Btl

[I Told You So]

Classic tale of a BTL acquaintance over the wkd.

Started with 1 has MEWed contantly over the last few years now has 8 properties.

Well done you may say but heres the killer, made a £12K loss this year with voids new boilers etc etc, until now he has happily mewed to cover any shortfalls but the partys over and he cant get any more money out the properties, stagnant prices hitting home.

So we are left with a landord with 2 empty properties £800K worth of mortgage and a salary of £25k a year, what do you thinks going to happen next.

I wonder how many more are like this, my guess is a lot.

[jp1]

Classic tale of a BTL acquaintance over the wkd.

Started with 1 has MEWed contantly over the last few years now has 8 properties.

Well done you may say but heres the killer, made a £12K loss this year with voids new boilers etc etc, until now he has happily mewed to cover any shortfalls but the partys over and he cant get any more money out the properties, stagnant prices hitting home.

So we are left with a landord with 2 empty properties £800K worth of mortgage and a salary of £25k a year, what do you thinks going to happen next.

I wonder how many more are like this, my guess is a lot.

If only the BoE had helped out with another rate-cut

[teddyboy]

The fact that anyone could get 800K's worth of mortgage's sickens me! I hope the BTl and more importantly the banks lose SHIT-LOADS of cash!!!

TB

[MOD]

Surely there has been a lot of fibbing going on to get that level of mortgage?

[BTman]

The fact that anyone could get 800K's worth of mortgage's sickens me! I hope the BTl and more importantly the banks lose SHIT-LOADS of cash!!!

TB

I agree. Would the bank's lend me nearly a Million to spend on property? I doubt it...

In fact they wouldn't even lend me enough to buy one property, where's the sense in that?

[lulu]

I agree. Would the bank's lend me nearly a Million to spend on property? I doubt it...

In fact they wouldn't even lend me enough to buy one property, where's the sense in that?

Yep there is definatly something wrong with the system - I have given up asking the bank to lend me enough money for a single one bedroom flat where I live - but some t***er is allowed to get hold of 8 of them despite the fact he earns just a few grand more than I do - its just wrong

[right_freds_dead]

getting a 20k car loan is harder than getting a 800k btl stack.

[Father Fred]

Yep there is definatly something wrong with the system - I have given up asking the bank to lend me enough money for a single one bedroom flat where I live - but some t***er is allowed to get hold of 8 of them despite the fact he earns just a few grand more than I do - its just wrong

It's not wrong, unless you think capitalism is wrong. Banks make fortunes, they know what they are doing (generally). BTLers have to put down 15% deposit, and are less risky than OOs.

Be patient, property cannot be historically expensive forever. And a few BTLers will go tits up if they have overextended themselves.

[Given Up]

Yep there is definatly something wrong with the system - I have given up asking the bank to lend me enough money for a single one bedroom flat where I live - but some t***er is allowed to get hold of 8 of them despite the fact he earns just a few grand more than I do - its just wrong

BTL is based on the following typical figures:

Bank lends 70-80% of value of property

Rent must be 130% of loan repayments

Do they look at income?

If you have a 20% desposit, the banks would probably give you a BTL mortgage

Edited April 18, 2006 by Given Up

[Rhombus]

So we are left with a landord with 2 empty properties £800K worth of mortgage and a salary of £25k a year, what do you thinks going to happen next.

Yes, BTL works fine in principle as long as your houses are going up in value.

Pyramid buying - its bound to end in tears.

[Guest Guy_Montag]

BTL is based on the following typical figures:

Bank lends 70-80% of value of property

Rent must be 130% of loan repayments

Do they look at income?

If you have a 20% desposit, the banks would probably give you a BTL mortgage

Would the bank want to know, or insist on knowing if the 20% deposit is cash or mew'd from another property?

[Given Up]

Would the bank want to know, or insist on knowing if the 20% deposit is cash or mew'd from another property?

Why would they care?

A bank lends against an asset.

If the loan is paid - that's fine

If the loan is defaulted on, the bank reposesses the property. If the loan is 70-80% of the property value their risk is minimal.

They are a business - they don't care where the money comes from

[Father Fred]

Yes, BTL works fine in principle as long as your houses are going up in value.

Pyramid buying - its bound to end in tears.

BTL... buy to let, property being bought to let out.

Some people have made 30k equity on their home, put 20k down as a deposit on a new place, waited for a 20k rise, MEW'd, bought another one etc etc.

It is like gambling, you bet one a horse, it wins. you bet on the next horse it wins. You can keep betting your winnings but sooner or later your gonna pick a loser, FACT.

BUT, others have saved the deposit for a BTL, bought it at a reasonable yield (maybe 7-8% +) and are waiting for the crash before buying the next one.

BTL and BTLers are all different... to stereotype all BTL as gearing up to the max at every opportunity is a bit inaccurate.

[Given Up]

BTL... buy to let, property being bought to let out.

Some people have made 30k equity on their home, put 20k down as a deposit on a new place, waited for a 20k rise, MEW'd, bought another one etc etc.

It is like gambling, you bet one a horse, it wins. you bet on the next horse it wins. You can keep betting your winnings but sooner or later your gonna pick a loser, FACT.

BUT, others have saved the deposit for a BTL, bought it at a reasonable yield (maybe 7-8% +) and are waiting for the crash before buying the next one.

BTL and BTLers are all different... to stereotype all BTL as gearing up to the max at every opportunity is a bit inaccurate.

isn't there a song about "The wise man built his house upon the rock.......The foolish man built his house upon the sand"?

it's a bit the same with BTL - build it on rock (daved up) or sand (mew)

Edited April 18, 2006 by Given Up

[othello]

Can't wait to snap up a bargain!

[Father Fred]

isn't there a song about "The wise man built his house upon the rock.......The foolish man built his house upon the sand"?

it's a bit the same with BTL - build it on rock (daved up) or sand (mew)

There is nothing wrong with MEW, but there is a time and a place. With hindsight, MEW to the max until about 2003/ 04 (maybe even today in some areas but calling the peak exacctly is very risky), then sell off one by one, reducing gearing until you are happy with the level of debt / equity.

I was talking with a friend a couple of days ago, and I found it surprisingly hard to get across the following points.

MEW, gear up to the max is the best thing to do in a booming market. The person that predicted 5% pa growth in the late 90s early 00s and bought one BTL would have been "beaten" by the guy who predicted 20% growth pa and bought three. But in turn he would have been outperformed by the complete idiot who predicted 10,000% pa growth and therefore put every last penny into buying six BTLs.

HOWEVER, there is undoubtedly (crash or no crash) going to be a time when constant over-confidence is going to cause the complete idiot to underperform the other two, and at some point the relative bear who predicts 5% growth will outperform the guy who expected 20%. And he might well lose out compared to the guy who predict -30%.

If the market is rising then the winner isn't the best predictor of the market, it is the most optimistic. When the market starts to level off or fall the winner is the smart one.

So, in short, MEWing is not a bad thing, but it is absolutely suicidal if it is to be used to constantly increase gearing at every opportunity.

QUICK EDIT: Incidentally the "MEW constantly and gear up" thing caught up with some "professional" investors a year or 2 with new build, so you don't even need to go back to the last crash to find evidence that constant gearing up is a bad thing.

Edited April 18, 2006 by Father Fred

[dog]

There is nothing wrong with MEW, but there is a time and a place. With hindsight, MEW to the max until about 2003/ 04 (maybe even today in some areas but calling the peak exacctly is very risky), then sell off one by one, reducing gearing until you are happy with the level of debt / equity.

I was talking with a friend a couple of days ago, and I found it surprisingly hard to get across the following points.

MEW, gear up to the max is the best thing to do in a booming market. The person that predicted 5% pa growth in the late 90s early 00s and bought one BTL would have been "beaten" by the guy who predicted 20% growth pa and bought three. But in turn he would have been outperformed by the complete idiot who predicted 10,000% pa growth and therefore put every last penny into buying six BTLs.

HOWEVER, there is undoubtedly (crash or no crash) going to be a time when constant over-confidence is going to cause the complete idiot to underperform the other two, and at some point the relative bear who predicts 5% growth will outperform the guy who expected 20%. And he might well lose out compared to the guy who predict -30%.

If the market is rising then the winner isn't the best predictor of the market, it is the most optimistic. When the market starts to level off or fall the winner is the smart one.

So, in short, MEWing is not a bad thing, but it is absolutely suicidal if it is to be used to constantly increase gearing at every opportunity.

MEWing sounds fine in principle but in practice it allows people to delay facing reality. The Goverment have MEWed off the people and the people have MEWed off the lenders. One of these three groups is in for a right royal shafting. I wonder who it will be?

[Father Fred]

MEWing sounds fine in principle but in practice it allows people to delay facing reality. The Goverment have MEWed off the people and the people have MEWed off the lenders. One of these three groups is in for a right royal shafting. I wonder who it will be?

It allows some (many, maybe even most MEWers) people to delay facing reality. Others it allows to add value to their home, build a small, profitable BTL portfolio, start a business etc etc.

I am sure you are not implying that every MEWer has made a mistake in MEWing, but I want to clarify as there is a lot of generalising on this site that is just inaccurate / misleading.

[MarkG]

I am sure you are not implying that every MEWer has made a mistake in MEWing, but I want to clarify as there is a lot of generalising on this site that is just inaccurate / misleading.

The MEW system as a whole has generated vast amounts of new credit. The smart people have used that credit to make money and then get out of the property market, leaving the stupid people with the debts.

It's a transfer of wealth, not a creater of wealth.

[Father Fred]

The MEW system as a whole has generated vast amounts of new credit. The smart people have used that credit to make money and then get out of the property market, leaving the stupid people with the debts.

It's a transfer of wealth, not a creater of wealth.

Surely wealth is created by people "adding value". If you are buying BMV because someone is desparate and selling at MV because you are not, then you are transferring wealth. If you are buying a house for MV (for a scruffy place, clearly the MV for scruffy places is less than MV for nice places) and a kitchen and bathroom for £15k that adds £30k then surely you are creating £15k of wealth?

What about the MEWer who uses the cash to start a business?

[Flat Bear]

Why would they care?

A bank lends against an asset.

If the loan is paid - that's fine

If the loan is defaulted on, the bank reposesses the property. If the loan is 70-80% of the property value their risk is minimal.

They are a business - they don't care where the money comes from

This, i believe, is exactly how they see it, they are a business and why should they care.

But remember when it is in their interest to put up rates and foreclose on properties they will do so and they will make sure the collatoral (equity value of property) does not dip into their proportion of the value, they are a business and why should they care if someone loses their home or investment.

[dog]

It allows some (many, maybe even most MEWers) people to delay facing reality. Others it allows to add value to their home, build a small, profitable BTL portfolio, start a business etc etc.

I am sure you are not implying that every MEWer has made a mistake in MEWing, but I want to clarify as there is a lot of generalising on this site that is just inaccurate / misleading.

I agree that MEWing can be used constructively but I suspect most people MEW out of fear, moral weakness and avarice. Until last year I rented a house on a modern built estate. It was inhabited by a wide cross-section of people but nearly of whom had to work for a living. Over the last couple of years the house prices rocketed and I was amazed by huge number of BMWs and Mercs that replaced the Fords and Vauxhalls.

[MarkG]

If you are buying a house for MV (for a scruffy place, clearly the MV for scruffy places is less than MV for nice places) and a kitchen and bathroom for £15k that adds £30k then surely you are creating £15k of wealth?

How does increasing the price of a house increase wealth? It just means that whoever buys it has to waste more money paying off their mortgage rather than using that money for something productive.

We'd all be much wealthier if we could buy a mansion for 50p.

What about the MEWer who uses the cash to start a business?

In that case, and provided it's a profitable business which would have been profitable without MEW, you're probably right. But an awful lot of new businesses will go bust when MEW dries up because they never made economic sense.

[dog]

But an awful lot of new businesses will go bust when MEW dries up because they never made economic sense.

And thats the problem. We are living in a fantasy economy. People are not facing up to reality. They run businesses proped up with MEW money.

[bazzzzzzz]

Can't wait to snap up a bargain!

It'll be at least 5 years before you can. A half a lifetime some would say.