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newbee

Btls Need 43% Liquidity

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With a 30% drop as indicated on this site I have done a little maths and basically any BTL who has not at least 44% liquidity on any investments is in for a nasty shock.

Property value £1,000,000

Mortgaged £560,000

Price drops 30%

Property Value £700,000

Lenders 80% ltv max loan £560,000- Safe

Lenders 75% ltv max loan £525,000 - Screwed

Any comments

Edited by newbee

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With a 30% drop as indicated on this site I have done a little maths and basically any BTL who has not at least 43% liquidity on any investments is in for a nasty shock.

Property value £1,000,000

Mortgaged £570,000

Price drops 30%

Property Value £700,000

Lenders 80% ltv max loan £560,000- Safe

Lenders 75% ltv max loan £525,000 - Screwed

Any comments

What may depress him even more is that he starts off with £430k wealth and after a 30% correction has £130k a near 70% fall in wealth I think many would cash up and leave

The arrangement fee could well be 2% on £570k so 11k of his wealth goes out the window 11k as a % of £130k is 8%...ooh did that hurt sir! doesn't suit you sir! would sir like to relieve himself!

Edited by numpty

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What may depress him even more is that he starts off with £430k wealth and after a 30% correction has £130k a near 70% fall in wealth I think many would cash up and leave

The arrangement fee could well be 2% on £570k so 11k of his wealth goes out the window 11k as a % of £130k is 8%...ooh did that hurt sir! doent suit you sir! would sir like to relieve himself!

( shallow hal ) DADDY LIKE

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not just btl but everyone

lenders reducing LTV, no more liar loans, and dropping prices will catch a lot out

a lot of people will not be able to get a new deal and will be stuck on their lenders SVR. ouch

proofvw3.th.jpg

Edited by cells

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Most BTL's probably dont even have 10% liquidity :lol::lol: especially the ones that joined the party in the past 4 years.

And how many BTL's have sourced the original deposit for their investment from equity achieved from their own home. So they are now highly geared on both.

Blood bath !!!!!!!!!!!!

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With a 30% drop as indicated on this site I have done a little maths and basically any BTL who has not at least 44% liquidity on any investments is in for a nasty shock.

Property value £1,000,000

Mortgaged £560,000

Price drops 30%

Property Value £700,000

Lenders 80% ltv max loan £560,000- Safe

Lenders 75% ltv max loan £525,000 - Screwed

Any comments

Assume rents are £60,000 per annum, interest on £570k at 6% = £34.2k plus expenses on say 7 properties at £1500 each = £10.5k less fallow periods = £6k

Total profit £10k what an appauling return on equity, even on £130k it is hardly exciting ,after tax down to a few hundred a month an awful lot of agro and hardly going to provide an afluent retirement

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I imagine that a BTL would have MEWed for the equity on their main home to provide the deposit for the BTL. Therefore, is quite likely to have two resets at the same time (and loosing equity on both at an alarming rate. Could be nasty for some.

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I imagine that a BTL would have MEWed for the equity on their main home to provide the deposit for the BTL. Therefore, is quite likely to have two resets at the same time (and loosing equity on both at an alarming rate. Could be nasty for some.

'Oh dear' indeed. :o

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OK.

This is what we do. :angry:

Im bored, therefore I've been going on the property pages and sending nice messages to the EAs.

Things like

'...you must be joking £100,000 for a studio flat LOL, don't you know the house price crash is here..'

I'm sure you can think of more. But so far today I've covered pretty much the whole of my town. If we all do the same, we can get our message across to those dumb EA's who have been greedy and ruined a once decent place to actually 'live' rather than invest in.

SOCIAL JUSTICE IN NUMBERS.....

COME ON PEOPLE. AT LEAST 5 EA'S EACH. THAT'LL DESTROY THEIR ALREADY FEBBLE CONFIDENCE.

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any BTL who has not at least 44%

You mean equity - not liquidity. Don't forget to include their own home - which might swing the equity balance for small investors... that' property is at risk of repossession too.

Their liquidity only needs to cover void periods and 'shocks' - such as failed appliances and other emergencies. A broken central heating system can be very costly.

External funding needs to be found to cover the shortfall of rents relative to mortgage, maintenance and council tax during voids.

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With a 30% drop as indicated on this site I have done a little maths and basically any BTL who has not at least 44% liquidity on any investments is in for a nasty shock.

Property value £1,000,000

Mortgaged £560,000

Price drops 30%

Property Value £700,000

Lenders 80% ltv max loan £560,000- Safe

Lenders 75% ltv max loan £525,000 - Screwed

Any comments

i think the fact that theyve lost £300,000 would sit higher in their concerns rather than problems remortgaging.

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i think the fact that theyve lost £300,000 would sit higher in their concerns rather than problems remortgaging.

They've only realised the £300K loss if they are forced to sell. If they can finance it for another decade or two, they never need to admit this loss.

A mate had his house valued twice - a year apart - and it went down from £300K to £275K - and I explained that, in my opinion, it was still £100K over-valued... though I didn't doubt that I'd have to pay £275K now if I wanted to buy one like his.

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They've only realised the £300K loss if they are forced to sell. If they can finance it for another decade or two, they never need to admit this loss.

A mate had his house valued twice - a year apart - and it went down from £300K to £275K - and I explained that, in my opinion, it was still £100K over-valued... though I didn't doubt that I'd have to pay £275K now if I wanted to buy one like his.

yeh but the only problem they have is that they will just have to pay the svr rate. losing 300k is a far bigger concern for the owner.

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With a 30% drop as indicated on this site I have done a little maths and basically any BTL who has not at least 44% liquidity on any investments is in for a nasty shock.

Property value £1,000,000

Mortgaged £560,000

Price drops 30%

Property Value £700,000

Lenders 80% ltv max loan £560,000- Safe

Lenders 75% ltv max loan £525,000 - Screwed

Any comments

Yes.

You are confusing liquidity & equity.

In your scenario there is still £140,000 equity.

So long as the mortgage payments are met the lenders won't GAF.

HTH.

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Yes have to agree liquidity doesn't really come into it, except to say that BTL'ers liquidity hasn't been as low as it is now for a very long time.

Interesting point though on the potential for loss of equity.

Most BTL landlords I know have got their hopes pinned on equity growth as their solvency is very poor i.e. rental income only just meets mortgage payments, and going forward more and more landlords are going to struggle with solvency as mortgage funding dries up.

One thing that I find amazing is how many of them have completely forgotten about or haven't considered disposal. As of April capital gains tax is 18%. Now on the basis that most landlords have released equity to get where they are today, I don't think they realise that they might end up owing the tax man more than they realise from the eventual sale of their properties, especially as nearly all BTL mortgages are on interest only.

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Mortgages are irrelevant for the CGT calculation - so there are a lot of BTLers who are in a for a nasty shock, and they are the ones who have made a profit.

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  • 292 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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