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The Rental Boom That Is In Line For A Bust


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Good article, although I don't agree that if you BTL with cash, it's fine. 5.2% yield is less than you could get in a building society right now and that's before you take into account the falling capital. It's a [email protected] investment, whether your mortgaged or not. A no-brainer. Yet so many are lured...

B)

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There were 473,000 buy-to-let mortgages in the UK as of June. But this is only the number of formal "buy-to-let mortgages" taken out.

The figure may be much higher, as a result of investors playing fast and loose with the facts when taking out loans.

They do so because they do not want to put down the 20 per cent or so deposit normally required with a buy-to-let mortgage. And some financial advisers have turned a blind eye.

Still think that BTL only accounts for 7% of property transactions? My guess would be more like 30-40%.

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The whole article is excellent. I particularly like their example of the 450k house in Balham, where buying is £1200pcm more expensive.

The meeja are finally getting their claws stuck in to the renting vs owning debate. As Christmas spending turns into new year rebugeting and debt management advice, the #1 money-saving tip will be: RENT, DON'T BUY!!

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Good article this, especially in pointing out that the real number of BTL's is alot higher than the official 1/2 million, a question I'd ask is, if someone moves out of there first property, buys a second, but keeps the first and rents it out, will this be included in the buy to let figures?

I have a friend who remortgaged his flat, used the cash as a despoit on a house, kept the flat and is renting it out, I think that alot of people who bought 3/4 years ago have been doing this, moving up the chain without finding a buyer for there first property.

Needless to say they were told NO by several lenders, but kept trying & erm altered a few facts, until they got the money.

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"Good article this, especially in pointing out that the real number of BTL's is alot higher than the official 1/2 million, a question I'd ask is, if someone moves out of there first property, buys a second, but keeps the first and rents it out, will this be included in the buy to let figures?"

My most expensive mortgage (< £100k) is on my house in Surrey which has been rented for the past 3 years while I am working in the North. On moving back North Abbey offered me to pay them a small upfront payment to change the terms of the mortgage to allow renting. I would doubt this shows as an official BTL loan.

They have recently signed me up to -2% SVR for the next three years which is better than my mates residential offer from the same lender.

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I like the article, great post.

BUT - what worries me if the BTL landlords who have recently bought and cannot make the rent to cover the mortgage, and refuse to sell up - wont they simply raise rents in the short to medium term?

People who are renting will have a problem, because if they are FTB, they wont be able to afford anything now, and will be forced to pay higher rents. They will still need somewhere to live - and moving back with relatives may not be an option if their workplace is elsewhere in the country.

Any ideas what may happen? Or are the renting FTB, set for doom?

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if the BTL landlords who have recently bought and cannot make the rent to cover the mortgage, and refuse to sell up - wont they simply raise rents in the short to medium term?

Trev, the market doesn't work like this. Muppet BTLers who are losing money hand over fist every month can't simply up the rent to make their sums work; there are always landlords who have little or no ongoing costs, who can afford to undercut the newbie BTL muppets; as with any business sector, the more well-established players can squeeze out the more marginal operators.

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Trev, the market doesn't work like this. Muppet BTLers who are losing money hand over fist every month can't simply up the rent to make their sums work; there are always landlords who have little or no ongoing costs, who can afford to undercut the newbie BTL muppets; as with any business sector, the more well-established players can squeeze out the more marginal operators.

I trully hope so. Thank you for your point. Phew!

I would have thought we are going to uncharted teritory though, as

I wasnt old enough to remember the last crash. For sure they are much more BTL landlords now than in the 90s - and if a higher proprtion of these are late commers to the BTL scene and raise rents - the base rate for rent, lets say will rise. Hopefully not by much.

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I've argued elsewhere on this forum (with BTLs like TTRTR etc disagreeing - obviously) that once house prices are definitely going downwards and BTLs are well aware that they NEED the income then you may well find that they are less inclined to try to whack up rents rather than more so (as TTRTR etc think).

If they up the rents they risk the tenant moving on and facing potential void periods. This MAY work in their favour but it COULD leave them with a geared asset that is falling in value, attracting zero income and requiring a monthly outlay from the landlord's own pocket to fund. I would have thought this is the disaster scenario for anything more than a couple of months for most landlords.

You may well find landlords will not want to take this risk and will try hard to keep their existing tenants happy and in place.

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For sure they are much more BTL landlords now than in the 90s - and if a higher proprtion of these are late commers to the BTL scene and raise rents - the base rate for rent, lets say will rise.

Trev, you are over-estimating how many rental props are BTL. There are 0.5 million BTL mortgages. The private rented sector makes up about 12% of the national housing stock, so about 3 million dwellings (properties). BTL aren't even a majority of the private rented housing stock.

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Trev, you are over-estimating how many rental props are BTL. There are 0.5 million BTL mortgages. The private rented sector makes up about 12% of the national housing stock, so about 3 million dwellings (properties). BTL aren't even a majority of the private rented housing stock.

1/2 million 'officially' BTL, which has been growing at an exponential rate of 50% year on year for 4 years. Bearing in mind that alot of people do not want to pay the 20% deposit normally required for a BTL I would suggest that an awful lot of people have been doing BTL without doing it officially. This is only anecdotal, but I know several friends who have rental properties which are BTL, none of them have BTL mortgages, they just bought the places and told the bank they were going to live there, then put them on the market as rentals, lovely jubbly, only a 5% deposit and a nice capital gain to look forward to........after all why tie up £20k in a property if you can get away with £5k and reduce your cost of funding.

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1/2 million 'officially' BTL, which has been growing at an exponential rate of 50% year on year for 4 years. Bearing in mind that alot of people do not want to pay the 20% deposit normally required for a BTL I would suggest that an awful lot of people have been doing BTL without doing it officially. This is only anecdotal, but I know several friends who have rental properties which are BTL, none of them have BTL mortgages, they just bought the places and told the bank they were going to live there, then put them on the market as rentals, lovely jubbly, only a 5% deposit and a nice capital gain to look forward to........after all why tie up £20k in a property if you can get away with £5k and reduce your cost of funding.

Uncharted territory it does seem...... who knows really what will happen. Although I am glad I havent bought anything now and happy to sit it out.

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Trev, the market doesn't work like this. Muppet BTLers who are losing money hand over fist every month.........

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BTLet is still a good long - term investment.

BTLet is not some new investment fad. 30 yrs ago many more people rented, so rent demand may still concieviebly have a long way to go.

Go back 100 yrs and you'll find most of the population rented.

There are more landlords now, where - as in days gone by there fewer landlords, but with more properties each.

I used to know Greeks and Indians that owned multiple properties in 1970s but the B2L lable hadnt been coined. Typically landlords used to make multiple First Time Buyer mortgage apllications which is how they built initial portfolios.

The real muppets are those who trust all thier future to Pensions.

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you mean they fraudelently applied for many mortgages at once?

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If you follow all the rules in life you will never realise your full financial potential.

As someone above said, its very common for people even now taking 95% mortgages and then letting. Most investors get first few this way.

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