Now Crash Is Underway, Doesn't Btl Makes Sense Again ?

[nova]

With house prices and probably interest rates dropping, isn't the BTL party back on ?

Apart from lack of available credit, I can't think of a reason against it now yields are back up....

SP thinks so too (as always).

"so lower prices, lower rates and considerably better yields.....i'll have some of that

If IR's hit below 4%, frankly i will be the first to fix for 10 years on what i have and buy as much as i can"

http://www.singingpig.co.uk/forums/thread/577369.aspx

[clloyd]

With house prices and probably interest rates dropping, isn't the BTL party back on ?

Apart from lack of available credit, I can't think of a reason against it now yields are back up....

SP thinks so too (as always).

"so lower prices, lower rates and considerably better yields.....i'll have some of that

If IR's hit below 4%, frankly i will be the first to fix for 10 years on what i have and buy as much as i can"

http://www.singingpig.co.uk/forums/thread/577369.aspx

Yields are far from being back, even with interest rates of 4% I would want yields in excess of 7%, reckon on my house as the example rent would have to rise nearly 30% or house price to fall it (and I dont see rents going up in the next two years!)

[grizzly bear]

Yields are far from being back, even with interest rates of 4% I would want yields in excess of 7%, reckon on my house as the example rent would have to rise nearly 30% or house price to fall it (and I dont see rents going up in the next two years!)

Yields are down as rents are sofening as supply seriously outstrips demand. Plus if you are a BTL you want to make sure you buy at the bottom which isn't yet. But yes as soon as the monthly drops slow into stability I think they will be back.

[dances with sheeple]

Yields are down as rents are sofening as supply seriously outstrips demand. Plus if you are a BTL you want to make sure you buy at the bottom which isn't yet. But yes as soon as the monthly drops slow into stability I think they will be back.

There is an oversupply of houses, the government are soon going to be forced to house millions in social/council housing again because the banks will never lend like they have again, the systemic risk is obviously too great, most economic migrants will be forced home by the recession, BTL seems like the craziest idea there is? It can only work in a boom where people are drunk on cheap credit and can`t afford overpriced houses?

[fallingbuzzard]

Have to agree. Massive oversupply at the moment as well as massive new build stock. Available capacity in retirement homes and flats as well.

[Papa Serf]

People are sheep, once the penny drops on their fantasies they will dismis the idea in the future.

During the .com bubble everyone was buying and talking shares, after the crash they never bothered again.

Everyone today knows someone into BTL, in a year or two everyone will know an ex BTLer who's finances and dreams where distroyed.

If you wanted to get in BTL you probably would have by now and will likely lose alot of money or consider yourself lucky to have escaped.

They will never see it as easy money ever again, they will have a slightly better idea of what leverage is and it will scare them. (I hope, because it should)

For a generation anyway.

[Te Mata]

The numbers still don't make sense unless there are fat capital gains going forward.

I see years of capital losses and/or stagnation.

IMO you need at least ~10% gross yield on 2up 2 down type properties to make any sense at all.

Until then, there are spiders in my pockets.

[Papa Serf]

I looked at btl back in around 1993 when the rent covered a repayment mortgage, it made sense then as in 20 years or so you totaly own the property. I was too young and skint to do it though.

[redwing]

As this is in the psychology section...

Over the next couple of years we will see enough BTL sob stories in the press, so many ruined lives and personal bankruptcies that it'll be ages before most people think it's the right time to get into BTL.

You've also got to remember that a lot of lenders, intermediaries and underwriters of BTL debt are also getting burned. It also takes a long time for institutions to get over the pain. There won't be much appetite for BTL lending for some years to come.

Obviously, right now is the wrong time to enter the market; any equity put in is going to reduce over the next year or two and this recession is going to cap any ideas of increasing rents.

Thirdly, the Government might want to regulate the BTL market to make it harder for fly-by-night landlords to enter.

So, if you're a good contrarian, then it might not be a bad idea to think about in about 2010.

Although if we're in for Japanese style period of stable or falling asset prices, then you might just be throwing money down the toilet for years to come.

[matchmade]

BTL still makes sense as the only mechanism for snall-medium property developers and builders to leverage an attractive-looking site and rent the house out to cover the interest costs while they seek planning permission for new-build or extension. Commercial loans on sites without planning permission have always been prohibitively expensive, and you can only have one residential mortgage at a time, so BTL has been an attractive alternative for developers for the last ten years or so.

I agree we won't see amateur BTL people back in the market anytime soon - the "it's my pension" brigade - but I suspect a surprising proportion of BTL mortgages are not "proper" ones at all - they are temporary holding operations whilst the owners pursue other plans. BTL which relies on rental income covering interest costs and some maintenance, let alone compensate for embedded capital, hasn't been a viable proposition since about 2003.

As house prices and land prices fall, large sites will become increasingly attractive to developers with the foresight to have a decent amount of cash or a low LTV so they can reconfigure their portfolios and start buying.

If you're just a FTB, I suggest you look carefully for signs of professional investors buying at auction or repossessions or probate jobs being sold direct to developers without being marketed by estate agents. That will be a sign of value and confidence returning to the market amongst people who are looking 1-2 years ahead. Even if the market is still officially gently falling, I think then would be a good time to buy - assuming you still have a job and can afford it.

[gotoutintime]

As this is in the psychology section...

Over the next couple of years we will see enough BTL sob stories in the press, so many ruined lives and personal bankruptcies that it'll be ages before most people think it's the right time to get into BTL.

You've also got to remember that a lot of lenders, intermediaries and underwriters of BTL debt are also getting burned. It also takes a long time for institutions to get over the pain. There won't be much appetite for BTL lending for some years to come.

Obviously, right now is the wrong time to enter the market; any equity put in is going to reduce over the next year or two and this recession is going to cap any ideas of increasing rents.

Thirdly, the Government might want to regulate the BTL market to make it harder for fly-by-night landlords to enter.

So, if you're a good contrarian, then it might not be a bad idea to think about in about 2010.

Although if we're in for Japanese style period of stable or falling asset prices, then you might just be throwing money down the toilet for years to come.

Very good post Redwing,

I was in BTL from end of 1999 after making my first deposit on stocks, and added to portfolio twice in 2000 and once in 2003.

As a keen stock market investor too and after learning how to assess charts, I turned bearish on BTL in 2007 and started to sell of the investment properties plus my own house over the next 6 months getting the timing right for tax purposes.

With the stock market due to recover ahead of the housing market, my cash is being drip fed monthly into the recovery and aggressive growth unit trusts starting last month. When the Dow Jones reaches its third "bottom" shortly and gets some support, I shall take a chance with a lump sum and buy "3 times leveraged ETF's large cap" on the US Stock Market investing 30% of my BTL gains.

If the market gains 40% from it's low, then the investment returns 120% to me, enough for a free house for us (but not coming back to UK!), Got used to sunshine now, lol

In my opinion, to make BTL work and allowing for voids in rental, maintenance, letting commissions, and all the other expenses and insurances then I think prices would need to fall a further 25% to 30% combined with low interest rates to make it fully viable.

Edited November 16, 2008 by gotoutintime

[riddle]

I've been trying to sell an empty house for a 12 months. I've lowered the price by 30K. As far as I'm concerned the price has gone as low as it is going to go.

I'm going to keep the house and rent it until prices recover. Tough luck to prospective buyers who are daft enough not to grab a bargain.

I think house prices are going to start rising very soon.

[Hip to be bear]

I've been trying to sell an empty house for a 12 months. I've lowered the price by 30K. As far as I'm concerned the price has gone as low as it is going to go.

I'm going to keep the house and rent it until prices recover. Tough luck to prospective buyers who are daft enough not to grab a bargain.

I think house prices are going to start rising very soon.

Riddle,

A surprisingly bullish attitude given that you have had your fingers burnt to the tune of 30K and all economic data points to further falls. Can I ask what percentage of the value of the property does the 30 k represent?

Did you get many viewings?

You are posting on the market psychology section of the forum, which makes me wonder what you are thinking.....

Is it wishful thinking or just that you cannot afford / accept to reduce the price further?

I am not trying to bait you...I am putting our house on the market at the moment, and I really want a quick sale for various reasons, but I am willing to accept a lowish / reasonable price as I know that buyers are few and far between.

Interested to hear your views.

[geoffk]

I've been trying to sell an empty house for a 12 months. I've lowered the price by 30K. As far as I'm concerned the price has gone as low as it is going to go.

I'm going to keep the house and rent it until prices recover. Tough luck to prospective buyers who are daft enough not to grab a bargain.

I think house prices are going to start rising very soon.

/quote]

oh no they are not m8..so if you think you can hold on for ten years you might be lucky the market dictates price and if its going down and down and down so does your selling price because the market will leave you behind...rents are dfalling because every tom and dick has said i will rent it out........bad timing

[marty]

Riddle,

A surprisingly bullish attitude given that you have had your fingers burnt to the tune of 30K and all economic data points to further falls. Can I ask what percentage of the value of the property does the 30 k represent?

Did you get many viewings?

You are posting on the market psychology section of the forum, which makes me wonder what you are thinking.....

Is it wishful thinking or just that you cannot afford / accept to reduce the price further?

I am not trying to bait you...I am putting our house on the market at the moment, and I really want a quick sale for various reasons, but I am willing to accept a lowish / reasonable price as I know that buyers are few and far between.

Interested to hear your views.

I have to disagree with you,

Politics drive market forces and market forces drive prices. Currently our beloved leader is contemplating a general election and there is nothing more emotive than house prices. He needs a vote catcher. Obviously his current strategy on repossessions is pointless and will be dropped after Christmas. There are far to many caveats and it’s much to unwieldy and of course home owners who are not under threat of repossession will be resentful of supporting people who they may consider feckless and irresponsible.

I feel that very shortly he will implement something similar to Mrs Thatcher’s “right to buy” but in this case he would guarantee mortgages to first time buyers through a Government vehicle, could well be a revamped Northern Wreck!!

Right to Buy has a nice ring about it, just the sort of thing that would appeal to Mandy!

Every man in the street knows that there is money to be made in prime mortgages and so he could project profit from public funding. This would drive up the property market more than any other strategy and would paint Gordo as some sort of Great Benfactor.

[milk_snatcher]

I have to disagree with you,

Politics drive market forces and market forces drive prices.

I think you are oversimplifying the situation, if things were that simple then a quick fix really would be possible. Its a complex situation that cant be put into an xyz equation like that dont you think?

[copper crutch]

I Know of a guy who has a buy to let flat, rented to the council he gets 500 pcm, his BTL Mortgage tracks at a half percent below base HBOS He took it out on a 3 year tracker deal last september, he says he is not paying any mortgage any more.

What percentage yeald does this work out at, and how do you calculate the yeald ?

Edited March 16, 2009 by thecrutchster

[Tinpusher]

I Know of a guy who has a buy to let flat, rented to the council he gets 500 pcm, his BTL Mortgage tracks at a half percent below base HBOS He took it out on a 3 year tracker deal last september, he says he is not paying any mortgage any more.

What percentage yeald does this work out at, and how do you calculate the yeald ?

Don't do it, you'll just encourage specufestors to buy some more and push up prices

[William Parkar]

I looked at btl back in around 1993 when the rent covered a repayment mortgage, it made sense then as in 20 years or so you totaly own the property. I was too young and skint to do it though. ....

[albertwilson]

In the might even help soften the house price crash. ..... Harvey definitely doesn't like the idea that anyone might make money from property Obviously, right now is the wrong time to enter the market; any equity put in is going to reduce over the next year or two and this recession is going to cap any ideas of increasing rents.