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Still Think Btlers Are In It Short-term . . . ?


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Some 38 percent of buy-to-let borrowers in a survey by mortgage lender Bradford & Bingley last year said they had invested to provide for their retirement and a further 34 percent invested for capital growth. Only 8 percent had bought for the regular rental income.

More like read it and laugh. The reason why so few invest for income is that there isn't any net income. It's a bubble.

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Some 38 percent of buy-to-let borrowers in a survey by mortgage lender Bradford & Bingley last year said they had invested to provide for their retirement and a further 34 percent invested for capital growth. Only 8 percent had bought for the regular rental income.

More like read it and laugh. The reason why so few invest for income is that there isn't any net income. It's a bubble.

The desire to 'hold' for the long term and the reality are two very different things. I sold all my BTL a while back precisely because I thought that the long term picture was not good and I did NOT want to be caught up in the mass stampede for the exit when we entered a high IR, tightening credit environment. I sold all of my BTL to young families often at 15-20% BMV. I had done well out of it and didnt want to rake more in at the expense of the next generation.

Anyway, in my estimation around 40-50% of the market is being held together by property speculators: the vast majority are amateurs, overstretched and have bought in the last few years. With the current malign credit enviroment kicking in, this is one house of cards that will fall hard. And when it does you will all have your HPC. The illusory idea that 'I am in it for the long-term' is based on the idea that HPI will continue forever and that the individual has the capacity to finance their 'golden next egg' in the face of the waves of economic downturn....we shall see how the desire and the reality collide over the next few years.

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Weep with what? Laughter?

Half of all BTL investors are under 40 and will have had no financial exposure to the last crash, and only 8 per cent are after the rental income! :lol: Even in a stagnant market, anyone investing for capital gains or 'for their pension' will be moving their money out of BTL and into stocks, bonds, etc. So when prices start to fall, the excrement will really hit the fan for 92% of BTLers ;)

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Weep with what? Laughter?

Half of all BTL investors are under 40 and will have had no financial exposure to the last crash, and only 8 per cent are after the rental income! :lol: Even in a stagnant market, anyone investing for capital gains or 'for their pension' will be moving their money out of BTL and into stocks, bonds, etc. So when prices start to fall, the excrement will really hit the fan for 92% of BTLers ;)

Yeah because people really do trust fund managers and pension providers, don't they ? <_<

Lots of people would rather trust property because, despite crashes, it's always performed over 25 years. If I was in the market for retirement planning, I'd sooner rely on my own ability to buy a decent flat/house in an area or location that'll remain attractive to renters and won't be that hard to sell (timing permitting) come the onset of retirement than entrust it to a shyster in a suit . . .

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Yeah because people really do trust fund managers and pension providers, don't they ? <_<

Lots of people would rather trust property because, despite crashes, it's always performed over 25 years. If I was in the market for retirement planning, I'd sooner rely on my own ability to buy a decent flat/house in an area or location that'll remain attractive to renters and won't be that hard to sell (timing permitting) come the onset of retirement than entrust it to a shyster in a suit . . .

Why do you have to entrust it to shyster in a suit? Ever heard of SIPPs? No? Thought not...

If you are already a home owner and decide to forgo a 'traditional' pension for a BTL empire, you have a very unbalanced investment portfolio. Most OOs have an investment in property (their home) which is nicely balanced by investments in the more traditional financial instruments, equities, gilts, and the like. If all your investment money is in property and there is a 10-15 year stagnation in the property market (never mind a fall)... where does that leave someone with that kind of exposure to property risk? Especially if this stagnation happens in the run up to their retirement... :o

Edited by redalert
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Lots of people would rather trust property because, despite crashes, it's always performed over 25 years.

Really? Take any 25 year period in the last 35 and you might be right. Before that, we have very sketchy information that tends to suggest that property generally performed in line with inflation. Hardly "always".

What you suggest is akin to betting that Aston Villa will win their next game, on the basis that they won the last one. Not an entirely unreasonable bet, but not one that I would advise staking such a large proportion of one's future earnings on.

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Sadly, it is easy to believe, my pops (a typical working boomer) bought his investment places purely for the fun of doing them up, he doesnt even bother renting one of them out chosing to have a crash pad. But then given that he bought them on the rise up, he got them cheap by todays standards, so is under no pressure from any angle. For example, one of the places was a rundown character London Edwardian flat, the type that have now become hugely popular, his yield is actually pretty handsome given the original purchase price. Rents have risen yet his mortgage hasnt, afaik one weeks rent now covers the monthly mortgage. Such people that fuelled HPI in the early days (according to the BTL haters) will be doing just fine.

I think we all agree that any part time investors jumping in this year last year and didnt bargin carefully (I fully believe a savvy buyer can get a good deal if they pick the right area at the right time) could face potential probs in the coming years. But the vast majority of BTLs will be either super wealthy, or quite simply bought ages ago when prices werent all that high. Some BTLs will be super rich offloading bonus money, they probably dont care whether they have a rental yield or not, chosing to get hard over their portfolio value instead.

But all this isnt that exciting, HPI has bigger factors, the increasing pressure on housing stock through trends for single occupancy and increasing population for example. I would like a dip in prices as much as anyone, but I just still dont see it coming soon :(

What you suggest is akin to betting that Aston Villa will win their next game, on the basis that they won the last one. Not an entirely unreasonable bet, but not one that I would advise staking such a large proportion of one's future earnings on.

Yet plenty of people around here seem to be happy on betting that they lose the next match. Hardly any better?

Edited by Orbital
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The desire to 'hold' for the long term and the reality are two very different things. I sold all my BTL a while back precisely because I thought that the long term picture was not good and I did NOT want to be caught up in the mass stampede for the exit when we entered a high IR, tightening credit environment. I sold all of my BTL to young families often at 15-20% BMV. I had done well out of it and didnt want to rake more in at the expense of the next generation.

In the Long term proprtey has returnd around 8% capital gain a year, why should it be different this time? I think the short to medium term does not look good for property.

BTL is the new pension for a lot of people and I am 80% sure it will work. Also I think that Capital Gains Tax will make a lot of people think twice if they want to sell their BTL.

I sold my BTL because I think I can turn a quicker profit in the short\medium term by doing so i.e sell now, stick all the money somewhere safe and if there is a crash, buy more property than I had before. My attitude is that all I want is a solid regular income when I retire, so what if I am not making huge yields now (Thats what my job is for) as long as the houses are paid for by 2040 when I retire then I will be happy. I could not put in enough money into a pension fund to generate the income these BTL property's will yield when I retire. Perhaps the sheeple are looking at the long term\bigger picture and are prepared to weather tough times when they are younger to be more secure in the future (sound familiar)?

As to voids, maintenance blah blah blah...Councils will take you poperty off your hands for three years at a time. They Guarentee your rent, return the property to you in the same condition you gave it to them and they have huge waiting lists for property. Not everyones cup of tea I know but it's risk free, you own an inflation proof asset, your mortgage gets paid and if you own say four flats then you get a full time inflation proof wage when you retire.

Compare this to a pension fund :

You have to have a pot of at least £400,000 to get £25,000 a year once all the greedy fund managers and administrators have had thier cut.

The fund can fold leaving you with nothing.

A stock market crash leaving you with a very small pension.

You only have one chance to buy an annuity so if you make a mistake your up a creek.

You cant leave you pension fund to you children, so if you die at say 71 its all gone.

You might have to work until you 68+.

Vs BTL

Buy poperty and get most of it paid off by someone else by the time you retire

Get and inflation proof income

Own an inflation proof asset that can be left to your children

Use the money that you would have paid into your pension to have a better lifestyle now.

Ok this doesn't address the problems for FTB and what it's doing to our society and demographics but the BTL is a symptom not a cause. If the goverment are not prepared or cannot provide sufficient resourcees for you in later life then you have to do it yourself. You have to put yourself and your family before anyone else. It's a tit for tat game of survival, there will be winners and there will be loosers it is that simple and it hasn't changed one little bit since the dawn of time.

:P

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Any flats in my area that come up for sale are being snapped up within days, BTL is booming with all the new immigrants, prices are however very static. My sums have worked out that after EAs letting and managing fees, maintenance (x3 normal for rented out flats, over owner occupied) the net return would be around 3%,

this would be without any voids. The vast majority of BTL'ers are running on yesterdays story (5 years old around here when last cap gains where to be made) and have made no calculations as to %age income, cash flow etc etc. I think we still have a very long way to go before we kill the BTL draggon, the vast majority are still stuck on stupid. The one issue however that will kill it for us is if price inflation becomes mainstream and we as a nation get into inflation mode, this will without any doubt push up rental rates, this has happened in OZ where in some areas rents have gone up 20% in a year, friends of ours have just re-rented thier flats after previous tennents (3 years) moved out, their previous annual increases were limited to CPI, however with a new lease have been able to push up by 20% and being smart have only given them 1 yr fixed leases.

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Sadly, it is easy to believe, my pops (a typical working boomer) bought his investment places purely for the fun of doing them up, he doesnt even bother renting one of them out chosing to have a crash pad. But then given that he bought them on the rise up, he got them cheap by todays standards, so is under no pressure from any angle. For example, one of the places was a rundown character London Edwardian flat, the type that have now become hugely popular, his yield is actually pretty handsome given the original purchase price. Rents have risen yet his mortgage hasnt, afaik one weeks rent now covers the monthly mortgage. Such people that fuelled HPI in the early days (according to the BTL haters) will be doing just fine.

I think we all agree that any part time investors jumping in this year last year and didnt bargin carefully (I fully believe a savvy buyer can get a good deal if they pick the right area at the right time) could face potential probs in the coming years. But the vast majority of BTLs will be either super wealthy, or quite simply bought ages ago when prices werent all that high. Some BTLs will be super rich offloading bonus money, they probably dont care whether they have a rental yield or not, chosing to get hard over their portfolio value instead.

But all this isnt that exciting, HPI has bigger factors, the increasing pressure on housing stock through trends for single occupancy and increasing population for example. I would like a dip in prices as much as anyone, but I just still dont see it coming soon :(

Yet plenty of people around here seem to be happy on betting that they lose the next match. Hardly any better?

Is he not in fear of a compulsory purchase order if it is left empty for 6 months? I notice this was a hot topic a few months ago but I have not heard anything since.

One of my old school friends Cat had a property and then bought another across the road from her parents for easy childcare with her partner. When I knew them the old property a small 3 bed semi was just left empty in case she ever needed it for the future. I am not sure if they still have it as they had no time for anything but children the last time I saw them about 5 years ago. I did say she could sell up and buy a fantastic property with her partner but the house is a 4 bed and they both earn 45K + in the Midlands and have no childcare costs so I suppose there is no need financially.

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Yeah because people really do trust fund managers and pension providers, don't they ? <_<

Lots of people would rather trust property because, despite crashes, it's always performed over 25 years. If I was in the market for retirement planning, I'd sooner rely on my own ability to buy a decent flat/house in an area or location that'll remain attractive to renters and won't be that hard to sell (timing permitting) come the onset of retirement than entrust it to a shyster in a suit . . .

err, the years before a crash in property have resulted in spectacularly poor returns for those who got in at that time, especially thru leverage.

what you say here is wrong. You seem to be suggesting that property is a good buy irrespective of price. If this is indeed what you feel, then that's just plain weird. Property is no more a magic investment than stocks and shares, oh, and discounting costs, labour etc, shares, so far as I know, have generally ourperformed property over the long term, suited shysters and all. Again, discounting leveraged risk, but that's your perogative I guess....

(ps, I don't feel that shares and related vehicles are a good buy right now either, but that doesn't make property any better)

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Compare this to a pension fund :

- You don't pay tax on the money you put into it, although you do pay tax when you draw your pension - usually at lower rate than you would have been paying at the time you were working.

Vs BTL

- You pay stamp duty out of (already taxed) money on every purchase/sale + you pay capital gains tax on any profit when you sell.

If you sell your BTL (in order to realise the capital gains) surely you then do not have an asset to pass on to your heirs? If you don't sell, I don't see much point in having one, unless you are in it for rental income and we are already in a situation where the rental income on most BTL property purchased now will be outperformed by the guaranteed return from gilts.

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Some 38 percent of buy-to-let borrowers in a survey by mortgage lender Bradford & Bingley last year said they had invested to provide for their retirement and a further 34 percent invested for capital growth. Only 8 percent had bought for the regular rental income.

Those muppets will be lucky to have their pants :P when they retire never mind investing for it. That makes me believe it really is different this time because when the bubble burst the scale of which will be scary!

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It's a good job that the landlords aren't in it for the monthly rental income, 'cos they're making a pretty huge loss on it in some areas of the country.

I was looking recently in SE Wales, and 3/4 bed houses in good areas are advertised on Rightmove for around £225k, but the rent is around £650-£700 per month (c.f. an IO mortgage on that amount is £1100).

http://www.rightmove.co.uk/viewdetails-144...1&tr_t=rent

http://www.rightmove.co.uk/viewdetails-585...=2&tr_t=buy

Edited by NJP
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unless you are in it for rental income and we are already in a situation where the rental income on most BTL property purchased now will be outperformed by the guaranteed return from gilts.

True, but when you retire the property will be owned outright and for the most part someone else had paid for it. Where I live a two beroom flat can be retend out for £800 a calender month. Say you own four, so you earn equivilent of £3200 a month in rental income . How much money would I have to have in my pension pot to generate this amount of monthly income. I rekon around £750,000 and I would have had to put in all the cash myself. You dont sell up just leave them to your children.

I am missing something really obvious?

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