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dnd

Rising Interest Rates -> Rising Rents -> Rising Inflation -> Rising Interest Rates...

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Potentially interesting one here for the UK in the near future, I believe, relating to US BTL brigade attempting to cover their mortgages...

http://www.housepricecrash.co.uk/forum/ind...topic=30229&hl=

Very good point DND. There is a vicious cycle related to interest rate rises and that means you have to raise quickly and go high to kill off inflation. Unfortunately, it kills a lot of people's paper wealth in the process.

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Guest Guy_Montag

Potentially interesting one here for the UK in the near future, I believe, relating to US BTL brigade attempting to cover their mortgages...

http://www.housepricecrash.co.uk/forum/ind...topic=30229&hl=

Only for people with large outstanding loans on their btl property. My guess is my landlord bought my flat outright, or with a very small loan. Pre-1999 landlords should also be relatively immune.

My last landlady came round to put up the rent the last time rates went up - I told her I would move out & she backed down. Interestingly I notice my rent didn't go down with rates the last time.

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As for me, I expect it's my duty as a landlord to pass on every cost increase.

IR rises are intended to take money from the consumers hand and put it into savers hands. Why would tenants be excluded from that intention?

Think about that.

IMO the less an LL raises their rents today, the higher they'll raise them tomorrow.

Edited by Time to raise the rents.

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IMO the less an LL raises their rents today, the higher they'll raise them tomorrow.

If you feel higher IRs mean higher rents then go ahead and boast about it.

As far as I'm concerned, higher IRs means lower house prices, a time when I'll buy, and therefore no more rent paid to the likes of you.

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As for me, I expect it's my duty as a landlord to pass on every cost increase.

IR rises are intended to take money from the consumers hand and put it into savers hands. Why would tenants be excluded from that intention?

Because many tenants are in fact the savers, whereas ecent LL's have been consumers... of VI bulldust and hype.

Think about that.

IMO the less an LL raises their rents today, the higher they'll raise them tomorrow.

Rots of Ruck!

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If you feel higher IRs mean higher rents then go ahead and boast about it.

As far as I'm concerned, higher IRs means lower house prices, a time when I'll buy, and therefore no more rent paid to the likes of you.

Agreed. When it becomes cheaper to buy than to rent regardless of where IRs are, what will LLs do then?

They'll have to lower rents to stay competitive, or go under. I think that's where 'being in it for the long term' might bite a few hard... ;)

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If you feel higher IRs mean higher rents then go ahead and boast about it.

As far as I'm concerned, higher IRs means lower house prices, a time when I'll buy, and therefore no more rent paid to the likes of you.

Being fair to your comment, you are right. But I would qualify it with the point IMO that reasonable rate rises are followed by reasonable rent rises as night follows days.

Unreasonable rate rises, now that's another story.

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As for me, I expect it's my duty as a landlord to pass on every cost increase.

IR rises are intended to take money from the consumers hand and put it into savers hands. Why would tenants be excluded from that intention?

Think about that.

IMO the less an LL raises their rents today, the higher they'll raise them tomorrow.

As it looks increasingly likely that rates will rise, will you wait before passing on the cost, or increase pre-emptively (like now)?

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But I would qualify it with the point IMO that reasonable rate rises are followed by reasonable rent rises as night follows days.

How are you going to increase rents when there's such a glut of rental property in most of the country? Some of the places I looked at on the web last year were advertised for months, and rents went down by up to 25% before they were finally let.

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As for me, I expect it's my duty as a landlord to pass on every cost increase.

IR rises are intended to take money from the consumers hand and put it into savers hands. Why would tenants be excluded from that intention?

Think about that.

IMO the less an LL raises their rents today, the higher they'll raise them tomorrow.

I have to say that I agree with TTRTR. However, there is a few catch. Currently there is an oversupply of rental property. There may be some elasticity in rental price rises over the next year until the unsustainable BTL sell their property, i.e., those landlords who had an unexpectedly high expectation of yield or who cannot let the property due to oversupply. This will increase supply of houses for sale forcing house prices down, but decreasing supply of rental property. Therefore, landlords who have done their sums correctly will, in the end, be able to match interest rate movements with rental increases, maybe not fully, but yields will have become much better for those serious about long term BTL.

TTRTR, I'm not sure why you're not voting for a rise in interest rates. If you have done your sums correctly, it may well benefit you.

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As it looks increasingly likely that rates will rise, will you wait before passing on the cost, or increase pre-emptively (like now)?

ASAP.

How are you going to increase rents when there's such a glut of rental property in most of the country? Some of the places I looked at on the web last year were advertised for months, and rents went down by up to 25% before they were finally let.

Not everyone lives in such a terrible area as you.

Remember, 9 years now & I still haven't had a day's void.

I have to say that I agree with TTRTR. However, there is a few catch. Currently there is an oversupply of rental property. There may be some elasticity in rental price rises over the next year until the unsustainable BTL sell their property, i.e., those landlords who had an unexpectedly high expectation of yield or who cannot let the property due to oversupply. This will increase supply of houses for sale forcing house prices down, but decreasing supply of rental property. Therefore, landlords who have done their sums correctly will, in the end, be able to match interest rate movements with rental increases, maybe not fully, but yields will have become much better for those serious about long term BTL.

I think the elasticity in rents as you describe it was already altered with the 1% rise since the base rate was 3.5%

TTRTR, I'm not sure why you're not voting for a rise in interest rates. If you have done your sums correctly, it may well benefit you.

Because I'm of the belief that interest rates cause inflation splirals exactly as described in the header of this thread. Increase people's costs in any sector & they will respond by passing on increases of their own to protect their bottom line.

This can get out of control if rate rises are unreasonable and cause a spiral that must end in a recession. Do you really think I would be pushing for that?

All you text book economists can come out now & tell me how interest rates fight inflation, but if you believe they don't also contribute to it, you're just a silly little college kid to me.

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ASAP.

Not everyone lives in such a terrible area as you.

Increase people's costs in any sector & they will respond by passing on increases of their own to protect their bottom line.

Tescos did not do that, infact their prices were down some 2%, they absorbed the extra fuel cost, because there is competition. If you think there is no competition in BTL, you might be able to increase the rents(my ll has not for almost 2 years)

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Not everyone lives in such a terrible area as you.

Terrible? I've spent the last six or seven years living in villages full rich bankers where a chav sighting is an extremely rare occurence and I don't have to wake up to the sight of vomit on the pavement outside the front door... though I suppose some people might regard having bankers for neighbours as pretty terrible.

Or do you just mean 'terrible' as in terrible for a landlord because they're building vastly more 'investment flats' than can possibly be let out?

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Tescos did not do that, infact their prices were down some 2%, they absorbed the extra fuel cost, because there is competition. If you think there is no competition in BTL, you might be able to increase the rents(my ll has not for almost 2 years)

You highlight an important point. There are two ways to better the bottom line. 1 is to attack costs and the other is to raise prices.

Smart LL's have already attacked the main interest cost as BTL mortgages offered became more & more competetive and IMO that has been reflected in HP's.

So that part of the game is history for a large part of the market.

Terrible? I've spent the last six or seven years living in villages full rich bankers where a chav sighting is an extremely rare occurence and I don't have to wake up to the sight of vomit on the pavement outside the front door... though I suppose some people might regard having bankers for neighbours as pretty terrible.

Or do you just mean 'terrible' as in terrible for a landlord because they're building vastly more 'investment flats' than can possibly be let out?

Well it looks like in your case you're just living in an area that doesn't appeal to tenants.

Did you know that Wandworth is 40% private rentals? That compares with the nationwide avg of about 10% private BTL.

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Being fair to your comment, you are right. But I would qualify it with the point IMO that reasonable rate rises are followed by reasonable rent rises as night follows days.

How come your "law" only works on the way up? As interest rates plummeted to 1% in the US, were rents slashed to token levels? Have the Japanese been living rent free for the past few years?

You are confusing rents rising with yields rising. Yields will rise, but that will be because prices are falling. Good for new entrant landlords, bad for those who bought at the top.

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Yeah right. The nice LL will just dig deeper without a 2nd thought.

No they won't. The most leveraged will try to bump the rent up considerably and soon have a void on their hands.

Those without bigger mortgages will be able to out-compete them for tenants.

Billy Shears

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--------------------

Here's the lowdown on TTRTR's finances (confirmed as being "damn close" to actual by TTRTR himself):

Equity £1.3m (Wandsworth property as per land registry quarterly report is up 0.5% since sep05)

Debt £2.25m

Total portfolio value = £3.55m

gearing = 63.4%

P&L for period Sep05 - Mar06

Rental income Sep05 - Mar05 (yield of 6.75% on £3.75m) = £126k

6 months interest payments @ 5% = £56k

Profit before expenses = £70k

Appreciation/depreciation (Land registry, 0.5%)= £6.5k

Profit before overheads £76.5k

Nice work if you can get it......;)

Have you sent this to Inland Revenue yet ?

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How come your "law" only works on the way up? As interest rates plummeted to 1% in the US, were rents slashed to token levels? Have the Japanese been living rent free for the past few years?

You are confusing rents rising with yields rising. Yields will rise, but that will be because prices are falling. Good for new entrant landlords, bad for those who bought at the top.

You are, of course, absolutely right

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As for me, I expect it's my duty as a landlord to pass on every cost increase.

Yeah but if your competing with a £170K mortgage against a landlord with a £60K mortgage, well...your just not competing. The recent BTL idiots will go to the wall.

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  • 301 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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