Tuesday, May 19, 2009

Buy to let left in tatters?

Has the crisis killed buy-to-let investing?

The writer has a point - while buy-to-let may well be here to stay, it is likely it will become the stomping ground of a much smaller group of investors.

Posted by smithers @ 11:31 AM (952 views)
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7 thoughts on “Buy to let left in tatters?

  • What planet is this writer on?

    BTL lending has been dead in the water for ages now – the only players left are those who have the cash to buy outright.

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  • Btl_and_milking_it says:

    uncle tom

    what planet are you on?

    cheltenham & gloucester 75% LTV 5.29% fixed for 3 years, and (quote) they are inundated. as i said on here yesterday, we’ve added 7 to our portfolio in as many months. no problems here.

    http://www.cheltglos.co.uk/mortgages/buy-to-let/index.html

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  • new builds and inner city properties are increasingly being seen as bad investments and would-be landlords are looking for properties in the suburbs instead

    So Buy to let do not want easy to rent properties they will buy family homes instead.

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  • btl_and_milking_it…

    I’ve seen you post a few times – and only on articles really relevant to you as a btl investor. I’m guessing taht you hover around the site quite often, but post infrequently. So I was wondering what you think will happen to house prices and general inflation over the next few months/years.

    Genuine interest in hearing your POV

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  • Hi Inbreda,
    What I do not understand is that if the borrowing rate is 5.29% then based on this can somebody please justify why if buying a property is beneficial.
    My calculation makes a non starter based below:

    Cost of Property £140000 – a 2/3 beroom property.
    Deposit 35000
    Amount borrowed 105000
    Interest Payable £5555
    Interest lost on £35000 @ 4% = 1400
    ____
    Therefore total cost 6955
    ====
    Rent required to cover the above 580 per month
    This is before taking into account any other expenses. I understand that this can be as much as £120 per month or more.
    Therefore monthly rent required to break even would be £700 per month. It would appear that in my opinion this is a futile investment especially in a depressed property market as there is a greater chance of dropping than rising. As I have said in the past if the the business model is so brilliant then why aren’t the estate agents taking advantage of the position.
    Any comments please to dispute this analysis.

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  • @2. You forgot a very important point regarding C&G …. the arrangement fee is 2.5% loan, then you would probably have to do it again in 3 yrs time. That is a lot of money to throw away for a depreciating asset. I would be interested to see your calculations and how you get a better than 5% return.

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  • House,

    The true return from BTL averages a little less than 60% of gross rent. Many landlords underestimate the expenses, which are:

    Void periods – upwards of 8%, in some areas, much higher
    Management fees – typically 10% + (some landlords self-manage, but their time is still money..)
    Letting agent fees – averages around 2%
    Short term maintenance – varies, but usually eats upwards of 7%
    Long term maintenance – often neglected, usually consumes 5% +
    Legal fees – averages around 2%
    Accountancy fees – averages around 2%
    Statutory compliance – averages around 1%
    Bad debt – most landlords suffer this, but don’t allow properly for it; average losses probably top 5%

    “Buy-to-let : Sell-in-debt..”

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