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Apologies if this has already been posted but I just had to share this...

Tales of a Landlady: Future shock

Is buy-to-let as a pension nest egg a good idea, wonders Rosie Millard

What are we all in this for? Tricky tenants, slippery agents, godforsaken building sites: yes, the whole buy-to-let game. Pensions, that’s why. We’re all doing it so we don’t end up facing our maker from the vantage point of the gutter. So if the average age of the buy-to-let investor is 45, what will happen in 20 years’ time? First up with the crystal ball: Yolande Barnes, head of residential research at Savills estate agency. Because so much buy-to-let investment is the same type of building (two-bed new-build) in the same place (the city centre), Barnes is concerned that rather than provide a pension payout, these areas will have an inbuilt price weakness because they will have never matured into family-led normality.

it gets better...

Let us then speak to the average buy-to-let landlord. I ring three of them. The first is Oscar Lennox, who has a clutch of flats in Clarence Dock, Leeds.

“Selling up in 20 years? I’m going to sell up in 20 weeks, to be honest,” grumbles Lennox. “Prices haven’t moved for two years and rents are coming down. Effectively, I am subsidising my tenants to maintain my properties. I bought these flats in 2002 for £126,000 and £128,000, with 80% mortgages, and I’m putting them on the market for £126,000 and £128,000. I’m happy to be leaving the buy-to-let world. I’m going to look to the stock market for my pension.”

Robin Lawton has 14 houses and flats in Southampton and one in central London. His outlook is a bit less Armageddon- like, but he’s still not hanging around.

“I’ve already started relinquishing my properties, but not in one fell swoop,” he says. “I’m going for a drip-feed approach.

http://property.timesonline.co.uk/article/...2215931,00.html

:D:D:D

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"I'm going back to the stock market for my pension"

So, going back into an asset class that has just had an amazing 3 year bull run and is now entering a bearish phase.

Could he get any less contrarian?

frugalista

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Some amazingly selective quoting from that article. You left out the bit about the 3rd landlord who has no intention of selling, and the 2nd landlord will be drip feeding his properties on to the market one per year to avoid capital gains tax.

Robin Lawton has 14 houses and flats in Southampton and one in central London. His outlook is a bit less Armageddon- like, but he’s still not hanging around.

“I’ve already started relinquishing my properties, but not in one fell swoop,” he says. “I’m going for a drip-feed approach. If I see the right opportunity, I’ll sell. Selling one a year also eases the pain of capital gains, because of the annual allowance. I’m going to operate slowly and progressively, depending on what the market is doing, dealing with my portfolio in stages to assist cash flow and my standard of living.”

Barry Martin, a wine importer, has nine properties, also in Southampton, and he isn’t budging.

“My view is ‘never sell’. If I want large amounts of cash, I will remortgage,” Martin says. “For a pension, I will use rental income. Why kill the goose that lays the golden eggs? Unless the entire property market changes, the properties will go on increasing in value. So you can always take something off the top.”

Marc von Grundherr, a rental specialist with Benham & Reeves, a residential lettings specialist, is on Martin’s wavelength.

Why sell off your assets when you retire? Keep the assets and have the rent come in as an income stream. That’s the beauty of buy-to-let as a pension. Upgrade the decor, and remember that if you have bought something decent in the first place then it will remain a property of good quality. It’s a no-brainer.”

Meaning that the excellence of your property 20 years back will dictate what you do in 20 years time. Probably.

Edited: sorry I submitted this before I'd finshed

Edited by Immigrant

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Some amazingly selective quoting from that article. You left out the bit about the 3rd landlord who has no intention of selling, and the 2nd landlord will be drip feeding his properties on to the market one per year to avoid capital gains tax.

ah but the second property IS GETTING OUT just slowly to avoid CGT and the third sounds pretty well off and does not need the money and his VI mate who is obviously creaming money off him is talking the market up.

'Property only ever goes up' eh talk to the first two BTL'rs then. Or come back here next year. Or speak to me after the next two IR rises.

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And this tit bit for a certain Mr Frank Harris. What are you saying Frank?

"What rot, says Frank Harris, who runs the eponymous central London estate agency. “Buy-to-let investors will make money. They will all make money. Some will sell now, and some will choose to hang on. But over 20 years they will all have made money.”

What about wear and tear? “You put in a new kitchen and bathroom and bingo! You’re away. Look at the cyclical nature of the market. Twenty years is enough time for troughs and peaks. I would be amazed if people don’t make a reasonable capital increase on what they have. All you can do is look at a historic graph of prices, and calculate that over a 20-year period there will be capital growth. There is nothing else to base it on.”

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And this tit bit for a certain Mr Frank Harris. What are you saying Frank?

"What rot, says Frank Harris, who runs the eponymous central London estate agency. “Buy-to-let investors will make money. They will all make money. Some will sell now, and some will choose to hang on. But over 20 years they will all have made money.”

What about wear and tear? “You put in a new kitchen and bathroom and bingo! You’re away. Look at the cyclical nature of the market. Twenty years is enough time for troughs and peaks. I would be amazed if people don’t make a reasonable capital increase on what they have. All you can do is look at a historic graph of prices, and calculate that over a 20-year period there will be capital growth. There is nothing else to base it on.”

Try not to use past performance as an indicator of future performance it just isn't healthy, even the toothless FSA knows that :P:P:P

Demographics might well see to it (that and the crumbling US/UK economic dominance) that house prices do not in fact rise over the long term.... they may well fall for a very long time.

Remember that rising house prices over the long term have been supported by increasing population, employment and wage inflation. We now low/no wage inflation, rising unemployment and will very soon have a rapidly ageing (and falling in numbers) population. Immigration could address this, but remember that most immigrants are not taking up well paid skilled jobs and so won't be able to pay silly prices for housing.

I do wonder whether this is the one last big gasp for property prices before they permanently fall back over a long number of years.

I'm open to other viewpoints and don't think anyone can call any outcome a certainty yet, and I will still buy even if I suspect there will be protracted falls, but I will only buy at a price that I can afford to pay off quickly.

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The degree of new BTL landlords who may be subsidising their rental properties is nothing compared to the degree of shareholders subsidising lackluster share performance when taking home next to nothing in divs (especially compared to bank interest) & losing capital my the minute while the market freefalls.

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If they are considering the long term performance of the residential investment market, they will understand that gross yields were 2.5 times higher in the past than they are now. I think Rosie is undergoing a process called dawning realisation.

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The funny thing is, if the avergage age of a BTL landlord is 45 ( probably due to owning a home and being able to secure the BTL agaisnt thier home or MEW) and the consensus seems to be "its my pension" surely then when these people retire they will have to sell, when they sell in such high numbers it will drop the price like a stone.

All hypothetical of course, very few of these people that are "in it for the long run" will actually see it through when they have a negative cashflow and the value doesnt rise.

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surely then when these people retire they will have to sell, when they sell in such high numbers it will drop the price like a stone.

Um, yes.

But if they were smart enough to forsee that, they wouldn't be BTLs.

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“Why sell off your assets when you retire? Keep the assets and have the rent come in as an income stream. That’s the beauty of buy-to-let as a pension. Upgrade the decor, and remember that if you have bought something decent in the first place then it will remain a property of good quality. It’s a no-brainer.”

Definitely brainless. The problem is rental income not covering the cost of borrowing. Get through the next 20 years before you think of your BTL as an asset!

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Why sell off your assets when you retire? Keep the assets and have the rent come in as an income stream.

Who's going to be renting when the market is flooded with cut-price BTL properties?

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The degree of new BTL landlords who may be subsidising their rental properties is nothing compared to the degree of shareholders subsidising lackluster share performance when taking home next to nothing in divs (especially compared to bank interest) & losing capital my the minute while the market freefalls.

I think you'll find share prices out-performed property by a substantial margin between 2003 and now. As for the current turbulence, which I think will blow over by the end of the Summer, at least you can buy and sell your shares in an instant. When the property market crashes, as a property owner or BTL investor there's not a lot you can do except watch - you can't just sell up - it can take months if not years to shift property in a falling market. It's bad enough now!

And this tit bit for a certain Mr Frank Harris. What are you saying Frank?

"What rot, says Frank Harris, who runs the eponymous central London estate agency. “Buy-to-let investors will make money. They will all make money. Some will sell now, and some will choose to hang on. But over 20 years they will all have made money.”

Of course they will, there, there...

Edited by othello

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“Why sell off your assets when you retire? Keep the assets and have the rent come in as an income stream. That’s the beauty of buy-to-let as a pension. Upgrade the decor, and remember that if you have bought something decent in the first place then it will remain a property of good quality. It’s a no-brainer.”

Definitely brainless. The problem is rental income not covering the cost of borrowing. Get through the next 20 years before you think of your BTL as an asset!

Laugh away.

But there is a serious point here - why do you assume that people will have to sell when they retire? Why not use the rental as an income stream?

By that time they will own the property outright, and whatever you say it will be a valuable asset (we can argue about just how valuable, but valuable it will be). I really don't see why you assume all BTL landlords should be selling a panic just because prices may drop. Many bought ages ago so aren't subsidising tenants anyway. Even those that are, they think rents will outstrip their mortgage repayments sooner or later so most will choose to hang in if they can. You can put £100 pm into a pension or you can put it into your rented property. There will be some forced sellers but you are making a big mistake if you're assuming most BTL will be panic selling. YOU might if you were in their shoes but you're not are you.

Stupid or not, they see things differently. That's what some of you don't get.

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Laugh away.

But there is a serious point here - why do you assume that people will have to sell when they retire? Why not use the rental as an income stream?

By that time they will own the property outright, and whatever you say it will be a valuable asset (we can argue about just how valuable, but valuable it will be). I really don't see why you assume all BTL landlords should be selling a panic just because prices may drop. Many bought ages ago so aren't subsidising tenants anyway. Even those that are, they think rents will outstrip their mortgage repayments sooner or later so most will choose to hang in if they can. You can put £100 pm into a pension or you can put it into your rented property. There will be some forced sellers but you are making a big mistake if you're assuming most BTL will be panic selling. YOU might if you were in their shoes but you're not are you.

Stupid or not, they see things differently. That's what some of you don't get.

It's all very subjective. Are most BTLers professional investors? I think not. Those that have cushioned themselves again financial shocks will indeed be sitting pretty; but how many of them are there exactly? How many of these amateur landlords are using interest-only mortgages to offset medium-term losses?

Things have the potential to unwind very fast; we've been given little lesson in the stockmarket just lately and our government can stealth tax pensions or anything else that looks like it's up for grabs - BTL perhaps?

The economic environment could also cause sell-offs by the less experienced e.g Have we seen the many tenant defaulters of late in these buoyant times. Hassle is a big factor; well to me anyhow!

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Guest donall

I read the times article and it seems to me that the smart people are looking to sell their BTL portfolios in 20 weeks not years. That's the times though, I'm sure that one of the red tops will still be singing the praises of BTL.

What concerns me about the BTL situation is that the middle aged are Buying and the young 20 somethings are having trouble getting on the ladder. Our society has been focused on home ownership as a sign of a successful/ independent lifestyle (i.e. living with parents at 25 bad, living in your own home aged 25 good)

Having city centres filled with empty 2-bed exec. flats is a worry. Especially if they haven't been designed to integrate into the city centre. Anyone who has lived in a European city will recognise why it is important to have local amenities availalble within walking distance of residental areas. In our cities we are losing a lot of smaller shops to Tescos and what remain are pricey bars and hairdressers.

Back to BTL.

Yields are currently too low to make BTL an option. High house prices make BTl a bad option too as it reduces your ROCE. Buying property to BTL is great if you can secure a good yield and favourable gearing. But as prices rise it makes your cash less effective*. When you look at what the markets (shares) have been doing in the last 3 years it makes tieing all you eggs into a BTL basket a little foolish.

Interestingly the EA recommends BTL as a good investment.

*Altough your CGT may become an issue

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When you look at what the markets (shares) have been doing in the last 3 years it makes tieing all you eggs into a BTL basket a little foolish.

Interestingly the EA recommends BTL as a good investment.

*Altough your CGT may become an issue

???

When you look at the fact that the FTSE100 is no higher now than in July '98 and also take into account inflation then BTL in the same time period looks drop dead gorgeous.

I'm no defender of BTL but when people tout common stocks as a way to grow money then I'm rather dubious. Good traders might make money but for the last few years J6P buy and hold types have been shafted.

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???

When you look at the fact that the FTSE100 is no higher now than in July '98 and also take into account inflation then BTL in the same time period looks drop dead gorgeous.

I'm no defender of BTL but when people tout common stocks as a way to grow money then I'm rather dubious. Good traders might make money but for the last few years J6P buy and hold types have been shafted.

You should never buy and hold indefinitely. If you do your an idiot!

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By that time they will own the property outright

Most of the more recent entrants to the BTL market are using IO mortgages. Repayment mortgages are so expensive the rent nowhere near covers it.

Look, BTLetters are not clever, innovative or entrepreneurial. They have no imagination and they think it's easy money. Everyone else is doing it so why not me.

In this as in all things the middle men make the money. The estate agents, rental agencies and mortgage brokers. Why are people in those jobsat all if BTL is so easy? The answer is if you let 100 properties and make £100 a month on each one that is 10 real grand a month. No talk about yields, bugger all risk and no worries about paying off Interest Only mortgages in the future.

Edited by Marina

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Perhaps there is a deeper meaning to the 'its my pension' cliche.

Has BTL taken over from flash cars, previously known as 'make-up for men' to attract women?

If this type of property has become the latest extension to the male physique, it's no accident that the letters also spell 'its on my penls' ;)

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  • 302 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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