Friday, April 25, 2008

Reality Check

Buy-to-let investors set to expand portfolios

"Professional landlords will expand or maintain their buy-to-let portfolio in coming months, a new survey has found." Now for real life story - I just bumped into an acquaintance I haven't seen for months. He's a serial BTLer who started 2 years ago, now has 40 odd properties scattered across the UK and is connected with a cartel. He left work Nov 2007 to grow his empire. I asked if he was still expanding. "Only if there's a 20% discount on it. Can't get mortgages anyway, and tenants are falling behind with rent cos of inflation. Upshot is I'm having to get another full time job to make up the shortfalls."

Posted by renting2 @ 11:08 AM (3892 views)
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25 thoughts on “Reality Check

  • Professional bullsh!tters will find many opportunities in the coming months. Just like the mentality of the dotcom bubble: buy on the dips; the new paradigm is here.

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  • just one fall time job renting2?

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  • full time or even fool time ?!

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  • I really can’t wait for the day these “paper millionaires” are taken aside and given a swift thrashing for their greed and stupidity.

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  • let’s all repeat togather:

    “Professional landlords will expand or maintain their buy-to-let portfolio in coming months, a new survey has found.”

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  • planning4acrash says:

    You mean to say, that after all that hard work, pricing me out of the market and destroying the economy, that this vallant (economic) soldier/veteran has to do a full day’s work? What has this world come to!

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  • And Elvis has been seen on Mars..

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  • Of course some buy to letters will buy. They will buy at auction where there is no reserve price and flats or houses sell for less than half of their value. The type of buy to letter that will buy will be the ‘seasoned buy to letters’ that built up their property 10 years ago (or in the last housing slump).

    The only impact this will have on the market is to make the market fall, not put it up as the surveys may suggest as they will be buying at vastly reduced price.

    The new buy to letters who have built their portfolio on dodgy developer pricing and cash back mortgages will fall.

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  • I think there’s something in this unfortunately. Not for BTLers on 25k and buying 20 cheesy city centre flats, but for wealthier people looking for somewhere to put their money outside of stocks. I know just such a person who’s in the process of looking for a ‘good victorian terrace’ cheap to let for the long term in the belief that current price falls are irrelevant over a 20 year perspective. And another wealthy friend has just bought a flat in Cheltenham at a knock down price with the same view.

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  • anyone buying a house or flat now is not getting a bargain….it may well take 20 years to get back to present prices…when this becomes clearer wealthy people will steer clear of property….prices in japan have fallen for 17 years and around 70 on average

    gold and oil fell in price for 19 years before recovering

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  • I heard that Alan Sugar is currently buying London property

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  • Alan Sugar is buying property, but mainly commercial property. That market was well on the way down by the time residential property got started on its crash trajectory and tends to follow different (though semi-connected) patterns anyway.

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  • Alan Sugar is a nob though. And not a particularly successful one at that.

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  • 9. paul said…
    Alan Sugar is a nob though. And not a particularly successful one at that.

    Paul, you do talk some rubbish….I think you’ll find he’s done all right for himself…whether you like him or not, based on your perceived knowledge of his character is obviously a different matter.

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  • george monsoon says:

    Won’t BTL’ers win in the short term, if they are already in the market? With the difficult mortgage market, a lot more people will have to rent until prices or wages meet at an agreeable level with the bank manager?

    Obviously when prices of houses start to match or go lower than rental prices, then rents must also go lower to attract tennants, but this is a fair way off surely?

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  • I don’t think that point is far off, in fact it’s starting to happen. But it depends on the type of property. Also, some would say that a shortfall of a hundred quid a month or so is a cheap price to pay for the long term acquisition of a property.

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  • If Alan Sugar wanted to offload a load of properties, he would seed a rumour that he was buying – he knows his influence..

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  • tafee,

    17 years, japan? come on thicko.. you think thats gona happen?

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  • “Won’t BTL’ers win in the short term, if they are already in the market? With the difficult mortgage market, a lot more people will have to rent until prices or wages meet at an agreeable level with the bank manager?”

    Hold on…!
    BTLetters are pocketing a meager 4% to 5% gross before maintenance and service charges and ea commissions. But their cost of capital is between 6 and 7% so they are losing money
    Their only hope of any return, is capital appreciacion, which is now out of the question… prices are falling

    These charlatans and commentators should stop deluding the BTLs that the market is good for them. The market is lousy for homeowners and BTLetters, all the same

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  • “Professional landlords will expand or maintain their buy-to-let portfolio in coming months, a new survey has found.”

    Not surprised – market adage “To average a loss is to compound stupidity”.

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  • There’s nothing wrong with people being confident and I’m sure many people will see the current situation as a buying opportunity. Only in hindsight will they be proved right or wrong.

    We are in an unprecedented period of financial instability and even the wisest economic minds have been dumbfounded so far and don’t really know where the future will lead us. So if someone thinks now is a good time to buy then good luck to them. I would suggest they bear in mind the following (amongst other things) –

    1. According to Wikipedia – Japanese asset price bubble (1986 – 1990) “Prices were highest in Tokyo’s Ginza district in 1989, with some fetching over US$1.5 million per square meter ($139,000 per square foot), and only slightly less in other areas of Tokyo. By 2004, prime “A” property in Tokyo’s financial districts were less than 1/100th of their peak, and Tokyo’s residential homes were 1/10th of their peak”.

    1/100TH AND 1/10TH OF THEIR PEAKS!!!

    2. Following the 1929 Stock Market Crash in the USA, it took a full 26 years before the stock market surpassed the level it had been at in 1929.

    26 YEARS!!!

    3. The run on Northern Rock was the first run on a UK bank in 150 years.

    150 YEARS!!!

    (Here’s another interesting comment from the Wikipedia article about the 1929 Crash. How times change…………

    “The deluge of selling overwhelmed the ticker tape system that normally gave investors the current prices of their shares. Telephone lines and telegraphs were clogged and were unable to cope. This information vacuum only led to more fear and panic. The technology of the New Era, much celebrated by investors previously, now served to deepen their suffering.”)

    believe many people in Japan in the 1990s were caught out badly by getting back into the market too early. Of course timing is everything and only in hindsight can you tell whether your judgement was right but personally I think UK house prices are going off a cliff this year.

    I think most observers agree we are in an unprecedented period of economic turbulence with no clear indication of how long it will last or how big will be the impact. If you look at two vaguely linked scenarios Japan in the 1990s and USA in the 1930s, Japan has taken almost 20 years to get it’s head above water and the US stock exchange took

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  • Oops sorry, I seem to have left my first draft attached there.

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  • crash bandicoot says:

    The BTL investors that are getting in now are buying properties at half the price that suckers in investment clubs bought them for. Whether this is the market value, below market value or still overpriced is yet to reveal itself. However you need to have cast iron yeilds because there ain’t going to be any capital appreciation for a while yet.

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  • @Paul,

    yiou weren’t the guy that was “fired” a couple of weeks back… Hey Greenbay, how is your portfolio? I’ve heard they are selling bunk beds half price at Argos.

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  • new user 2007 says:

    Greenbay and BTL rules

    Welcome back. Still no concept of reality or basic accounts/ maths I see.

    Goodluck to the btl who 1) can get a mortgage and 2) are either thinking they know the market has bottomed OR don’t care. Egotististical morons or just morons?

    Greenbay. Not sure what, as ever, your point is…does the Japan example offend because it is so obviously true (and you deny past data so what hope is there for you to accept current trends)?

    As for the source…what else are they going to say to their fellow pyramiders..”abandon ship”? Not really credible given the maths involved, unless their clients are as clever as Greenbay and BTL rules:)

    p.s. If BTL did not make sense even under the relaxed criteria of 2006 owing to prices (and so mortgage costs) AND including at the time mortgages could be gotten at 4.5%, then can someone explain

    1) how they are getting bargains when the market has only just turned i.e. Asking prices have only now started to fall properly so at best they would be paying higher prices than the Actual prices of 2006, even with a discount

    2) and then are not suffering, given rates have shot up by more than rents and there is no capital appreciation? Inconsistent?

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