BTL as a pension fund - why not?

[s1962a]

fblm said:

s1962a said:

It's no bad thing to have BTL or be a landlord at all. But to make it an even playing field between owner occupiers and those looking to profit off housing is what I disagree with.

The % of renters is far higher in the rest of Europe and yet (current economic woes aside) they have always had relatively much lower house prices. How can this be if houses bought to let drive the price up?

This is a very good point! Basically, there are a lot of barriers against being successful as a BTL investor in countries like germany. This reduces speculative buying and has reduced property bubbles forming in the past.

[LucreLout]

s1962a said:

Because housing is a basic need - whether you rent or buy. If BTL investors push up prices so that owner occupiers have to pay more for the same property had the BTL investor not been in the picture, then that is unfair on them.

I have to pay more in IT than most of the country, which isn't fair on me. So what? Life isn't fair. They need to dry their eyes, pick themselves up, and press on.

[mrpurple]

Landlord associations are getting concerned about landlords / BTL becoming a political football in the lead up to the next GE.


http://www.landlordzone.co.uk/update/november14.ht...

[98elise]

economicpygmy said:

LucreLout said:

They stimulate demand which encourages building.

Not really, demand in all its forms does that. The whole of point of BTL is to maximise profit, nothing else matters.

Edited by economicpygmy on Friday 28th November 14:02

It depends on your view. He's my take on my investment.

I took 100k that was dormant. I bought 4 BTL properties that needed work. This injected £500k into the economy (ie I've spent my 100k and borrowed 400k which has also been spent.

I then did the properties up, which cost at say 10k each. Some were a general tidy up, some were complete gut and renew. That injected a further 40k into the economy.

4 families now have modern clean homes at a reasonable rent (£650 pcm in the south east), and I have a long term investment that will form my pension.

Alternatively I could have just sat on the 100k and let it do nothing.

[s1962a]

LucreLout said:

s1962a said:

I noted you mentioned in a previous comment that you work in the city. Something banking related? Me too.

Therefore, what you have suggest is that at the moment prices are going up due to demand exceeding supply (looking at sold prices only to take out the outliers of unrealistic asking prices by vendors). If you reduce the demand, what do you thin kwill happen to house prices? If BTL landlords find it unappealing to invest due to barriers of entry or doing business, then existing housing stock may come down to levels that meets the demand at the time.

BTL are a small part of the market. Logically they'd be replaced by all this pent up FTB demand and prices would carry on much as before.

In reality however, people would struggle to move about to find better quality work because there would be nowhere to rent. Gen X would struggle for building a retirement.

So how would landlords maintain exposure to property without BTL? Why, through their PPR of course. Which would ensure prices maintain the current trajectory due to not one pound less being invested.

BTL isn't the problem, expectations of buying a similar house to that in which they were raised, as a first purchase, is. Due to globalisation, it may never be realistic for gen y to own their parents home unless they inherit it. We need to deflate the over entitled sense of expectation that gen y's parents have allowed to fester.

These are very good points. Something to ponder over. Cheers

[economicpygmy]

98elise said:

It depends on your view. He's my take on my investment.

I took 100k that was dormant. I bought 4 BTL properties that needed work. This injected £500k into the economy (ie I've spent my 100k and borrowed 400k which has also been spent.

I then did the properties up, which cost at say 10k each. Some were a general tidy up, some were complete gut and renew. That injected a further 40k into the economy.

4 families now have modern clean homes at a reasonable rent (£650 pcm in the south east), and I have a long term investment that will form my pension.

Alternatively I could have just sat on the 100k and let it do nothing.

Alternatively you could have invested 100k into a pension, commodities, directly or indirectly into businesses, your own business, commercial property...etc; the list goes on. And while your money was being productive, 4 families could have paid stamp duty and purchased their own modern clean secure family homes, not to mention there being a good chance of them all making regular pilgrimages to home improvement retailers.

[pork911]

s1962a said:

Because housing is a basic need - whether you rent or buy. If BTL investors push up prices so that owner occupiers have to pay more for the same property had the BTL investor not been in the picture, then that is unfair on them.

presumably you equally advocate a tax on unused spare rooms in owner occupied houses since they are constricting supply thereby increasing house prices and this (along with many other things in life) is 'unfair' on your world view?

[aizvara]

LucreLout said:

Were I a landlord I'd happily sign a contract granting all of that, with two provisos.

First, that repairs can be inspected and must be of equal quality or better than I'd buy - stops the house getting slowly wrecked by cheap tenants who have a mate in the trade.

Second that rent reviews were covered within the contract - happy to let you stay very long term but at market price plus or minus a bit depending on who is funding the trades in point number one.

Why would a landlord not want a tenant to stay for years? Saves on voids and agency fees. Landlords, what am I missing? I'm guessing inspections could be defrayed by having a guarantor for any damage you do that exceeds the bind paid.

Sounds reasonable to me. So you agree then that there can be other forces behind gen. y's desire for housing, than seizing other's gains through spite and envy?

I don't know exactly why your scenario doesn't happen more. Here are some guesses:

The six months start followed by normal AST rolling contract with two month notice is pretty standard everywhere I've looked. So far I've not found any landlord, or agent more to the point, who is interested in giving up that two month notice or even altering the agreement. The terms read nearly identically everywhere. When first trying to rent a property, I've never managed to actually talk directly a landlord. So reason one is: the agent, and the AST, or The Way Things Are Done.

Then there's the really very amateur landlord. Often seems to be couples who have moved in together and can't sell one house at the value they want, so rent through an agency instead. Or inherited property - that's common too. They love the short notice as they can quickly sell or let a family member move in instead. They see this as a quick way to temporarily make some money/cover a mortgage, not as a business. Sometimes they become a proper landlord in it for the long term, but it is impossible to know what sort of landlord you are (indirectly) dealing with (due to reason one) when signing up.

Right now in my situation I don't want to rock the boat by asking for any changes (as I think there's little chance for success), and I'm even a bit worried about persisting with continued requests for a properly working boiler (it is very old). Our current landlord is of the above category - we've since learnt that they tried unsuccessfully to sell the house for years. Since renting they've taken little interest in the upkeep of the place beyond the bare minimum and may well just evict and/or sell if we become too much of a hassle. I've heard of a lot of evictions for this type of thing.

As an aside about your comment on rent increases: For some reason these are just not happening, at least where I've lived recently (last ten years or so). I think there's a fairly strong tendency not to put up rents on sitting tenants, alongside a big increase in BTL meaning there's a fairly good supply in most areas.

[s1962a]

pork911 said:

s1962a said:

Because housing is a basic need - whether you rent or buy. If BTL investors push up prices so that owner occupiers have to pay more for the same property had the BTL investor not been in the picture, then that is unfair on them.

presumably you equally advocate a tax on unused spare rooms in owner occupied houses since they are constricting supply thereby increasing house prices and this (along with many other things in life) is 'unfair' on your world view?

Nope. What a person does on a home they are living in is up to them. A home they have bought as an investment - thats what I think should have additional barriers of entry so that it's not a level playing field between owner occupiers and investors.

[pork911]

aizvara said:

Sounds reasonable to me. So you agree then that there can be other forces behind gen. y's desire for housing, than seizing other's gains through spite and envy?

I don't know exactly why your scenario doesn't happen more. Here are some guesses:

The six months start followed by normal AST rolling contract with two month notice is pretty standard everywhere I've looked. So far I've not found any landlord, or agent more to the point, who is interested in giving up that two month notice or even altering the agreement. The terms read nearly identically everywhere. When first trying to rent a property, I've never managed to actually talk directly a landlord. So reason one is: the agent, and the AST, or The Way Things Are Done.

Then there's the really very amateur landlord. Often seems to be couples who have moved in together and can't sell one house at the value they want, so rent through an agency instead. Or inherited property - that's common too. They love the short notice as they can quickly sell or let a family member move in instead. They see this as a quick way to temporarily make some money/cover a mortgage, not as a business. Sometimes they become a proper landlord in it for the long term, but it is impossible to know what sort of landlord you are (indirectly) dealing with (due to reason one) when signing up.

Right now in my situation I don't want to rock the boat by asking for any changes (as I think there's little chance for success), and I'm even a bit worried about persisting with continued requests for a properly working boiler (it is very old). Our current landlord is of the above category - we've since learnt that they tried unsuccessfully to sell the house for years. Since renting they've taken little interest in the upkeep of the place beyond the bare minimum and may well just evict and/or sell if we become too much of a hassle. I've heard of a lot of evictions for this type of thing.

As an aside about your comment on rent increases: For some reason these are just not happening, at least where I've lived recently (last ten years or so). I think there's a fairly strong tendency not to put up rents on sitting tenants, alongside a big increase in BTL meaning there's a fairly good supply in most areas.

why don't you move?

[98elise]

LucreLout said:

s1962a said:

I noted you mentioned in a previous comment that you work in the city. Something banking related? Me too.

Therefore, what you have suggest is that at the moment prices are going up due to demand exceeding supply (looking at sold prices only to take out the outliers of unrealistic asking prices by vendors). If you reduce the demand, what do you thin kwill happen to house prices? If BTL landlords find it unappealing to invest due to barriers of entry or doing business, then existing housing stock may come down to levels that meets the demand at the time.

BTL are a small part of the market. Logically they'd be replaced by all this pent up FTB demand and prices would carry on much as before.

In reality however, people would struggle to move about to find better quality work because there would be nowhere to rent. Gen X would struggle for building a retirement.

So how would landlords maintain exposure to property without BTL? Why, through their PPR of course. Which would ensure prices maintain the current trajectory due to not one pound less being invested.

BTL isn't the problem, expectations of buying a similar house to that in which they were raised, as a first purchase, is. Due to globalisation, it may never be realistic for gen y to own their parents home unless they inherit it. We need to deflate the over entitled sense of expectation that gen y's parents have allowed to fester.

One thing I think a lot of people miss is that BTL doesn't create demand, its simply an alternate ownership model.

If a family need a home, they only occupy one home regardless of if they rent a BTL or buy. The number of available properties, and the number of people looking, is no different. Its simply two different ways in which to put that roof over your head.

The rises in prices are driven by a lack of housing stock to meet demand, and thats in both the rental and owner occupier markets. There are simply not enough properties in the country to meet the housing needs of everyone.

[anonymous-user]

s1962a said:

fblm said:

s1962a said:

It's no bad thing to have BTL or be a landlord at all. But to make it an even playing field between owner occupiers and those looking to profit off housing is what I disagree with.

The % of renters is far higher in the rest of Europe and yet (current economic woes aside) they have always had relatively much lower house prices. How can this be if houses bought to let drive the price up?

This is a very good point! Basically, there are a lot of barriers against being successful as a BTL investor in countries like germany. This reduces speculative buying and has reduced property bubbles forming in the past.

Interesting. Funnily enough I just did our rental accounts for last year and the costs I incurred were eye watering. We've been doing it for a decade now so I do have half a clue and yet from the gross amount my tenants pay i paid 15% in building service charges, 17% in repairs (unusually high!), 9% mortgage interest, and 19% (managing agent and other fees - 2 year leases paid up front), leaving me with net 40% of the rent, on which I pay tax. I'd hate to see the costs incurred elsewhere in europe if they are higher!

[s1962a]

98elise said:

One thing I think a lot of people miss is that BTL doesn't create demand, its simply an alternate ownership model.

If a family need a home, they only occupy one home regardless of if they rent a BTL or buy. The number of available properties, and the number of people looking, is no different. Its simply two different ways in which to put that roof over your head.

The rises in prices are driven by a lack of housing stock to meet demand, and thats in both the rental and owner occupier markets. There are simply not enough properties in the country to meet the housing needs of everyone.

Fair point. Would you have the same views around privitisation of the NHS, where there may even be an improvement in service / reduced waiting times if private companies took over running certain operations. Obviously they would be in it for a profit, but as an end consumer get equivalent or better treatment, would you care?

[aizvara]

pork911 said:

why don't you move?

Did you not read the context? That is kind of the point - I'd like security in where we live, so wish to buy, but would be happy staying renting if there were protections against the stuff I've mentioned.

More practically, I'd rather not have to move to get away from this sort of thing when there's no guarantee the next place won't have the same issues. All the previous rentals have had slow to react agents, tight landlords and non working boilers at one point or another. It would also be a lot of upheaval for my family, and we'd like that to happen only for when we are able to buy a place.

[98elise]

economicpygmy said:

98elise said:

It depends on your view. He's my take on my investment.

I took 100k that was dormant. I bought 4 BTL properties that needed work. This injected £500k into the economy (ie I've spent my 100k and borrowed 400k which has also been spent.

I then did the properties up, which cost at say 10k each. Some were a general tidy up, some were complete gut and renew. That injected a further 40k into the economy.

4 families now have modern clean homes at a reasonable rent (£650 pcm in the south east), and I have a long term investment that will form my pension.

Alternatively I could have just sat on the 100k and let it do nothing.

Alternatively you could have invested 100k into a pension, commodities, directly or indirectly into businesses, your own business, commercial property...etc; the list goes on. And while your money was being productive, 4 families could have paid stamp duty and purchased their own modern clean secure family homes, not to mention there being a good chance of them all making regular pilgrimages to home improvement retailers.

Fair comment, however I know that none of the families I rent to could have bought (I manage the properties myself) and they certainly could not have invested 10k in the first month of ownership. They would also all still need rental properties.

[s1962a]

fblm said:

s1962a said:

fblm said:

s1962a said:

It's no bad thing to have BTL or be a landlord at all. But to make it an even playing field between owner occupiers and those looking to profit off housing is what I disagree with.

The % of renters is far higher in the rest of Europe and yet (current economic woes aside) they have always had relatively much lower house prices. How can this be if houses bought to let drive the price up?

This is a very good point! Basically, there are a lot of barriers against being successful as a BTL investor in countries like germany. This reduces speculative buying and has reduced property bubbles forming in the past.

Interesting. Funnily enough I just did our rental accounts for last year and the costs I incurred were eye watering. We've been doing it for a decade now so I do have half a clue and yet from the gross amount my tenants pay i paid 15% in building service charges, 17% in repairs (unusually high!), 9% mortgage interest, and 19% (managing agent and other fees - 2 year leases paid up front), leaving me with net 40% of the rent, on which I pay tax. I'd hate to see the costs incurred elsewhere in europe if they are higher!

Still a profit though right? and then there is long term capital appreciation

I had something similar a while back where a tenant set fire to the kitchen. The hassle with insurance companies and finding tenant alternative accomodation was stressful to say the least. Saying all that though, recent price increases of houses in this area are ridiculous. Would be interesting to know how many are selling to BTL investors.

[economicpygmy]

fblm said:

The % of renters is far higher in the rest of Europe and yet (current economic woes aside) they have always had relatively much lower house prices. How can this be if houses bought to let drive the price up?

Becuase its not the only contributing factor.

[anonymous-user]

s1962a said:

Still a profit though right?

Bien sur. More than can be said for my traditional pension.

[Eleven]

Sheepshanks said:

Eleven said:

I've just looked up my first house, which sold recently. It's in the South East.

I paid £41k for it with my then girlfriend it was in the mid 1980s. We earned £12kpa jointly as a car mechanic and a secretary.

The property has just sold for £148k. A couple buying the place would very roughly need an income of £43k jointly. What would a secretary and a car mechanic earn jointly today?

That's a very low change in price - is there a reason for that?

I paid £30K for my house in 1986 - at its peak in 2007 they were knocking on £300K. With softening prices they tend to be bound now by the £250K stamp duty threshold but that's still an 8x increase, and that's low compared to increases other people of my age have seen.

Don't know. It's Maidstone, so not Kensington and Chelsea.

I sold it in 1999 for £55k and it re-sold 4 years later for £108k.

It's changed hands a lot and was a spooky place with a bad feeling about it. The sale prices over the years, haven't really lagged behind the market.

[s1962a]

economicpygmy said:

fblm said:

The % of renters is far higher in the rest of Europe and yet (current economic woes aside) they have always had relatively much lower house prices. How can this be if houses bought to let drive the price up?

Becuase its not the only contributing factor.

Rent controls, long term rents, and the govt being basically on the side of the renters.

Some more controls proposed in germany

http://www.out-law.com/en/articles/2014/october/ge...