Sunday, February 22, 2009

Forced landlords in holiday homes –

How to earn money from your second home

Last year Paul and Julia bought a second home near Boscombe Pier in Bournemouth. In November, Paul, a credit-risk manager, lost his job and Julia’s work as a freelance human-resources consultant began to dry up. “We went from being a fairly comfortable two-income family to a no-income family,” Julia says. “There’s no way we want to sell the flat – and we’d lose money on it if we did – so we’ve had to offer it as a holiday let to pay the mortgage." In the current climate, such properties are rapidly turning into an expensive indulgence many can no longer afford. The most obvious solution is to sell, but this can be painful financially. As second homes are essentially discretionary purchases, their prices have been particularly hard hit by the down-turn. Holiday lettings are up 77% this year

Posted by drewster @ 11:32 AM (1648 views)
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19 thoughts on “Forced landlords in holiday homes –

  • Let me get this straight – a professional credit-risk manager buys a second home – in 2004!. Sums up the whole sorry mess we are in.

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  • Shameless and reckless advertising by Times paid and run by BTL VI. Shamelessly dotting web addresses to BTL holiday homes in the article and then conclude, “It is good money”. The journalism ethic really went down drain. The parliament should summon all these writers and lock them up.

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  • I see the wife is doing work as a ‘freelance human resources consultant’ – doesn’t sound like that will be a payer for much longer.

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  • Eternal Sceptic says:

    A credit risk manager buys a second home as the bubble is ramping up nicely. Must have been away with the fairies instead of getting an education. God help us all!

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  • This reads like an extended advert for the author’s friends. More greedy selfish people getting their comeuppance. Those homes should be available for local people at reasonable prices – and would have been, if these parasites hadn’t used their incomes to bully the market up to ludicrous levels.

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  • nubbers – It’s far worse than that. The professional risk manager lost his job last November, “when they had owned the flat for less than a year”. So they must have bought around January 2008, a time when the writing was clearly already on the wall. For a credit risk manager the irony is too much!

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  • peter – There is a silver lining. If you’re looking for a holiday cottage this summer, the vastly increased supply should mean lower prices and ample room to negotiate. No doubt the chancellor will want to put holiday lettings into the CPI basket of goods.

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  • These articles are just more and more evidence of how the whole property pyramid has made half the population VIs.

    I know a lot of people in London, having lived there for several years, worked there for even longer and have family there. I can’t tell you how many people I know who are either BTLers or who have bought way beyond their means. I know quite a few ‘professionals’ and a fair few people who never need to work because they have inherited a load of wealth. More than half, I estimate, will be in serious trouble by the end of this recession, they never appreciated the risks they were taking and certainly didn’t think this property thing could get as bad as it has already and will in the next few years. Some of these people put all their wealth into property, and one ‘lady’ (you know who you are) put nearly 700k into a house in NW london (against the advice of nearly everyone she knows) in late 2007. They are now being advertised for 500-600k.

    One of these people is a journalist for one of the broadsheets, and they have been working for one of these since the early nineties, although no their current employer. They inform me (and I believe them as I have known them since the mid 80s) that almost everyone above the secreteries and admin staff, that they know, has either bought several properties or has bought an incredibly expensive house or apartment since 2000. Most have remortgaged to buy their additional properties or to release ‘equity’ from their ‘invesment’ to facilitate a more ‘advanced’ lifestyle.

    One of these has now declared bankruptcy and they estimates that by the end of the year several more will have done so too. Another has had to accept property sales that, although it hasn’t meant their own bankruptcy, it has completely wiped out their own 20 year pension, to remain in their own home. They tell me of BTL properties taking more than 6 months to let and people on long term sickness with depression and stress.

    What I am trying to say here is that these people have milked the cow dry. This is so similar to the Japanese experience but without the saving and prudent attitude. As Drewster says, their will be a glut of rental properties and holiday properties flooding the market. I know that another friend in Wales is down more than 25% on bookings for their holiday cottage because they say their is a big increase this year in available properties and they has already dropped their prices from 2007 prices (they did not put them up last year at all) in an attempt to increase their income and in reflection of some of the other asking prices for similar properties.

    They are all sh!t scared now.

    “They even had it on the news…
    Don’t believe the hype…”

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  • What worries me is the government will nick everyones’ savings to bail out these [email protected]

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  • Most people who rent out their second homes are in breach of contracts with their mortgage company. Within the small print most banks do not allow letting without written consent and usually the banks demand a higher interest rate.

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  • @shining wit

    “They inform me (and I believe them as I have known them since the mid 80s) that almost everyone above the secreteries and admin staff, that they know, has either bought several properties or has bought an incredibly expensive house or apartment since 2000. Most have remortgaged to buy their additional properties or to release ‘equity’ from their ‘invesment’ to facilitate a more ‘advanced’ lifestyle.”

    Thanks for sharing that with us – it’s absolutely jaw dropping. Sounds as though things are much worse than I thought.

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  • @shining wit

    Can I second thanking you for sharing that?

    I made a bit of a mess of my life in the early 2000s but started my own recovery in 2003. I have a few friends who are like me, after a lot of hard work, sitting and renting with a good amount in the bank ready as a deposit WHEN the price is right. Whilst I don’t bear any ill will to the people you describe I have to say that they are due their comeuppance for the inflated house prices and many people’s refusal to believe that 2007 prices are no longer valid.

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  • still they keep pumping out the property porn on tv, this fiasco has been like living in a madhouse the last five years or so!

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  • quiet guy

    I’m sure not everyone is in trouble but the bank of the property cash cow is well and truly closed !

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  • shining wit…..Lucid info. Thanks.

    Over the years I could see this building and building into a huge bubble. I received not one single concern for my views. In fact I felt embarrassed. There is great vested interest here which is part of the problem from those who see themselves as affluent to those that are affluent. That’s a lot of people in all walks of life and the reason for the denial. Another reason:
    Admitting ignorance is almost impossible as well. Today I spoke to a couple who are desperately trying to sell their property they bought just a year ago. They agree that this was caused by over-lending and there is no more money to lend.One said to me(the wife) “Why don’t they just print more money”?
    There you are in a nutshell. Simple ignorance.

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  • mountain goat says:

    Maybe people who actually live in seaside towns will be able to afford homes soon.

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  • voiceofreason says:

    Just waiting for these plonkers to lose their shirts.
    Then the prudent people on this website can buy into these markets with our cash – no loans needed.

    How it should have been done all along.

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  • @Shining Wit,
    One of the best posts I’ve read in a long time. Thanks for sharing!

    @Mountain Goat,
    Yes and no. There will always be a premium on attractive seaside towns because they are popular with older people, and older people (normally) have built up savings and/or equity over the years. People dream of retiring to Torquay; nobody dreams of retiring to Swindon.

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  • drewster @3, now that I re-read the article, I see it was the accountant who bought in 2004 and the credit-risk manager who bought in 2007/8. You might have thought either should be capable of enough financial sense to see the danger, but then I guess a lot of financial people higher up the food chain didn’t either.

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