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othello

Btl Investors - You Could Have Made 20% Elsewhere

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As a BTL frield of mine tries to convince himself that his 'investment' was a winner I look at the stock market and see how it has outperformed most property rises in the last two years. Last year it rose 20% and rise by a similar amount in 2004. He on the other hand bought a flat on a new development in 2003 for £295,000 (BTL) In 2006 there are several in the same development on the market (not actually sold) for the same price - a net loss of about 15% in real terms taking account of inflation, stamp duty, fees etc.

For people investing in domestic property, the problem is that they cannot buy and sell quickly or easily in response to changing markets - and that will be the downfall of many amateur BTL investors. Sure many lost money in the dotcom era if they bought at the top of the market and no doubt many of those smae people will lose out in a falling property market.

As for my BTL friend, it's no good trying to reason with him. He thinks he's onto a winner. UInfortunately he hasn't even looked at the facts. I feel sorry for him as his BTL represents his pension pot and given that he invested 15% himself and borrowed the rest, the 15% he invested has been lost completely, but he can't even see it.

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As a BTL frield of mine tries to convince himself that his 'investment' was a winner I look at the stock market and see how it has outperformed most property rises in the last two years. Last year it rose 20% and rise by a similar amount in 2004. He on the other hand bought a flat on a new development in 2003 for £295,000 (BTL) In 2006 there are several in the same development on the market (not actually sold) for the same price - a net loss of about 15% in real terms taking account of inflation, stamp duty, fees etc.

For people investing in domestic property, the problem is that they cannot buy and sell quickly or easily in response to changing markets - and that will be the downfall of many amateur BTL investors. Sure many lost money in the dotcom era if they bought at the top of the market and no doubt many of those smae people will lose out in a falling property market.

As for my BTL friend, it's no good trying to reason with him. He thinks he's onto a winner. UInfortunately he hasn't even looked at the facts. I feel sorry for him as his BTL represents his pension pot and given that he invested 15% himself and borrowed the rest, the 15% he invested has been lost completely, but he can't even see it.

i really dont think the stock market will go up anything like 20% this year

Edited by Milkshock

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He might be thinking, "Maybe now the rent is not actually covering the mortgage, but over time rent increases approximately in line with earnings, whereas my mortgage will remain largely static. Therefore in 10 years time, the house will be paying for itself and probably generating a small income. Over 25 years, the house will have more than paid for itself and I will have a retirement income or an asset to sell."

A BTL is not in itself a bad investment and history suggests that it is one of the safest. What causes people to slip up is cash flow problems in the first few years, much the same as for all businesses. It is also difficult to compare a mortgage to the stockmarket. It is hard to get leveraged on the same way. The figure of 15% is not totally clear either. If he sells, will he have lost his initially £45k investment?

I am not very keen on BTL, and hope that these mugs get their fingers burnt. Many will have made investments that will never pay for themselves. However, it is not a bad investment just because the market has a quiet couple of years. I do not know the age of your friend, but unless he is elderly, I can hardly see how he could have lost his pension pot.

Edited by Ah-so

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i really dont think the stock market will go up anything like 20% this year

Individual stock picking could yield hefty results. Apparantly an AIM listed company 'Speyside' which is investing in Berlin real estate has gone from 5p to 83p in 12 months.

Im looking at a German property company that is almost zero geared called Hamborner (e 23.90). It owns vast tracts of city centre property. It is very conservative and pays a steady not very exciting divi. If Germany turns the corner.................. A freind piled into British property companies in the mid 1980s and became a millionaire overnight when the property boom came.

Im thinking of risking a large chunk of dosh am I mad or will such a conservative company (owned by the billionaire 'Thyssen' family) never likely loose value given we are at 1975 property prices in Germany after 10 years of falls?

Oh and yes, stocks have been and will be a better play than UK property for the time being.

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BTL was a hot investment in 2004.

It became overly popular, and overvalued. And has been a DOG since then.

Stocks have been better.

BUT 2006 is a year of big danger for stocks. The second half may be a big disaster.

Fortunately, there are instruments like shorts, puts, and bear funds - and maybe gold -

where you can invest and make money in a Bear Market.

The Challenge portfolio on Singing Pig is up 329% since early August :

http://www.singingpig.co.uk/forums/13/8682...read.aspx#86820

I agree gold.

you're a chartist Bubb,what do you make of the US 10yr chart?...lokk back 30 years or so and what I see happening is a VERY big base in 2003.Looks like we are reaching critical levels that if they are breached will see bond yields and IRs MUCH higher in a few years.(with that comes lower house prices!!!!)

...gold being a store of (real) wealth will come in handy when the ficticious stuff dries up,whether that be through MEW exhaustion or central banks tightening supply.

tracks very nicely with your dow/gold index that you posted a while back.

I also like other tangible assets like food.

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  • 343 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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