bugged bunny Posted August 20, 2006 Share Posted August 20, 2006 Hmmm. Wasn't it you who said: "That's the frustrating thing about responding to bullish types. Anything that remotely challenges them and they run off"?? Marina's right. In an ideal (BTL) world, the rent would cover or exceed the mortgage, but that might be asking just too much. As long as it subsidises a hefty proportion and the landlord can afford to top up to the level of payments required, then the BTL-ers are quids in over the medium and long term -- and in recent years, the short term too, though the latter can't be relied upon, obviously. I also fear that Marina may be right. 25-year interest-only BTLs on newbuilds are clearly just the latest get-rich-quick scam. However, I've looked at some scenarios of BTL with the landlord putting in an initial deposit of around 30% and paying a substantial portion of mortgage repayments on a 10 or 15-year repayment mortgage (instead of paying into a pension fund). I came to the conclusion that if rents increased 2% a year, then the investment would have outperformed by 20% investing the same money in a high-interest savings account earning 4% net a year. I factored in maintenance costs and 10% voids. I didn't factor in tax breaks or capital gains should the investor want to sell the property at the end, so my model was lacking some of the necessary details. However, as a pension, the rental income once the mortgage had been paid off would seem to be a very nice little earner compared with savings or a private pension. I know nothing about other forms of investment, so I had nothing else to compare it to! It seems to me that many recent amateur BTLers who got too greedy will soon be toast, but will this be enough to bring down the house of cards? Quote Link to comment Share on other sites More sharing options...
Mags Posted August 20, 2006 Share Posted August 20, 2006 (edited) Hmmm. Wasn't it you who said: "That's the frustrating thing about responding to bullish types. Anything that remotely challenges them and they run off"?? Marina's right. In an ideal (BTL) world, the rent would cover or exceed the mortgage, but that might be asking just too much. As long as it subsidises a hefty proportion and the landlord can afford to top up to the level of payments required, then the BTL-ers are quids in over the medium and long term -- and in recent years, the short term too, though the latter can't be relied upon, obviously. You're taking a very narrow view of the financial reality of being a landlord. It is not that easy to be 'quids in'. You have no crystal ball. We can learn from the cycles of the past. I think that those BTLers who end up not only in negative equity but also subsidising rent each month would not agree that major profits are a foregone conclusion. Look at the whole picture. Genuine investors will seek more profitable routes to wealth. You missed my response to Marina btw! Edited August 20, 2006 by Mags Quote Link to comment Share on other sites More sharing options...
DabHand Posted August 20, 2006 Share Posted August 20, 2006 I also fear that Marina may be right. 25-year interest-only BTLs on newbuilds are clearly just the latest get-rich-quick scam. However, I've looked at some scenarios of BTL with the landlord putting in an initial deposit of around 30% and paying a substantial portion of mortgage repayments on a 10 or 15-year repayment mortgage (instead of paying into a pension fund). I came to the conclusion that if rents increased 2% a year, then the investment would have outperformed by 20% investing the same money in a high-interest savings account earning 4% net a year. I factored in maintenance costs and 10% voids. I didn't factor in tax breaks or capital gains should the investor want to sell the property at the end, so my model was lacking some of the necessary details. However, as a pension, the rental income once the mortgage had been paid off would seem to be a very nice little earner compared with savings or a private pension. I know nothing about other forms of investment, so I had nothing else to compare it to! It seems to me that many recent amateur BTLers who got too greedy will soon be toast, but will this be enough to bring down the house of cards? Many recent BTLers have got that 30% deposit from mewing their last purchase, so yes even those with 30% deposit on their latest aquisition will be 100% leveraged just not directly. Anyone who had 30% of a deposit from their own wallet would probably be thinking they could make that money work better elsewhere in the current climate. Unless they are stupid and swept up in the ramping hysteria. Quote Link to comment Share on other sites More sharing options...
bugged bunny Posted August 20, 2006 Share Posted August 20, 2006 Anyone who had 30% of a deposit from their own wallet would probably be thinking they could make that money work better elsewhere in the current climate. I am curious to know where they'd believe their money would work better, over a 10-15 year period, whatever the real inflation rate. The kind of investors I have in mind are high-earning 50-year olds who've paid off the mortgage on their family home, and want to invest 6- 8K from their earnings each year into an investment scheme. They have an initial lump sum of around 50-80K which they've recently inherited. Quote Link to comment Share on other sites More sharing options...
brassfarthing Posted August 20, 2006 Share Posted August 20, 2006 (edited) You're taking a very narrow view of the financial reality of being a landlord. It is not that easy to be 'quids in'. You have no crystal ball. We can learn from the cycles of the past. I think that those BTLers who end up not only in negative equity but also subsidising rent each month would not agree that major profits are a foregone conclusion. Look at the whole picture. Genuine investors will seek more profitable routes to wealth. Yet more selective quoting. I said "Quids in in the medium and long-term". There is no recent historical precedent I know of in the UK where this isn't true, perhaps apart from one-off disasters. If you don't absolutely HAVE to sell, then you just bide your time. Even if your property never increased in value, you'd still end up with a property that you'd bought with a heavy subsidy from your tenants. And yes, I understand the "financial reality of being a landlord". I've been one for the past 5 or 6 years (by accident rather than design). I agree that the "financial realities" (and the increasing regulation) are making BTL more hassley than it used to be, which is one of the reasons I'm selling up. Wouldn't mind so much if the property was local but it's 200 miles away so the logistics are tricky. You'll be pleased to hear that the property hasn't been a spectacular investment - just over 100% in 10 years which isn't great compared with some areas, apparently. But well over half the mortgage is now paid off, I lived in it for 5, and I've been very lucky with tenants since, so it's still been worthwhile. It's a modest, but perfectly good, example of what Marina was talking about. If there was a crash right now, I would just hang onto the flat, and allow the tenants to continue paying off the mortgage until prices recovered. Edited August 20, 2006 by brassfarthing Quote Link to comment Share on other sites More sharing options...
Keith.G Posted August 20, 2006 Share Posted August 20, 2006 I kind of go along with this but not fully. BTL has caused demand - the demand was not there in its current state in the first place. I know what I wrote was unrealistic but that doesn't mean that BTL is ethical in any way. Stating that murder should be eradicated is unrealistic but murder remains unethical. The social consequences of allowing BTL to go unchecked are immense. And who will pay for that? People will always need to be housed safely and affordably. If BTL continues, those LLs will be subsidising the rents that LAs used to subsidise. How long until they decide that's not a game worth playing? Well, anyone can make up off the scale examples attempting to draw an analogy where none exists - I'm talking about the real world - Those last couple of sentences don't really make sense at all in terms of the whole BTL sector Quote Link to comment Share on other sites More sharing options...
papyrus Posted August 20, 2006 Share Posted August 20, 2006 brass, you've been lucky to be a btl landlord during the highest ever increases in prices - backed up by historically low bowering costs. the same scenario hardly prevails today.. of course, it may well be that the average houseprice in 10 years is 500k.. but that 500k in 10 years won't buy many ounces of gold, or sacks of wheat, or uranium chips, or copper turbines or much of anything else of value. la la la dee doo da da .. who will buy my box my tulips Quote Link to comment Share on other sites More sharing options...
Keith.G Posted August 20, 2006 Share Posted August 20, 2006 Someone posted a link to the Singing Pig site. I am quoting someone called James Smith on that site - so don't have a go at me - I just want to remind you what you are dealing with. Remind you who has priced you out of the market and what they think of you. HE said ... "If like me you have a couple of properties on repayment then essentially some other mug is paying off the mortgage." Nice to know what your landlord thinks of you. I have rented a couple of times myself for convenience due to work relocation (about 5yrs 6mths in total) I'd probably agree I was a mug for doing so for that long that and would have been better off buying another property - what I actually did was Let-to-Let :-) L2L! But I'm only saying that with the 'benefit' of hindsight now knowing that prices were still rising - Otherwise at the time it seemed very convenient. Renters are only as big a mug as anyone who pays over the odds for goods & services as happens all the time in our economic system Quote Link to comment Share on other sites More sharing options...
Mags Posted August 20, 2006 Share Posted August 20, 2006 Well, anyone can make up off the scale examples attempting to draw an analogy where none exists - I'm talking about the real world - Those last couple of sentences don't really make sense at all in terms of the whole BTL sector You stated (at least I think it was you) that with reduced council stock demand for private rental has increased. The assumption is that people will be able to afford to pay whatever a BTL landlord wants to charge. They won't. People pay what they can afford. Someone has to subsidise the rest. If it isn't the LL who is it? Taxpayers. They may grab the money with one hand but it will be taken out of the other. I'm just saying that regardless of how realistic a statement is, the ethics related to it remain the same. I'm talking about the real world. BTL should be stopped. It's unrealistic to expect that it will be but the reasons for it needing to be stopped remain. This is not 'off the scale'. If you don't understand just ask! But don't get stroppy! brass, you've been lucky to be a btl landlord during the highest ever increases in prices - backed up by historically low bowering costs. the same scenario hardly prevails today.. of course, it may well be that the average houseprice in 10 years is 500k.. but that 500k in 10 years won't buy many ounces of gold, or sacks of wheat, or uranium chips, or copper turbines or much of anything else of value. la la la dee doo da da .. who will buy my box my tulips Exactly! Quote Link to comment Share on other sites More sharing options...
Nick.. Posted August 20, 2006 Share Posted August 20, 2006 (edited) Someone posted a link to the Singing Pig site. I am quoting someone called James Smith on that site - so don't have a go at me - I just want to remind you what you are dealing with. Remind you who has priced you out of the market and what they think of you. HE said ... "If like me you have a couple of properties on repayment then essentially some other mug is paying off the mortgage." Nice to know what your landlord thinks of you. Wow, just had a look over the forums on that site, what a despicable group of people. 16 year olds saving now to buy their first properties at age 18, with the aim of retiring at 35, now there's ambition ! I actually enjoy the social interactions of working full time and the relationships you form, character building projects I work on etc. Imagine getting one of those spotty little turds as a landlord Edited August 20, 2006 by Nick.. Quote Link to comment Share on other sites More sharing options...
tenroom Posted August 20, 2006 Share Posted August 20, 2006 As someone who has a flat rented out to tenants in Ladbroke Grove, I can honestly say that if property values started falling, there's NO F***ING way I'd buy another. The majority of BTL LLs are in it for short-medium term capital appreciation - property as a pension has f**k all to do with it. To subsidise the rent on a BTL while it's falling in value is the most acute form of madness for anyone other than the truly professional landlord. Most BTL LLs were just looking for an additonal source of extra income to supplement whatever it is they were earning from their regular occupations, not trying to take over the world. I know several LLs who are earning, like, £25K but have busted a gut to buy a run down flat or whatever thanks to bullsh*t articles in the property sections of the Express and the Standard. They've gone in at top dollar and the deals are just about washing thir own faces but these people are crapping htemselves at the prospect of higher interest rates. Look at websites like moveflat.com, gumtree.com or Loot.com. Everyone and the dog is trying to rent out their flat. Many are going down the HMO route cos they can't find tenants who can afford to rent a whole flat . . . especially in the smarter parts of town. Rents are either stagnant or falling and only stand to drop more as the amount of choice increases. Even an increase in rates isn't going to bring that many properties into the range of the average FTB overnight or even within the next coupla years so I'm bailin' out now before it gets messy ! Quote Link to comment Share on other sites More sharing options...
Keith.G Posted August 20, 2006 Share Posted August 20, 2006 marina, you seem always to make two assumptions. 1) that the bears are the stupid ones who will never own a home. 2) that the bulls and btl'ers are the smart ones securing their futures. both of those assumptions are wrong imo. there are many asset classes set to outperform housing over the next period that do not rely on expanding debt to income ratios. gold, wheat, corn, sugar to name but a few of them. investing is a question of value and not of pricing. I don't neccessarily agree with Marina. I believe that now is not such a good time to get into BTL because of market conditions. Also BTLers often have to invest 15% of their own capital so should want to assess the risk fullyHowever, remember that if they use a repayment rather that I/O they will have to pay more tax but eventually the property will be bought largely with 'other peoples money' Quote Link to comment Share on other sites More sharing options...
brassfarthing Posted August 20, 2006 Share Posted August 20, 2006 (edited) brass, you've been lucky to be a btl landlord during the highest ever increases in prices - backed up by historically low bowering costs. the same scenario hardly prevails today.. of course, it may well be that the average houseprice in 10 years is 500k.. but that 500k in 10 years won't buy many ounces of gold, or sacks of wheat, or uranium chips, or copper turbines or much of anything else of value. la la la dee doo da da .. who will buy my box my tulips Well, the simple truth is that we don't know what the average house price will be in 10 years time. I suspect it will be considerably higher than it is now, but who knows? What I actually said was that even if there was no increase at all, at least you'd have a chunk of your mortgage paid off for you by someone else. I think that's the realistic worst-case scenario. (This model falls down with IO mortgages though, which is why I don't approve of them. You've got to be paying off at least some of the mortgage to help insulate you.) Even if there really is a crash in the next couple of years, I suspect even the bears on here would expect prices to rise again afterwards and eventually to exceed where prices are right now. Who knows what 500K will buy you in 10 years time? No one. I don't know the inflation rate over the last 10 but given the same rate it will still be a tidy sum I suspect, though maybe not enough to retire on. Edited August 20, 2006 by brassfarthing Quote Link to comment Share on other sites More sharing options...
Keith.G Posted August 20, 2006 Share Posted August 20, 2006 You stated (at least I think it was you) that with reduced council stock demand for private rental has increased. The assumption is that people will be able to afford to pay whatever a BTL landlord wants to charge. They won't. People pay what they can afford. Someone has to subsidise the rest. If it isn't the LL who is it? Taxpayers. They may grab the money with one hand but it will be taken out of the other. I'm just saying that regardless of how realistic a statement is, the ethics related to it remain the same. I'm talking about the real world. BTL should be stopped. It's unrealistic to expect that it will be but the reasons for it needing to be stopped remain. This is not 'off the scale'. If you don't understand just ask! But don't get stroppy! Exactly! I'm only stating what I think about those comments - I'm assuming that as people were allowed to buy their council houses this must have reduced the number of properties for rent but I have done no price comparisonsBut the explosion in demand is caused by factors such as the increase in 1 person households, one parent families and immigration I'm supposing not all rents are high - People shop in their own price bracket. I don't see that LL's would normally subsidise the rent (unless thay have to and it's a relatively small amount that they can see as 'investment') Whilst the last few years do seem to have been a 'lucky' period for BTLers, remember they were not aware of what would happen to prices in such a short period - same as everyone else. And it's not neccesarily luck but a willingness to invest and take a potentially long term view that's needed as the general long-term trend has always been upward Also remember that all those who own property have seen these rises in their property not just BTLers Quote Link to comment Share on other sites More sharing options...
Casual Observer Posted August 20, 2006 Share Posted August 20, 2006 16 year olds saving now to buy their first properties at age 18, with the aim of retiring at 35, now there's ambition ! I actually enjoy the social interactions of working full time and the relationships you form, character building projects I work on etc. Imagine getting one of those spotty little turds as a landlord So much for boomers being the source of all evil! Do certain posters need to re-evaluate their stereotyping? Quote Link to comment Share on other sites More sharing options...
bugged bunny Posted August 20, 2006 Share Posted August 20, 2006 So much for boomers being the source of all evil! Do certain posters need to re-evaluate their stereotyping? You're as much as a stereotyper as anyone else on this site. No-one thinks boomers are the source of all evil. You exaggerate posters' claims in order to bolster your own arguments. That is so weak. Just be prepared to admit your good fortune and then you might be granted some credibility. I have no problem with admitting that generation Y are less fortunate than generation X, the latter of which I'm a member - OK? It's a no-brainer. I had it tough, those younger than me had it tougher, my grandparents had it tougher, fighting in a World War, and living in the subsequent economic hardship - what could be tougher than that? I don't disagree with everything you say,.. However, your smug avatar and smug derivise comments say it all. You get off on patronising people less fortunate than yourself. That's sad with a capital 'S'. Quote Link to comment Share on other sites More sharing options...
Casual Observer Posted August 21, 2006 Share Posted August 21, 2006 (edited) I don't disagree with everything you say,.. However, your smug avatar and smug derivise comments say it all. You get off on patronising people less fortunate than yourself. That's sad with a capital 'S'. Smug and derisive? I point out the hypocrisy of a poster who blames the boomer generation for pricing out youngsters, only to reveal that he bought a house 12 years ago and it's now "worth" 4 times as much? What I've done is to highlight the stupidity of the "boomer at fault" argument, since his post shows that youngsters have clearly made profit from others beneath them in recent years. And bearing in mind the post about the 16 year old, many still have the attitude which boomers are accused of having. I would have thought this was not smug, but a useful thing to do, on a thread about boomers and BTlers. But if my line of questioning has upset your black and white view of the world, then tough. You should question things more, and not just dismiss them as "derisive" Edited August 21, 2006 by Casual Observer Quote Link to comment Share on other sites More sharing options...
Marina Posted August 21, 2006 Author Share Posted August 21, 2006 You're taking a very narrow view of the financial reality of being a landlord. No, you are. You're the one thinking about today ... 'ooh, I'm in negative equity and subisiding the rent by £200 a month to pay the mortgage ... I've got to panic, lose a load of money and sell up.' I don't think the daftest BTL investor thinks they are going to make money in a year, or two years - the thickest of them realise it is a long term investment. Many are using it as a 'pension' investment so are looking 10 to 30 years down the road. It is not that easy to be 'quids in'. You have no crystal ball. Nor do you. Fact is over any 25 year period you care to name, property has been a good investment. We can learn from the cycles of the past. What can we learn? That property sometimes goes down a bit. Yes we can learn - but some people have learnt that if you have time on your side - property is a very good (leveraged) investment - and they have priced you out of the market. I think that those BTLers who end up not only in negative equity but also subsidising rent each month would not agree that major profits are a foregone conclusion. No, major profits are a foregone conclusion as long as you can hang on. Many people would rather put £300 a month into their BTL investment than they would into their Equitable Life pension. Look at the whole picture. Genuine investors will seek more profitable routes to wealth. What the hell is a 'genuine investor?' Someone who invests in stocks and shares? Ye gods. Lots of 'genuine investors' would give their right arms to have enjoyed the same returns as BTL investors over the last 10 years. There is only one category of investor - and an 'amateur' BTL investor who can hold on to his investment for 25 years - even at just 3% growth per year - is going to do a lot better than any 'genuine' investor. You just seem to refuse to get it. This is why BTL is so popular - not because people have lost a fortune - but because they have made a fortune and - even with just nominal growth in capital and rent, it is still a good investment ... which is why lots of people who already have BTL investments are regularly expanding their portfolio. You missed my response to Marina btw! Quote Link to comment Share on other sites More sharing options...
jenko3000 Posted August 21, 2006 Share Posted August 21, 2006 (edited) Marina, For someone who isn't a BTL investor, you seem to know a hell of a lot about their motivations, mentality and future behaviour. Why are you still harping on about this huge and amorphous group of people as if they were rational and all behaved as one synchronised group? It won't need every landlord to cause your 'new paradigm' to unwind, it will only need those on the margins to start the panic off. Like every market that's driven by greed and fear, both emotions are equally contagious. Edited August 21, 2006 by jenko3000 Quote Link to comment Share on other sites More sharing options...
Garry AKA Pod Posted August 21, 2006 Share Posted August 21, 2006 My dad is bigger than your dad! Quote Link to comment Share on other sites More sharing options...
Marina Posted August 21, 2006 Author Share Posted August 21, 2006 (edited) Marina, For someone who isn't a BTL investor, you seem to know a hell of a lot about their motivations, mentality and future behaviour. Thank you. Why are you still harping on about this huge and amorphous group of people as if they were rational and all behaved as one synchronised group? I guess for the same reason that everyone else on here harps on about how they think people behave i.e. as one amorphous group. It won't need every landlord to cause your 'new paradigm' to unwind, it will only need those on the margins to start the panic off. Like every market that's driven by greed and fear, both emotions are equally contagious. Greed and fear eh? So you've invested 20k to become a BTL landlord because you are greedy and you fear to lose that money - so, even if things do unwind a bit, you stay invested because you have no choice. If you don't, you realise a loss. It's the same mentality that makes people hold on to shares as the price goes down. Sell them and the reality of making a loss happens - hold on to them and wait until the market turns - surely that is what most people do. Of course, with a share it may never turn. History teaches us that property will - reinforcing the willingness to 'hang on'. And, as I have said now so often I am bored .... but here goes because it doesn't seem to sink in .... let's say a BTL investor with one flat loses his job, can't get another job, in the doo-dah, so is forced to sell his BTL. Property market is falling at the time. Who is he going to sell to? Your answer will be 'no-one' - you have this nutty notion that the property market will go into a slide and everyone will know its sliding and everyone will stand back until it hits the bottom. Which, if that were true, it never would. No one would buy until houses were £1 each. The reality is that during any correction (and we had plenty of evidence of this in 2004 when the market did start correcting) the whole might of the media and VIs calls the bottom of the market everyday. 'Property market recovers,' 'Prices up again in London' 'Property market rebounds'. Faced with this endless onslaught of information, faced with all the property programs on the box saying you have to look harder for bargains - seek out the 'hot spots' - faced with the interminable drivel .... the BTL investor in trouble will simply sell to another BTL investor who is not in trouble. If prices 'correct', yields will go up and this will be seized on to pull more of the b@stards in. So, BTL, have priced you out on the way up - and they'll price you out on the way down. It is very simple. You are priced out. End of story. Someone with access to greater borrowing power than you is using it to manipulate the property market so you can't get a look in. And they get favourable tax treatment. And yet you don't even seem to be annoyed about it. Edited August 21, 2006 by Marina Quote Link to comment Share on other sites More sharing options...
jenko3000 Posted August 21, 2006 Share Posted August 21, 2006 So you've invested 20k to become a BTL landlord because you are greedy and you fear to lose that money - so, even if things do unwind a bit, you stay invested because you have no choice. Again, you've imagined the circumstances and motivations of one BTL landlord and extrapolated them across an entire market. I repeat... why are you still harping on about this huge and amorphous group of people as if they were rational and all behaved as one synchronised entity? Quote Link to comment Share on other sites More sharing options...
Mags Posted August 21, 2006 Share Posted August 21, 2006 Again, you've imagined the circumstances and motivations of one BTL landlord and extrapolated them across an entire market. I repeat... why are you still harping on about this huge and amorphous group of people as if they were rational and all behaved as one synchronised entity? Because he has an undeclared vested interest in continually ramping up BTL perhaps? Sure looks that way. Quote Link to comment Share on other sites More sharing options...
Marina Posted August 21, 2006 Author Share Posted August 21, 2006 Because he has an undeclared vested interest in continually ramping up BTL perhaps? Sure looks that way. Yes I spend time on here trying to wind you lot up into doing something about BTL - protesting about it, encouraging people to maybe disrupt a few Inside Track seminars ... because I have an undeclared vested interest. You seem to have a brain the size of a pea. Again, you've imagined the circumstances and motivations of one BTL landlord and extrapolated them across an entire market. I repeat... why are you still harping on about this huge and amorphous group of people as if they were rational and all behaved as one synchronised entity? Errr, let's see if we can work that one out .... maybe because BTLs all have the same aim - to buy property and let it out and the same modus operandi - leverage the equity they already have to buy more property. Of course some want to own just one extra property and some want to own 50 - but the principle is the same. Quote Link to comment Share on other sites More sharing options...
Cuckoo Posted August 21, 2006 Share Posted August 21, 2006 I think Marina makes some very valid points. People should protest if they dont like the current situation, rather than just winge about it. Either that or perhaps more easily, they should start saving to get on that ladder! Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.