Is this the way you'd do it? (Landlords)

[DomBertone]

Thanks all, especially your insight drainbrain, a really nice positive read.

Rufus sorry I missed your earlier reply, I guess paying down the current BTL wouldn't feel like enough of a step forward, as we already do overpay it. I think the idea of growing a portfolio is what excites us right now. Agree it would be nice to have more equity but to get to that stage I first need the properties We could wait until we have saved ourselves but we aren't getting any younger and property prices could easily get away from us (or not-who knows) if we don't look soon.

WelshBeef...no, absolutely haven't checked any of this is actually possible! How's that for honesty reason for that being we won't be doing anything until March when the only debt we will have are the mortgages. If the computer says no then so be it and back to the drawing board. We are currently over 150% cover of the mortgage though, although I haven't spoke to the providers I have checked current requirements to the best of my knowledge and all seems fine. I'm merely exploring options at this stage.

[nikaiyo2]

Welshbeef said:

OP have you actually asked your mortgage BTL provider currently what if any increased borrowing they would offer on your 2x BTL's?

Previously it was easy value gone up interest multiplier was a low 100-110% and then it was at the current interest rate - not is 125-140% interest cover along with 5.5%. If this cannot be covered off the assumed equity you have to reinvest simply is not accessible.
This has all changed in the last 12months.


Clearly if you are a cash buyer no issue otherwise it means vastly higher deposit to values OR massively higher rental rates (neither of which might be possible). BTL has certainly especially since April turned into a wealthy persons game.

Wow did not realize that, just played on TMW site, the rental "multiples" are huge compared to what they were!

[Sir Bagalot]

DomBertone said:

In regards to releasing equity, we have 53k left on a 140k flat, and we wouldn't be doing anything until next March, I don't think taking it to 90k is that much of a push?

Remember when it comes to offsetting interest against tax that you can not offset more interest on what the flat was worth when it first entered the rental market. For example when you first rented it out if the flat was worth £70K then you can only offset the interest on a max £70K loan regardless of the fact that 20 years later the flat is now worth £220K with a £170K mortgage.

Some people borrow borrow borrow and might well own X BTL's but they are all 80% mortgaged.

Me? I like to have a small LTV ratio. Place I bought a shade over 3 years ago now as a LTV ratio of 40%.

As others have said the extra Stamp duty is having an effect, as is Brexit. The more BTL's you have the bigger a PITA it all is to manage

[drainbrain]

Sir Bagalot said:

The more BTL's you have the bigger a PITA it all is to manage

Which is why you eventually open a letting agency which then makes you even more profit from btl.

The best agencies for owners to use as managers (though not necessarily the most profitable for the agencies' owners) are the ones which have grown out of successfully expanded portfolios which one man can no longer handle.

So if you know what you're doing, the successful management of your own properties is applied to the property owned by others who come to your agency so they can become successful too. This is popular amongst owners who universally seem to like making a success of their btl empires as opposed to making a fist of it.

[Welshbeef]

drainbrain said:

Welshbeef said:

BTL has certainly especially since April turned into a wealthy persons game.

Nonsense.

It is you need big deposits and large rental cover plus renovate them plus 3% stamp duty. To say it's not it means your already in the game so you are wealthy already even if you don't recognise it.

[drainbrain]

Welshbeef said:

drainbrain said:

Welshbeef said:

BTL has certainly especially since April turned into a wealthy persons game.

Nonsense.

It is you need big deposits and large rental cover plus renovate them plus 3% stamp duty. To say it's not it means your already in the game so you are wealthy already even if you don't recognise it.

So, let's say you've got £25k.

And you buy a property for £20k and spend £1k on fees and£4k 'renovating' it.

You've paid no deposit you've got no loan so you need zero 'rental cover' and you've not needed to pay the 3%. And the property rents for £300 a month.
And that's you in the game. And you're on your way to your next one. And then the next one. Ad infinitum.

Are you saying that having the £25k to start with classifies you as 'wealthy'?

To some people yes that would make you wealthy.

But then to some people having twenty-five quid would make you wealthy.

Sorry mate but your theory that something's happened since April that has made btl for the wealthy only is NONSENSE.

Since time immemorial people (and I am one) have got into the btl game starting with NOTHING. And this continues to this very day and will continue for any foreseeable future you care to name.

[Welshbeef]

Please tell me where you can buy a residential property in the UK in rentable area for £20k.

Given average house price is £300k I'm struggling with this £20k house.

[Jockman]

The attractiveness certainly lessened in April and will continue to do so over the coming years.

[mph1977]

Welshbeef said:

Please tell me where you can buy a residential property in the UK in rentable area for £20k.

Given average house price is £300k I'm struggling with this £20k house.

ifthey had said 50 -60 K it'd be just about believable 1/2 bed flat / maisonette/ terrace in a not so brilliant location territory ...

but how many people have genuinely got that much to just drop like that ... I would suggest that it does put people in the top whatever percent

[drainbrain]

Welshbeef:

I can do better than that. I can show you realtime examples. But who said anything about residential? Of course you CAN get residential but why limit yourself to resis rather than commercials with FRI leases? MUCH less hassle and virtually costless.

Google 14 Aitken Street

Click on the pic

See the little beauty shop? The very busy little beauty shop which has been there for years and will be there for years more? The one whose tenant pays me £250 a month rent so she and her large circle of chums can play at beauty to their hearts' content in their very own small but very well fitted out (by her) playroom?

How much do you think it cost?

Look it up on 'Our Property' or similar.

20 grand? 15grand? 10 grand? 5grand? 3 grand? (getting warmer…….)

Do you have any idea how fast it could get 15-20k back for it if I stupidly decided to sell it?

lol…..there's a whole snarling world of btl dogs out there fighting for any meaty bone that passes their way. And it's not about the size (wealth) of the dog in the fight. It's all about the size of the fight in the dog.

And no. The beauty shop isn't for sale. Well I MIGHT sell it for £30k. But that would only bring you back 10% gross per annum. And of course there IS £15 a month inc vat to management to pay as well…..

[drainbrain]

mph1977 said:

ifthey had said 50 -60 K it'd be just about believable 1/2 bed flat / maisonette/ terrace in a not so brilliant location territory ...

but how many people have genuinely got that much to just drop like that ... I would suggest that it does put people in the top whatever percent

Right now on Rightmove a "Hull + 5 miles" search indicates 146 items at £50k or less. Greater Manchester + 5 has 269. And that's on the old open market. Where (mostly) the amateurs do play and the stuff the sourcers can't shift gets displayed. And even there there are a few rich pickings if you can be assed trawling thru.

What do you seriously think the real players in Hull and Mancs are paying for their stock? Rightmove open market estate agent prices? Really? Let me tell you, a goodish number of that Rightmove stock esp. auction stock is via players who've bought it to sell at short profit which requires AT LEAST £3-£4k to be added to cover buy/sell costs and make that short profit. And some of it is being sold at £50k or less which is TWICE what these players have sourced them for when they bought them. Maybe 3 times as much. Maybe even more.

Don't kid yourselves that these deals aren't done all the time, because they are. Every day. All over the country. The BMV market is MASSIVE and about to get even bigger as the huge UK amateur btlers start panicking and needing out fast. Nothing better than a seller who needs a quick clean cash deal. Yum yum yummy!! And as to needing to be wealthy to join in……are you kidding? The player splits the net with the money man. Lots of cash rich people who can't get a return are only too happy to make a fast decent buck funding a deal for a shrewd sourcer. And lots of private and perfectly legitimate moneylenders who'll lend short term money at 20% or even less if they like you.

Yeah well, there IS the small matter of the years you have to spend in the game to get to the sources of the stock, the sourcers who handle it and the all important trust if you're using money that's on a handshake rather than a time consuming and clownish obstacle course of risk assessment fantasy carried out by people who wouldn't know a real good deal if it crashed into them on the motorway. But hey ho….believe what you like. Location's all important, isn't it? No good profits in poor areas are there? And no good deals at the expensive end without having high personal wealth, eh?

[rufusgti]

Fantastic.
Play on player.

Check back in with us in 5 years.

[drainbrain]

Thanks, friend, that's kind.

I'm an old(ish) man and may not be here in 5 years, so let me share a bit of investment advice with you.

Found it in The Bible.

Matthew 6:34

Give it some thought.

[Ozzie Osmond]

drainbrain said:

Yeah well, there IS the small matter of the years you have to spend in the game to get to the sources of the stock, the sourcers who handle it and the all important trust if you're using money that's on a handshake rather than a time consuming and clownish obstacle course of risk assessment fantasy carried out by people who wouldn't know a real good deal if it crashed into them on the motorway.

Sounds like the kind of business where someone comes round to break your legs if the return doesn't work out the way the nightclub owner had hoped. Not for me.

[drainbrain]

Ozzie Osmond said:

Sounds like the kind of business where someone comes round to break your legs if the return doesn't work out the way the nightclub owner had hoped. Not for me.

Gosh that's a quaint notion…..very yank post war gangster flick.

In reality it's rather more about the lender (with a DoT credit licence) knowing for certain that there's both security and ability to repay. And that the borrower has a history of integrity especially when things go wrong. And that if the borrower has a heart attack and dies there's someone who'll step up and step in and sort it.

This may be hard to believe, but years ago (back in the days when they made profit) mainstream financial institutions worked more or less the same system.

Do you seriously believe that the collapse of sensible lending in the mainstream means that people who needed funding didn't quickly find alternatives or that alternatives didn't quickly fill the vacuum?

So what do you think people who need to quickly find funding for an opportunity that will quickly disappear if they don't find that funding do in the real world? Just let it pass them by? Queue up at nightclubs to see some shadowy Mr Big sitting at a mahogany desk surrounded by muscular bodyguards? Sit and worry about what might or might not happen in 20 years time?

Well, maybe…...

[Ozzie Osmond]

drainbrain said:

Do you seriously believe that the collapse of sensible lending in the mainstream means that people who needed funding didn't quickly find alternatives or that alternatives didn't quickly fill the vacuum?

I invest equity. With an unsecured loan you've got all the risk but no opportunity to participate in the upside - a balance which doesn't work for me.

All this business done on a handshake - what happens when things go wrong? Black-balled at the golf club?

[drainbrain]

Ozzie Osmond said:

I invest equity. With an unsecured loan you've got all the risk but no opportunity to participate in the upside - a balance which doesn't work for me.

All this business done on a handshake - what happens when things go wrong? Black-balled at the golf club?

Unsecured lending doesn't work for you for one of two reasons. 1) You've tried it and discovered your risk assessment skills weren't as good as you thought and it came a co-co. Possibly more than once. So you (probably quite rightly) decided your risk skills weren't up to it so that was enough. Lesson learned. 2) You've not tried it and aren't confident your risk assessment skills could make it work for you so you won't be trying it, which is, again, the right thing to do. Though you should be careful not to shape a belief that because it's not for you it's not for anybody.

Now, here's where you have to make the mental shift.

Imagine a scenario where someone (and that someone could be an individual or a household name company) tries it and, hey presto! The deal works out for them! So they try it again. And again. And again. And even if on occasions it DOESN'T work out, in the main on balance and over a period it does work out. It's profitable. Very profitable. So they keep doing it. They become a lender of unsecured money. Obviously their risk judgements are pretty good. Is that hard to imagine? Thus there is availability of unsecured money in this world, including from private individuals where your 'credit reference' is far more from experience than Experian.

And that unsecured money may well be from a private individual. Who is only likely to deal with referred business. And who is only likely to advance largish sums on 2 reasonable certainties. One is, that, should things go wrong there is background security that the borrower will use to make things right again. Indeed that the borrower agrees will be used in the event of calamity. And an important part of that security - as important as tangible asset security - is the borrower's integrity. So the lender sleeps peacefully knowing that if it goes wrong as agreed, it will be put right.

Strangely enough, you're not far off the mark with the "blackballed at the golf club" notion. How do you fancy a reputation as an untrustworthy defaulter? Having it known that your word's worthless? In your circles of business does that open doors or make anything easier for you? It's the opposite, isn't it? You'd absolutely hate it, wouldn't you? Y'know…"aren't you the chap who was involved in that such and such deal that left so and so seriously out of pocket"? Just what you need, eh? So if a deal goes wrong you put it right, don't you, using whatever means you planned to use before you did the borrowing. So do most people. And you won't get in the door of a private lender unless you're known as a safe pair of hands. Oddly enough, that reputation can be earned if things do go wrong, but I can't really be assed explaining how and why.

So yes sir. That's what certainly does happen with welchers. They get "blackballed at the golf club." Reputation gone. And that's the hardest thing to undo.

[drainbrain]

Goodness me. That's an unexpected pleasant compliment.
If there was a blush smiley I'd use it.

[Trabi601]

Ozzie Osmond said:

I invest equity. With an unsecured loan you've got all the risk but no opportunity to participate in the upside - a balance which doesn't work for me.

All this business done on a handshake - what happens when things go wrong? Black-balled at the golf club?

I'm thinking more along the lines of kneecapped in Epping Forest.

It's all a bit East Enders if you ask me.

[Ozzie Osmond]

drainbrain said:

Unsecured lending doesn't work for you for one of two reasons. 1) You've tried it and discovered your risk assessment skills weren't as good as you thought and it came a co-co. Possibly more than once. So you (probably quite rightly) decided your risk skills weren't up to it so that was enough. Lesson learned. 2) You've not tried it and aren't confident your risk assessment skills could make it work for you so you won't be trying it, which is, again, the right thing to do. Though you should be careful not to shape a belief that because it's not for you it's not for anybody.

Let me put it a different way. If you're happy to take the risk of investing in these businesses whilst specifically being excluded from participation in the upside (i.e. as a shareholder) then I think you've let yourself be taken for a ride.

Take a look Entrepreneurs Relief (from CGT) which results in a very modest 10% rate of tax on backing small companies.