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stuckmojo

Bye Bye-to-let?

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Bye Bye-to let?

Anyone with a brain would tell you that nowadays buy-to-let is not a good investment. It was in 2002 and still a couple of years ago. Nowadays, if your lucky, you get a 3-4% yeld and all the worries in the world. Much better to put your money in an ISA or indexed Bonds.

Of course the issue must be tackled from another angle (it's Rugby World Cup days after all): the vast majority of the BTL brigade jumped on the bandwagon with huge mortgages, collaterals on their houses, lie-to-buy and interest-only mortgages as the icing on the cake. If I can accept that it worked when house prices inflation was over 10% a year, I'm not so sure about now.

Many BTL amateur landlors have to subsidise their tenants, as there is a huge gap between what the tenant pays and the mortgage the landlord pays (don't forget he was there to speculate in the first place...).

The only thing that kept these specu-vestors hanging in there was the idea that, after all, the value of the asset (the 175,000£ one-bedroom cage) was appreciating so fast that they wouldn't care subsidising their tenants for a while. They would have been able to sell the above-mentioned cage for 250k to a greater fool in a year or to. So what's the problem?

Here comes the credit crunch. We all know about the subprime crisis. What it means for the man in the street is that he/she won't be able to get a 125% lie-to-buy, interest only mortgage to chase the stupid dream. Thank goodness for that!

It means that the BTL amateur specu-vestor will not sell his/her flat at a profit. That's if it gets sold at all.

The consequences are: BTL brigade is panicking, they will run for the door as quick as they can. Expect flats to drop dramatically in price very quickly (they are the BLT favourite purchase) and all the Industry around to suffer quite a lot.

Ah, and don't forget that today is HIPs day.

Cheers

P.S.> also posted on the Idiot's wallet

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The consequences are: BTL brigade is panicking, they will run for the door as quick as they can. Expect flats to drop dramatically in price very quickly (they are the BLT favourite purchase) and all the Industry around to suffer quite a lot.

P.S.> also posted on the Idiot's wallet

If you have a flat worth £200k with a mortgage of £150K you have £50k equity. If prices fall by 10% to £180k you have £30k equity. ie a fall of 40% because of a 10% slide in prices. Yes they will be running to the doors !!

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If you have a flat worth £200k with a mortgage of £150K you have £50k equity. If prices fall by 10% to £180k you have £30k equity. ie a fall of 40% because of a 10% slide in prices. Yes they will be running to the doors !!

And if they fall by 25% you have a loss of 100% :) Nice investment. :lol:

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Bye Bye-to let?

Anyone with a brain would tell you that nowadays buy-to-let is not a good investment. It was in 2002 and still a couple of years ago. Nowadays, if your lucky, you get a 3-4% yeld and all the worries in the world. Much better to put your money in an ISA or indexed Bonds.

Of course the issue must be tackled from another angle (it's Rugby World Cup days after all): the vast majority of the BTL brigade jumped on the bandwagon with huge mortgages, collaterals on their houses, lie-to-buy and interest-only mortgages as the icing on the cake. If I can accept that it worked when house prices inflation was over 10% a year, I'm not so sure about now.

Many BTL amateur landlors have to subsidise their tenants, as there is a huge gap between what the tenant pays and the mortgage the landlord pays (don't forget he was there to speculate in the first place...).

The only thing that kept these specu-vestors hanging in there was the idea that, after all, the value of the asset (the 175,000£ one-bedroom cage) was appreciating so fast that they wouldn't care subsidising their tenants for a while. They would have been able to sell the above-mentioned cage for 250k to a greater fool in a year or to. So what's the problem?

Here comes the credit crunch. We all know about the subprime crisis. What it means for the man in the street is that he/she won't be able to get a 125% lie-to-buy, interest only mortgage to chase the stupid dream. Thank goodness for that!

It means that the BTL amateur specu-vestor will not sell his/her flat at a profit. That's if it gets sold at all.

The consequences are: BTL brigade is panicking, they will run for the door as quick as they can. Expect flats to drop dramatically in price very quickly (they are the BLT favourite purchase) and all the Industry around to suffer quite a lot.

Ah, and don't forget that today is HIPs day.

Cheers

P.S.> also posted on the Idiot's wallet

I wonder whether it is worth just taking a look at one aspect of the BtL argument that seems to shape the view of many contributers to the site and which, in my view, is slightly flawed. That aspect is the definition of “yield”.

I am more than happy to accept that “yield” to the businessman might means percentage profit on an asset after taking into account current value and net income. If the arguments as to why BtL landlords might be disillusioned are fashioned around this definition then let me explain why it is mostly irrelevant to any landlord who has been in the business for more than a few years.

I will, if I may, take the example of my first BtL purchase (all figures approximate). In 1999 I purchased a property for £80k with a £20k deposit. It is now worth, at a conservative estimate, about £200k. The monthly interest at the time was £315 (mortgage rate IO 6.25%) and the monthly rent £750. There have been no major repairs required or voids worth mentioning over the period of ownership and the monthly interest is now £335 and the rent £800. Work out the yield however you wish, it probably seem pretty paltry on an asset worth £200k, however as long as the rent covers the mortgage I could not be less interested. In simple terms a £20k investment has increased to £140k over a period of about 8 years (after CGT in the worst case scenario this would equate to a net value of more than £100k). In addition I have had a taxable annual income of between £3k and £5k for the duration.

Currently I am selling my small portfolio, not because I expect prices to go down, I know no better than anyone else how the market will fare (although I am inclined to think it will level off) – what I do know is that I have made a tremendous profit from a £20k investment and that being a landlord is quite hard work (oh, and after all kinds of tax I suppose I shall be contributing in the region of £50k to HMIT). Incidentally, to my view, it is no less worthy me making a large amount from the property market than it is for the many non property owners on the site who hope to make large sums from the stock market/gold. With the benefit of hindsight how many of them would have dismissed this opportunity on the basis of conscience. Furthermore, those on site who berate the BtL brigade but who wait gleefully to jump on the property bandwagon after the "crash" will no doubt see the irony if their "investment" leaps in value over their period of ownership. Over.

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I wonder whether it is worth just taking a look at one aspect of the BtL argument that seems to shape the view of many contributers to the site and which, in my view, is slightly flawed. That aspect is the definition of “yield”.

I am more than happy to accept that “yield” to the businessman might means percentage profit on an asset after taking into account current value and net income. If the arguments as to why BtL landlords might be disillusioned are fashioned around this definition then let me explain why it is mostly irrelevant to any landlord who has been in the business for more than a few years.

I will, if I may, take the example of my first BtL purchase (all figures approximate). In 1999 I purchased a property for £80k with a £20k deposit. It is now worth, at a conservative estimate, about £200k. The monthly interest at the time was £315 (mortgage rate IO 6.25%) and the monthly rent £750. There have been no major repairs required or voids worth mentioning over the period of ownership and the monthly interest is now £335 and the rent £800. Work out the yield however you wish, it probably seem pretty paltry on an asset worth £200k, however as long as the rent covers the mortgage I could not be less interested. In simple terms a £20k investment has increased to £140k over a period of about 8 years (after CGT in the worst case scenario this would equate to a net value of more than £100k). In addition I have had a taxable annual income of between £3k and £5k for the duration.

Currently I am selling my small portfolio, not because I expect prices to go down, I know no better than anyone else how the market will fare (although I am inclined to think it will level off) – what I do know is that I have made a tremendous profit from a £20k investment and that being a landlord is quite hard work (oh, and after all kinds of tax I suppose I shall be contributing in the region of £50k to HMIT). Incidentally, to my view, it is no less worthy me making a large amount from the property market than it is for the many non property owners on the site who hope to make large sums from the stock market/gold. With the benefit of hindsight how many of them would have dismissed this opportunity on the basis of conscience. Furthermore, those on site who berate the BtL brigade but who wait gleefully to jump on the property bandwagon after the "crash" will no doubt see the irony if their "investment" leaps in value over their period of ownership. Over.

..or there might just be some of us who would like to put a roof over our heads which won't potentially be taken away with 2 months notice. We're not all in it for the investment and maybe some of the BTL brigade would do well to remember that. Good luck to you though - hope you manage to get rid of your portfolio before its too late...

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If you have a flat worth £200k with a mortgage of £150K you have £50k equity. If prices fall by 10% to £180k you have £30k equity. ie a fall of 40% because of a 10% slide in prices. Yes they will be running to the doors !!

very good point. The equity is the first to "vanish". They must be scared ****less

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I wonder whether it is worth just taking a look at one aspect of the BtL argument that seems to shape the view of many contributers to the site and which, in my view, is slightly flawed. That aspect is the definition of “yield”.

I am more than happy to accept that “yield” to the businessman might means percentage profit on an asset after taking into account current value and net income. If the arguments as to why BtL landlords might be disillusioned are fashioned around this definition then let me explain why it is mostly irrelevant to any landlord who has been in the business for more than a few years.

I will, if I may, take the example of my first BtL purchase (all figures approximate). In 1999 I purchased a property for £80k with a £20k deposit. It is now worth, at a conservative estimate, about £200k. The monthly interest at the time was £315 (mortgage rate IO 6.25%) and the monthly rent £750. There have been no major repairs required or voids worth mentioning over the period of ownership and the monthly interest is now £335 and the rent £800. Work out the yield however you wish, it probably seem pretty paltry on an asset worth £200k, however as long as the rent covers the mortgage I could not be less interested. In simple terms a £20k investment has increased to £140k over a period of about 8 years (after CGT in the worst case scenario this would equate to a net value of more than £100k). In addition I have had a taxable annual income of between £3k and £5k for the duration.

Currently I am selling my small portfolio, not because I expect prices to go down, I know no better than anyone else how the market will fare (although I am inclined to think it will level off) – what I do know is that I have made a tremendous profit from a £20k investment and that being a landlord is quite hard work (oh, and after all kinds of tax I suppose I shall be contributing in the region of £50k to HMIT). Incidentally, to my view, it is no less worthy me making a large amount from the property market than it is for the many non property owners on the site who hope to make large sums from the stock market/gold. With the benefit of hindsight how many of them would have dismissed this opportunity on the basis of conscience. Furthermore, those on site who berate the BtL brigade but who wait gleefully to jump on the property bandwagon after the "crash" will no doubt see the irony if their "investment" leaps in value over their period of ownership. Over.

You bought at the right time and right place. your yield was sufficient to cover your outgoings and you ae getting out at the right time.

However there are many landlords who have bought in the last couple of years where they are have at best a breakeven cash flow and the chances of capital growth are minimal. These will be the first to sell an dcould be facing leveraged losses.

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very good point. The equity is the first to "vanish". They must be scared ****less

People have forgotten that using debt is risky in finnacing an asset. Debt leverages profits but also leverages losses.

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Bye Bye-to let?

Anyone with a brain would tell you that nowadays buy-to-let is not a good investment. It was in 2002 and still a couple of years ago. Nowadays, if your lucky, you get a 3-4% yeld and all the worries in the world. Much better to put your money in an ISA or indexed Bonds.

Cheers

P.S.> also posted on the Idiot's wallet

....what you are saying is borrow from the lender at say or 6% - 7% and invest in an ISA bearing in mind you cannot set you income from the ISA off against your the interest on your loan from the lender for tax purposes?.... :o

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..or there might just be some of us who would like to put a roof over our heads which won't potentially be taken away with 2 months notice. We're not all in it for the investment and maybe some of the BTL brigade would do well to remember that. Good luck to you though - hope you manage to get rid of your portfolio before its too late...

No, but you are both in it for your own gain.

I wish many of the people here would realise that and drop the "holier-than-thou" attitude. <_<

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Guest An Bearin Bui
I wonder whether it is worth just taking a look at one aspect of the BtL argument that seems to shape the view of many contributers to the site and which, in my view, is slightly flawed. That aspect is the definition of “yield”.

I am more than happy to accept that “yield” to the businessman might means percentage profit on an asset after taking into account current value and net income. If the arguments as to why BtL landlords might be disillusioned are fashioned around this definition then let me explain why it is mostly irrelevant to any landlord who has been in the business for more than a few years.

I will, if I may, take the example of my first BtL purchase (all figures approximate). In 1999 I purchased a property for £80k with a £20k deposit. It is now worth, at a conservative estimate, about £200k. The monthly interest at the time was £315 (mortgage rate IO 6.25%) and the monthly rent £750. There have been no major repairs required or voids worth mentioning over the period of ownership and the monthly interest is now £335 and the rent £800. Work out the yield however you wish, it probably seem pretty paltry on an asset worth £200k, however as long as the rent covers the mortgage I could not be less interested. In simple terms a £20k investment has increased to £140k over a period of about 8 years (after CGT in the worst case scenario this would equate to a net value of more than £100k). In addition I have had a taxable annual income of between £3k and £5k for the duration.

Currently I am selling my small portfolio, not because I expect prices to go down, I know no better than anyone else how the market will fare (although I am inclined to think it will level off) – what I do know is that I have made a tremendous profit from a £20k investment and that being a landlord is quite hard work (oh, and after all kinds of tax I suppose I shall be contributing in the region of £50k to HMIT). Incidentally, to my view, it is no less worthy me making a large amount from the property market than it is for the many non property owners on the site who hope to make large sums from the stock market/gold. With the benefit of hindsight how many of them would have dismissed this opportunity on the basis of conscience. Furthermore, those on site who berate the BtL brigade but who wait gleefully to jump on the property bandwagon after the "crash" will no doubt see the irony if their "investment" leaps in value over their period of ownership. Over.

I think you haven't really read the original post: he was pointing out that BTL is no longer a viable investment at current prices and that all the latecomers who are currently piling in (BTL mortgage rates relative to OO mortgages went up this year) will be the first to be hit in a property crash. No-one disputes that buying a flat in 1999 for 80k and renting it out for double the cost of the mortgage is a great investment: you were clearly old enough and cash-rich enough to get into BTL when it still made financial sense. Are you trying to say it's still a good investment just because it was 8 years ago?? If so, that's a meaningless argument as I might as well write in and say that because someone bought Apple stocks in 2001 just before the iPod became the must-have / iconic consumer purchase and made 100k from their original 5k investment, everyone should invest in Apple stocks because you can't lose. Never mind the fact that they're currently viewed as overpriced due to hype about the iPhone - people made money since 2001 so everyone else will too. That's not an argument any shrewd investor would buy.

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And if they fall by 25% you have a loss of 100% :) Nice investment. :lol:

Yep - leverage works in both directions. Something which many 'investors' have failed to appreciate. I guess they're about to learn the lesson the hard way.

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Bye Bye-to let?

Anyone with a brain would tell you that nowadays buy-to-let is not a good investment. It was in 2002 and still a couple of years ago. Nowadays, if your lucky, you get a 3-4% yeld and all the worries in the world. Much better to put your money in an ISA or indexed Bonds.

Of course the issue must be tackled from another angle (it's Rugby World Cup days after all): the vast majority of the BTL brigade jumped on the bandwagon with huge mortgages, collaterals on their houses, lie-to-buy and interest-only mortgages as the icing on the cake. If I can accept that it worked when house prices inflation was over 10% a year, I'm not so sure about now.

Many BTL amateur landlors have to subsidise their tenants, as there is a huge gap between what the tenant pays and the mortgage the landlord pays (don't forget he was there to speculate in the first place...).

The only thing that kept these specu-vestors hanging in there was the idea that, after all, the value of the asset (the 175,000£ one-bedroom cage) was appreciating so fast that they wouldn't care subsidising their tenants for a while. They would have been able to sell the above-mentioned cage for 250k to a greater fool in a year or to. So what's the problem?

Here comes the credit crunch. We all know about the subprime crisis. What it means for the man in the street is that he/she won't be able to get a 125% lie-to-buy, interest only mortgage to chase the stupid dream. Thank goodness for that!

It means that the BTL amateur specu-vestor will not sell his/her flat at a profit. That's if it gets sold at all.

The consequences are: BTL brigade is panicking, they will run for the door as quick as they can. Expect flats to drop dramatically in price very quickly (they are the BLT favourite purchase) and all the Industry around to suffer quite a lot.

Ah, and don't forget that today is HIPs day.

Cheers

P.S.> also posted on the Idiot's wallet

There is one thing and one thing alone that keeps people buying BTL around us. Multiple Occupancy.

They buy a 3 bed, or a 2 bed and split it into 4 bedsits.

Each room, around 60-80pw = 60 x 52 x 4 = 12480, which on a place that costs them around the 120K mark.... is about a 10% yeild.

Now I thought about buying some, but a combination of things, including my own view of the market, RB's view of the market e.t.c. and the fact that I thought the market was saturated would stop all this rubbish.

It is very much still going strong.... I just don't know when/if they will run out of tenants. IMHO there are still plenty around at the moment, many migrant workers. Maybe it could die off now the farming work has dies off a bit round us? I don't know.

But with a yeild of 10%, they are not going to stop.

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I think that you guys fail to appreciate that many people BTL as a pension ie so that once the asset is paid for they can live off the rent. For those investors a fall in prices in the short term makes little difference.

I think that one thing that people fail to appreciate in the rise of UK property prices is the end of final salary pension schemes - many now BTL to support themselves in their retirement rather than to make money on capital appreciation.....

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I think that you guys fail to appreciate that many people BTL as a pension ie so that once the asset is paid for they can live off the rent. For those investors a fall in prices in the short term makes little difference.

I think that one thing that people fail to appreciate in the rise of UK property prices is the end of final salary pension schemes - many now BTL to support themselves in their retirement rather than to make money on capital appreciation.....

Good luck to them paying off the debt before they retire... :) That's certainly not the position for people with negative cashflow on an IO mortgage who are praying for capital gains.

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I think you haven't really read the original post: he was pointing out that BTL is no longer a viable investment at current prices and that all the latecomers who are currently piling in (BTL mortgage rates relative to OO mortgages went up this year) will be the first to be hit in a property crash. No-one disputes that buying a flat in 1999 for 80k and renting it out for double the cost of the mortgage is a great investment: you were clearly old enough and cash-rich enough to get into BTL when it still made financial sense. Are you trying to say it's still a good investment just because it was 8 years ago?? If so, that's a meaningless argument as I might as well write in and say that because someone bought Apple stocks in 2001 just before the iPod became the must-have / iconic consumer purchase and made 100k from their original 5k investment, everyone should invest in Apple stocks because you can't lose. Never mind the fact that they're currently viewed as overpriced due to hype about the iPhone - people made money since 2001 so everyone else will too. That's not an argument any shrewd investor would buy.

I think I pretty much covered the point that this was a slight deviation with "I wonder whether it is worth just taking a look at one aspect of the BtL argument that seems to shape the view of many contributers to the site and which, in my view, is slightly flawed. That aspect is the definition of “yield”". Hopefully people will look at this topic because it is BtL and it might inform their views when other aspects come up (though if it had said in the title "Buy to Let yields fall" then that would have made my contribution so much easier and (from your point of view) pertinent.

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I think that you guys fail to appreciate that many people BTL as a pension ie so that once the asset is paid for they can live off the rent. For those investors a fall in prices in the short term makes little difference.

Possibly, but I think many of these people are slightly deluded too. I know a couple who did this many years ago - bought in the 1970s when prices were incredibly cheap. They bought their first rental property with inheritance money, not on debt. And even they say it's a lot of work and the returns aren't as good as you might think.

What you have to rember is that if you take on a BTL with debt, you have to keep paying - interest and capital - for 25-30 years, through whatever economic and social conditions happen to hit. Prices going down in the short term might not appear to have a huge effect on equity. But consider if you buy in an estate which is then overbuilt and ends up with masses of empty flats? Consider if there's a major recession...the city you bought in goes down...the estate becomes a no go area. Sure, it all may very well turn round again before you retire, but you have to pay the mortgage and interest through all of that, with no guarantee of anything in the future. And if there are major repairs that need done you could be talking £10,000 just like that. Even 5 years of a bad recession (highly likely within a lifetime) could see you struggling to even keep the property. It's a very risky strategy - surely putting £200 a month into a savings account would be better? Or using the debt to start your own business in something a bit more easy to change if it goes tits up?

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I agree with the general point that a BTL panic canl precipitate an eventual property crash, but I doubt that a panic is imminent. It's not enough that economic conditions turn against property investment, sentiment has to turn as well, and property is still seen as such a cast-iron investment that even if HPI does decline, many people will write it off as a short-term blip, and many VIs will talk up the depressed market as an excellent time to get into property investing. Sentiment is only going to bleed very slowly out of the market as HPI flattens and IMO it will take a number of quarters of non-existent growth before people realise that the party is over and a panic menatlity sets in.

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I think that you guys fail to appreciate that many people BTL as a pension ie so that once the asset is paid for they can live off the rent. For those investors a fall in prices in the short term makes little difference.

I think that one thing that people fail to appreciate in the rise of UK property prices is the end of final salary pension schemes - many now BTL to support themselves in their retirement rather than to make money on capital appreciation.....

I posted a thread about this last week, people need to look at the annuity rates, BTL doesn't need to make a profit now, it just needs to provide a good, relatively index linked income stream 30 years from now once you retire, and an income stream with a big fat asset at the end of it.

People seem to forget about savings rates not being likely to stay at their current peak as well . . . over the next year it's a mug's game, but over a realistic 60 year timescale? It's a bit different . . .

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I posted a thread about this last week, people need to look at the annuity rates, BTL doesn't need to make a profit now, it just needs to provide a good, relatively index linked income stream 30 years from now once you retire, and an income stream with a big fat asset at the end of it.

People seem to forget about savings rates not being likely to stay at their current peak as well . . . over the next year it's a mug's game, but over a realistic 60 year timescale? It's a bit different . . .

ok. How about those who took out IO mortgages to BTL?

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Nobody is ever going to come here and say:

"I MEWd my house (worth £180k which had a mortgage of £150k) and got £30k to use as a 15% deposit on a new build at £200k off plan, giving me a mortgage of £170k, which I completed 2 years ago on an IO mortgage at 5%, costing me £708/month. Plus the £30k MEW costing me another £177.

"I pay £80/month service charges and another £40 in insurances. I furnished it for £1500 and in 2 years it's been occupied for two periods of 6 months at £600/month - with agent fees of 8% which is £48/month.

I've gave up 5 months ago and put it on the market at £160k and nobody's viewed it yet - the EA wants me to reduce it by another £10k"

Are they .....?

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I wonder whether it is worth just taking a look at one aspect of the BtL argument that seems to shape the view of many contributers to the site and which, in my view, is slightly flawed. That aspect is the definition of “yield”.

I am more than happy to accept that “yield” to the businessman might means percentage profit on an asset after taking into account current value and net income. If the arguments as to why BtL landlords might be disillusioned are fashioned around this definition then let me explain why it is mostly irrelevant to any landlord who has been in the business for more than a few years.

I will, if I may, take the example of my first BtL purchase (all figures approximate). In 1999 I purchased a property for £80k with a £20k deposit. It is now worth, at a conservative estimate, about £200k. The monthly interest at the time was £315 (mortgage rate IO 6.25%) and the monthly rent £750. There have been no major repairs required or voids worth mentioning over the period of ownership and the monthly interest is now £335 and the rent £800. Work out the yield however you wish, it probably seem pretty paltry on an asset worth £200k, however as long as the rent covers the mortgage I could not be less interested. In simple terms a £20k investment has increased to £140k over a period of about 8 years (after CGT in the worst case scenario this would equate to a net value of more than £100k). In addition I have had a taxable annual income of between £3k and £5k for the duration.

Currently I am selling my small portfolio, not because I expect prices to go down, I know no better than anyone else how the market will fare (although I am inclined to think it will level off) – what I do know is that I have made a tremendous profit from a £20k investment and that being a landlord is quite hard work (oh, and after all kinds of tax I suppose I shall be contributing in the region of £50k to HMIT). Incidentally, to my view, it is no less worthy me making a large amount from the property market than it is for the many non property owners on the site who hope to make large sums from the stock market/gold. With the benefit of hindsight how many of them would have dismissed this opportunity on the basis of conscience. Furthermore, those on site who berate the BtL brigade but who wait gleefully to jump on the property bandwagon after the "crash" will no doubt see the irony if their "investment" leaps in value over their period of ownership. Over.

Good god man, i dont think people on this site are berating you for making a lucky decision back in 1999 to get into BTL. If most of us were old enough chances are we would have done that too... Good on you.. I've nothing against someone who has had a lucky break..

The point is though that BTL easy money is now over. Do not tell me you would willingly take the same decision now? Once the message gets through to the 'sheeple' (sorry, hate that word, but i cant think of any other one word that sums these people up!) that prices are not rising (i come from Brighton, BTL capital of UK - 0.0% increase in July (Land Registry)) they will desert in their droves. Sure, those that bought 5 to 10 years ago will be sitting pretty but now demand from new BTL entrants and existing BTLs thinking of expanding their portfolio will dry up. Once the credit crunch ratchets up the interest rates on the high street it surely mean the new entrants flee from the playing field.

This added to the extraordinary amount of various bearish news out there will fuel a huge HPC.

Of course there will be those that stupidly wont do their research and will blindly follow the link to some dumb 'property never goes down' investment website when wondering what to do with their inheritance from aunt matilda.....

I'm very glad to see that you are not one of them... Glad you are selling up... Good decision! (and yes, i think you are calling the top of the market if truth be told!)

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The post, in general, is probably correct. The actual maths of the situation eludes most BTLs I've met. I'm a LL myself (and a tenant, btw) and I've seen more than a fair number of very basic questions about yields to know that most of the amateurs have no clue and can't even use a calculator.

The dodgey state of the market means that a fall in prices of 20% needs to be factored into any purchase. This rules many properties out, but there's still a healthy auction market. And with careful allocation of up-front cash and careful analysis of the local area and market, it is still possible to get decent value from the investment. IO mortgages are not going to be servicable or practical, but long-term investments (pension-style) are still out there.

I believe the morons will be out of the game. Quite a few of them are going to get stung. But there'll still be LLs around and they'll probably be picking up the odd bargain as it presents itself.

EDIT: A crucial part of this struggle is to have the flexibility to lower rents in order to remain competitive as prices fall or to reduce voids.

Edited by dellboy

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The post, in general, is probably correct. The actual maths of the situation eludes most BTLs I've met. I'm a LL myself (and a tenant, btw) and I've seen more than a fair number of very basic questions about yields to know that most of the amateurs have no clue and can't even use a calculator.

The dodgey state of the market means that a fall in prices of 20% needs to be factored into any purchase. This rules many properties out, but there's still a healthy auction market. And with careful allocation of up-front cash and careful analysis of the local area and market, it is still possible to get decent value from the investment. IO mortgages are not going to be servicable or practical, but long-term investments (pension-style) are still out there.

I believe the morons will be out of the game. Quite a few of them are going to get stung. But there'll still be LLs around and they'll probably be picking up the odd bargain as it presents itself.

EDIT: A crucial part of this struggle is to have the flexibility to lower rents in order to remain competitive as prices fall or to reduce voids.

Very sensible post in my opinion. Property is a long term investment and if you are going to cry to mummy if it drops 20 % then you shouldn't be in it in the first place. It is very likely to be a good pension if you start young and actually pay the thing off rather than piss about with IO.

One important point to add. The best way to get value out of property is to buy in falling market and to buy once it becomes affordable again. A lot of investors are driven by 2 things only greed and fear. They are greedy so they are stupid and buy at the top of the market and they are fearful so are stupid and sell once their investment plummets.

I plan on only ever buying property (until maybe I retire) although I can't afford to buy a second one at the moment if the market crashes I will definitely be looking to buy rather than sell especially if there are bargains around. However, I worry there are lots of people like me on the sidelines looking to do exactly the same thing and therefore I will never get the opportunity.

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I know a pretty sharp BTLer who has started offloading his portfolio, sold two in April and is putting a further 7 places on the market now in London. I think he may be the exception at this point in time but he is no mug.. and thats almost 50% of his portfolio!

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