The future for the small BTL investor

[theboss]

13m said:

avinalarf said:

I tend to agree with Donkey.
The worst fear for the amateur is the dreaded void and losing a good tenant.
Whereas it is often the case that big landlords will take a void to maintain rental increase and preserve portfolio value.

We are a medium size landlord and we raise rents regularly knowing that it will cause some wastage. Tenants are replaced quickly however and it does maintain portfolio value.

That's perfectly rational of you, if the local market rents are rising year on year - and of course the tenants will realise they are going to bear the same increased cost (plus that of moving) if they were to rent from another landlord. My last two professional, not-mortgaged landlords have kept rents static for >3 years at a time but that reflects the fact that the market has barely changed in 8 years.

[avinalarf]

It is important to separate the cash rich,amateur BTL, pensioner from a professional landlord and the speculator.
The cash rich pensioner may have say £200/300K that he wants to get a return on now the interest rates are so low.
He is not particularly financially savvy so only sees the headline 5% to 8% gross return and thinks "I'll have some of that".
Remember he's about 65 years old so long term views are not his first priority.
He just wants the extra few grand to maintain a lifestyle.

[Guvernator]

I know a lot of 40-50 somethings who are BTL'ing so it's not just cash rich pensioners. By that age kids may be getting ready to fly the coup and the mortgage is mostly paid off or at the very least they have massive equity in their first property. However they are also at an age where they have one eye on retirement and a BTL is an obvious choice.

I am in the early part of that age group and all my friends and peers of the same age who have the funds pretty much have the same plan, buy a second home as soon as you can raise the deposit or release equity from your first home, rent it out then once the mortgage is paid off, continue to rent or sell the second home to retire to the Bahamas and live a life of leisure.

[avinalarf]

Ozzie Osmond said:

avinalarf said:

I still think a bout of modest interest rises over the past 2/3 years to bring it up to say 3% now would have been more effective with regard to addressing the rise of the amateur BTLs whilst giving respite to cautious older folk looking for a safe haven for their savings.

UK economy is not and should not be a slave to BTL. Or cash savers. Or council house tenants.

On the question of housing, 200,000 net immigrants each year find jobs. They also find accommodation without the need for a council house. It seems curious to me that Brits appear unable to achieve the same thing.

I take the view that a healthy capitalist economy should work in the interests of ALL of society,not just those that are blessed with financial savvy or inherited wealth.
Work hard,be prudent and thy shall be modestly rewarded with a little bite of the cherry.
There is an unacceptable face of capitalism and it is that of which I am not a fan.
The immigrant thing is a can of worms.
Most immigrants work hard and are more hungry than the indigenous population some of whom are use to the cushion of our welfare system. Some of that system allows corporations to pay low wages that we the taxpayer subsidise with working tax credits etc.
Those immigrants that come here for 2/3 years to send money home to finance their life when they return home are prepared to live in pretty stty,cramped,conditions.
I might add that I see responsible,managed,immigration can be a benefit to our economy however I feel that our present mismanaged immigration system gives rise to social unrest when it puts too much pressure on our limited ,cash strapped infrastructure .

[DonkeyApple]

Ozzie Osmond said:

UK economy is not and should not be a slave to BTL. Or cash savers. Or council house tenants.

On the question of housing, 200,000 net immigrants each year find jobs. They also find accommodation without the need for a council house. It seems curious to me that Brits appear unable to achieve the same thing.

Don't forget Ozzie, that an immigrant is relatively happy to live in the same conditions that they have just left behind. Hence the huge numbers of slum dorms that have always existed in places like Earls Court, Shepherds Bush or White City.

The real question to be asking is why these same dorm enterprises aren't being run for English migrant workers?

Last I heard was a bed + locker was about £25/night.

[avinalarf]

Guvernator said:

I know a lot of 40-50 somethings who are BTL'ing so it's not just cash rich pensioners. By that age kids may be getting ready to fly the coup and the mortgage is mostly paid off or at the very least they have massive equity in their first property. However they are also at an age where they have one eye on retirement and a BTL is an obvious choice.

I am in the early part of that age group and all my friends and peers of the same age who have the funds pretty much have the same plan, buy a second home as soon as you can raise the deposit or release equity from your first home, rent it out then once the mortgage is paid off, continue to rent or sell the second home to retire to the Bahamas and live a life of leisure.

I was particularly addressing my post to the older generation.
As for the 40/50 year group....well that depends somewhat on how leveraged their mortgage is.....to large a mortgage and a hike in the interest rate might confound their dreams.

[andye30m3]

I'm not sure the new rules will make a huge difference other than the government making additional tax income. I doubt 3% stamp duty would put many off (I don't think it's intended to) after all most people do BTL are looking at it in the long term so the additional borrowing can be spread across several years to the point at which it's insignificant.

Not being able to offset mortgage payments may have a more significant impact but as others have said theres a number of people out there with cash. It will be interesting to see if rents go up as a result of people with minimal equity getting out of the BTL market and a lack of supply, however this many encourage more people with cash to invest.

I have 2 BTL's at the moment and can still make it work with the new rules, It was my intension to possibly buy a third once my mortgage was paid off but I'm not sure that will make sense without rent's increasing to cover some of the additional tax.

[Ozzie Osmond]

DonkeyApple said:

The real question to be asking is why these same dorm enterprises aren't being run for English migrant workers?

Precisely. Perhaps gov't should allow higher rate tax relief back again for HMOs (Houses in Multiple Occupation) so long as minimum standards of accommodation are met and rents fall within a specific band? Could improve the dog-kennel standards some of our immigrant workers have to put up with and at the same time encourage Brits to migrate for employment.