property the landlord seriously overpaid for is paid off. After all the market for the last few years has just been the most desperate greatest fools buying in the hope prices continue to rise. 

I suspect most landlords will never be in a position where they can sell their properties and will now end up in a holding pattern, desperately trying to keep their rowing boat from sinking until a Bank decides enough is enough and makes their move. And remember Natwest have already moved their more worrying customers to a department who will just pull the plug as soon as any opportunity arrives to pull that plug. 

 

[Diver Dan]

1 hour ago, Houdini said:

The issue will be that most marginal buyer won't be able to pay enough to ensure the outstanding IO mortgage on the property the landlord seriously overpaid for is paid off. After all the market for the last few years has just been the most desperate greatest fools buying in the hope prices continue to rise. 

I suspect most landlords will never be in a position where they can sell their properties and will now end up in a holding pattern, desperately trying to keep their rowing boat from sinking until a Bank decides enough is enough and makes their move. And remember Natwest have already moved their more worrying customers to a department who will just pull the plug as soon as any opportunity arrives to pull that plug. 

 

You're probably right. I was referring to when/if BTL lenders decide that 'enough is enough'. 

I could also see legislation for 'right to buy' or right to first refusal for private tenants whose home is being reposessed coming in. It wouldn't do me much use because the flat i rent is smaller and less nice than one that I would consider buying; the rent is affordable and it's conveniently located though.

Edited January 16, 2018 by Diver Dan

[Crashchris]

https://moneyweek.com/dont-pile-into-property-in-2018/

Was surprised but happy to read this (falling rather than flat would have been better

Quote

Overall, the only group that would be much bothered by flat prices is the group we need worry about least — buy-to-let investors. Many rely on fast capital gains to boost returns as their rental yields are ripped to shreds by changes to tax relief, rising stamp duty and a renewed focus on tax evasion in the sector. A scenario of flat prices sounds pretty good to me. So much so that when we talk about flat prices it might be a nice idea to stop using the word that the property industry favours — stagnant — and use something less miserable instead. How about stable?

[hi5lo5]

http://forums.moneysavingexpert.com/showthread.php?t=5776199

NHS worker MEWed £20k to "invest" in BTL. You can't go wrong on bricks. Can you?

 

[Bland Unsight]

10 hours ago, hi5lo5 said:

http://forums.moneysavingexpert.com/showthread.php?t=5776199

NHS worker MEWed £20k to "invest" in BTL. You can't go wrong on bricks. Can you?

 

From the thread:

Quote

Many thanks for your responses. We bought both houses on interest only mortgages- we did not/do not have lump sums to invest- just believed property would be a form of investment. We would have liked to continue but the mortgage needs to be paid off as it has come to the end of its term and due to our age and minimal income we could not get another mortgage. on your point about NHS pensions - as I trained to be a midwife later in life the pension is minimal- however when I eventually get my state pension at 66 I will get less than my husband because I have an NHS pension- which I have been paying ++ into. All very frustrating. off to work now- thank you

Source

Nice example of how lending criteria have tightened (in terms of the income other than rental income).

The age thing is also quite interesting.

Source: CML, December 2016 - The profile of UK private landlords

Never really thought about the number of people who will find it difficult to remortgage because a new mortgage would take them past the age of 75 but eye-balling those figures suggests it is going to be a big issues for lots of borrowers over the next five years.

[Ah-so]

13 hours ago, hi5lo5 said:

http://forums.moneysavingexpert.com/showthread.php?t=5776199

NHS worker MEWed £20k to "invest" in BTL. You can't go wrong on bricks. Can you?

 

Apparently not, given that they turned £20k into £53k over 10 years and received an income along the way. 

[Greg Bowman]

On 16/01/2018 at 11:56 AM, Houdini said:

And remember Natwest have already moved their more worrying customers to a department who will just pull the plug as soon as any opportunity arrives to pull that plug. 

 

Too true but then being a people farmer is a business innit ?

Love Natwest been a personal and business customer for over 25 years, had a brush with that unit 20 years ago - they are very good at their job.....

[Pop321]

10 hours ago, Beary McBearface said:

From the thread:

Source

Nice example of how lending criteria have tightened (in terms of the income other than rental income).

The age thing is also quite interesting.

Source: CML, December 2016 - The profile of UK private landlords

Never really thought about the number of people who will find it difficult to remortgage because a new mortgage would take them past the age of 75 but eye-balling those figures suggests it is going to be a big issues for lots of borrowers over the next five years.

Interesting. 

I have been asked consistently about 'property investment' by others and am often surprised how old they are. 

I am 49 and tell them I have sold and am selling all remaining because I want cash not bricks and mortar. I estimate death at 75 and I need it all gone before then otherwise I gave wasted precious 'life' time accruing wealth I didnt need. If I am lucky enough to be alive at 75 I will be grateful for that fact...and not wishing I had lots of money. They look at me strangely and I realise they are in their mid sixties already....so I backtrack re age of death but still reiterate...spend it don't accrue wealth into old age. 

My point I guess is what do they think the end game is with interest only and inelastic property investment? It might have been a short term proposition whilst you add value to a development to sell but it's not a long term strategy....not in any business, investment or pension. 

Several factors including the one you highlight in your post which is increasingly looking like BTL is going to be a source of sales and push prices back down to normal levels.  

[spyguy]

22 hours ago, hi5lo5 said:

http://forums.moneysavingexpert.com/showthread.php?t=5776199

NHS worker MEWed £20k to "invest" in BTL. You can't go wrong on bricks. Can you?

 

Some will get out with some money.

Most wont.

Most will leave it too long and get bled by the mortgage before, finally, throwing the towel in and accepting a large loss.

IO BTL is well into the realm of (bad) investment psychology.

[Andy T]

[Chrippie]

That age distribution is really interesting as its % of landlords. It makes sense that the older landlords have a higher number of properties each (not sure if there is data on this), as in your 20s and 30s you haven't had the time to build a big portfolio. Older people are also the ones with equity in their own home that they've levered up to get into the BTL market, so most likely if you looked at it in terms of % of BTL properties there would be a significantly higher skew towards older people. If 50% of BTL landlords are over 55, could be as much as 70% of BTL properties are owned by people over 55. Makes the pressure from these people selling that much greater. 

[iamnumerate]

29 minutes ago, Chrippie said:

That age distribution is really interesting as its % of landlords. It makes sense that the older landlords have a higher number of properties each (not sure if there is data on this), as in your 20s and 30s you haven't had the time to build a big portfolio. Older people are also the ones with equity in their own home that they've levered up to get into the BTL market, so most likely if you looked at it in terms of % of BTL properties there would be a significantly higher skew towards older people. If 50% of BTL landlords are over 55, could be as much as 70% of BTL properties are owned by people over 55. Makes the pressure from these people selling that much greater. 

Surely old people have more equity and so should be able to hold on to their properties (unless it is I/O).

[Chrippie]

2 hours ago, iamnumerate said:

Surely old people have more equity and so should be able to hold on to their properties (unless it is I/O).

Aren't the majority of btl mortgages io? And the old people relying on btl as their "pension" don't have time on their side to wait for capital gains. I would think they need the income now which means s 24 is more of an issue, especially if they have decent sized portfolios. So if they are struggling to refinance due to their age, and are more exposed to portfolio lending restrictions (because they have more btl than average) and s. 24 then its game over for them. Plus you've just got demographics at work - if 70% of btl are owned by over 55s then as those people die its just further overhang. And if according to that chart this could be a very significant proportion of total btl properties owned in this way these effects are potentially pretty significant. Anyway, just my thoughts. 

[Smiley George]

First one I've noticed in my area - http://www.rightmove.co.uk/property-for-sale/property-71059175.html

It's starting!! 

[Ah-so]

7 hours ago, Chrippie said:

Aren't the majority of btl mortgages io? And the old people relying on btl as their "pension" don't have time on their side to wait for capital gains. I would think they need the income now which means s 24 is more of an issue, especially if they have decent sized portfolios. So if they are struggling to refinance due to their age, and are more exposed to portfolio lending restrictions (because they have more btl than average) and s. 24 then its game over for them. Plus you've just got demographics at work - if 70% of btl are owned by over 55s then as those people die its just further overhang. And if according to that chart this could be a very significant proportion of total btl properties owned in this way these effects are potentially pretty significant. Anyway, just my thoughts. 

If you are retired and have a big enough portfolio and pension to be worried about s24, you are probably fairly lucky. 

[Chrippie]

3 hours ago, Ah-so said:

If you are retired and have a big enough portfolio and pension to be worried about s24, you are probably fairly lucky. 

Indeed you would be lucky. But you'd still be affected sufficient to potentially make you want to sell up. All I'm saying is if there is a concentration of portfolio landlords in that age group relying on their rental income as their pension then imo as s 24 bites they are less likely to hold on for long term gainz than someone in their 30s . You dont need to have that high a gross rental income for s. 24 to impact. Unless you have no other income a few thousand a month is enough to see you impacted. Which I'm guessing most portfolio landlords are generating. 

[Confusion of VIs]

On ‎1‎/‎18‎/‎2018 at 8:08 AM, spyguy said:

Some will get out with some money.

Most wont.

Most will leave it too long and get bled by the mortgage before, finally, throwing the towel in and accepting a large loss.

IO BTL is well into the realm of (bad) investment psychology.

A friend who works as a mortgage broker told a few months ago that the ones who will need to sell already cannot.

He said a trade sale won't give them enough to clear their mortgages and that in a slowing market they cannot afford the costs of refurbishing their houses to attract buyers and the potential 6-12 months void they are likely to face while selling.

Some have already decided that they will try to defer the impact of s24 for a few years by the simple strategy of lying to the taxman by submitting large claims for maint/refurb work in the hope that they are not selected for an investigation.

So as you say their only choice is to hang on in the hope that something turns up, while they gradually sink further into debt.

 

 

    

[spyguy]

9 hours ago, Confusion of VIs said:

A friend who works as a mortgage broker told a few months ago that the ones who will need to sell already cannot.

He said a trade sale won't give them enough to clear their mortgages and that in a slowing market they cannot afford the costs of refurbishing their houses to attract buyers and the potential 6-12 months void they are likely to face while selling.

Some have already decided that they will try to defer the impact of s24 for a few years by the simple strategy of lying to the taxman by submitting large claims for maint/refurb work in the hope that they are not selected for an investigation.

So as you say their only choice is to hang on in the hope that something turns up, while they gradually sink further into debt.

 

 

    

Well, how do you close a position where youre leveraged up your ar5e, there little is no cash between the mortgage repayments and rental income, you have to sell to someine who, due to needing a repayment mortgage, can only borrow 50% of the some you, io only, could borrow. 

[Mrs Bear]

As I posted recently on the Oxford thread, while checking daughter's area (OX3) on zoopla the other day (I like zoopla  for the 'most reduced' feature) I saw several (empty) HMOs just on the first page. 

One was originally priced at £750k, reduced to £599,999.  Owner paid £98,500 in late 90s - remains to be seen whether any other LL will want it at current  price.  

 

 

[Neverwhere]

On 19/01/2018 at 9:37 AM, Chrippie said:

That age distribution is really interesting as its % of landlords. It makes sense that the older landlords have a higher number of properties each (not sure if there is data on this), as in your 20s and 30s you haven't had the time to build a big portfolio. Older people are also the ones with equity in their own home that they've levered up to get into the BTL market, so most likely if you looked at it in terms of % of BTL properties there would be a significantly higher skew towards older people. If 50% of BTL landlords are over 55, could be as much as 70% of BTL properties are owned by people over 55. Makes the pressure from these people selling that much greater. 

That's a good point!

If older BTL landlords are more likely to have larger BTL portfolios then those numbers seem to broadly tally.

On 17/01/2018 at 8:35 PM, Beary McBearface said:

Nice example of how lending criteria have tightened (in terms of the income other than rental income).

The age thing is also quite interesting.

Source: CML, December 2016 - The profile of UK private landlords

Never really thought about the number of people who will find it difficult to remortgage because a new mortgage would take them past the age of 75 but eye-balling those figures suggests it is going to be a big issues for lots of borrowers over the next five years.

On 06/04/2017 at 3:47 PM, Beary McBearface said:

As also flagged a number of times on the forum, in December 2016 the CML issued a report they'd had produced by Scanlon and Whitehead, The Profile of UK Private Landlords.

That report gives the the same kind of data, but this time the presentation is a bit tighter. Also it's now a survey of landlords and not the data for just one lender.

Here's the key table:

The Scanlon/Whitehead report uses BTL to mean a landlord who has at least one leveraged property and non-BTL to mean a landlord who owns all their property outright. For this reason the numbers above don't tally with the non-BTL portfolio sizes in Figure 2 of the report because many of one or two BTL guys also have one or more unleveraged properties.

Now, if you know that there were 861 landlords with a mean number of houses encumbered by BTL mortgages of 2.12 then you know that there is a total of 1,825 houses with BTL mortgages in your sample. Then you can solve backward to work out what share of the houses the 10+ guys have. (I've then extrapolated forward show what these percentages mean when applied to the approximately 2 million BTL mortgages out there in the wild).

The most striking thing about that is that it implies that about 40% of all buy-to-let mortgages are going to be caught by the 4+ portfolio PRA SS13/16 credit underwriting rules which come into play on 30 September 2017.

As usual a chart helps:

Now I propose a round of "Spot the PovertyLater tw@ts"

 

[Neverwhere]

12 hours ago, Confusion of VIs said:

A friend who works as a mortgage broker told a few months ago that the ones who will need to sell already cannot.

He said a trade sale won't give them enough to clear their mortgages and that in a slowing market they cannot afford the costs of refurbishing their houses to attract buyers and the potential 6-12 months void they are likely to face while selling.

Some have already decided that they will try to defer the impact of s24 for a few years by the simple strategy of lying to the taxman by submitting large claims for maint/refurb work in the hope that they are not selected for an investigation.

So as you say their only choice is to hang on in the hope that something turns up, while they gradually sink further into debt.   

They could choose to make the sale and then come to an arrangement with their lender to repay or write off any outstanding debt.

It's just an unpalatable option because it involves definitely losing money where they were expecting to make money, so instead they're choosing to gamble that their losses will be reduced before circumstances force their hand, while risking that they will in fact be significantly increased.

For those that face bankruptcy in the here and now that choice makes a certain amount of sense - they have nothing more to lose and so aren't risking anything more by staying at the table, and may be gaining a continuation of their current unsustainable lifestyles in the meantime - but for those who could get out now with some of their other assets and income intact, and don't, their current choices could be a matter of significant regret later down the line.

[thewig]

5 hours ago, Mrs Bear said:

As I posted recently on the Oxford thread, while checking daughter's area (OX3) on zoopla the other day (I like zoopla  for the 'most reduced' feature) I saw several (empty) HMOs just on the first page. 

One was originally priced at £750k, reduced to £599,999.  Owner paid £98,500 in late 90s - remains to be seen whether any other LL will want it at current  price.  

 

 

nice

these are the sorts of scumbags who will become the marginal sellers and set the prices for all the other scumbags who can't afford to sell for as low an amount

 

the luckier ones who bought in the nineties will realise they can drop their price until they find where the buyers are, the dumb as rocks DEBTjunkie breed of scumbag (psycho gaz, pricey, roz et al)are stuck at the top of the bubble, they'll never be able to realise any gains because the only place those  gains exist are in the once in a lifetime top of the megabubble valuations they've typed into their spreadsheets

 

 

Edited January 20, 2018 by thewig