Buy to Let - What to consider?
Discussion
jonny70 said:
jonnydm said:
The surprise so far for me has been a 3 bed semi near Heaton Park in Prestwich, Manc. Currently bringing in £7200 pa and it went for £55k. Assuming nothing nasty happens to the market over the next few months, with a little polish that house is easily £130k next summer.
link please?or can you post more information ,please?
Lot 176, top right.
HTH
Just got the keys today for our first B2L!
Had an ad in the local rag today and got two potential tenants coming round tomorrow.
Its a 3 bed terrace right in our local town center but with off street parking. In move-inable condition.
We did a LOT of research before making the jump. Its in our local area which helps in researching but I went to the local agents for some no nonsense advice on the state of the rental market. Some agents were of course more candid than others.
We're looking at 8-9% yield on this one and looking to get another property later this year or early next. Will probably look to lower gearing one the next one as we arent wealthy by any means so protection against future interest rates is paramount for us. Maybe look to have a 65% LTV on the next one (75%) on this.
Had an ad in the local rag today and got two potential tenants coming round tomorrow.
Its a 3 bed terrace right in our local town center but with off street parking. In move-inable condition.
We did a LOT of research before making the jump. Its in our local area which helps in researching but I went to the local agents for some no nonsense advice on the state of the rental market. Some agents were of course more candid than others.
We're looking at 8-9% yield on this one and looking to get another property later this year or early next. Will probably look to lower gearing one the next one as we arent wealthy by any means so protection against future interest rates is paramount for us. Maybe look to have a 65% LTV on the next one (75%) on this.
fridaypassion said:
We're looking at 8-9% yield on this one and looking to get another property later this year or early next. Will probably look to lower gearing one the next one as we arent wealthy by any means so protection against future interest rates is paramount for us. Maybe look to have a 65% LTV on the next one (75%) on this.
I don't understand how you are protecting against future rate rises with 8-9% yields (assume net), and 75% LTV. Surely when rates go up, your deposit will be eroded, and finding funding at 8% will be tricky?NoelWatson said:
I don't understand how you are protecting against future rate rises with 8-9% yields (assume net), and 75% LTV. Surely when rates go up, your deposit will be eroded, and finding funding at 8% will be tricky?
I think the usual PH way to calculate yield is to take the price of the property (say £100k) and the maximum achieveable rent at full occupancy (say £10kpa) and then to divide the latter into the former and express the result as a %age - and that's the yield! Thus £100k cost and £10k max rent pa = 10% yield! Reality in this case might be a bit different. Assume a 75% loan at 6% on a 20 year profile and you'll be left with about £300 a month. If there's an agent, inc VAT, you'll be left with £200. And once every other real world cost from BI to voids kick in, you'll be left with ZERO. Don't even think about the opportunity cost of the £25k deposit!
Nightmare, innit? ....but at least after 20 years of nothing you'll have a property!
I'd recommend re reading my post. 75% LTV I have no illusions is not great. But theres little point having a single B2L property is there? By decreasing LTV on subsequent purchases we are looking reduce our overall exposure when the rates go up.
The B of E know everyones tied up in property so when will rates go up properly? When the housing market starts heating up again. Sell a couple of your properties, pay down your mortgages on the rest of your portfolio. Boom.
If the market goes the other way and we end up with high rates and a still subdued market I think we will be in trouble long after half the population has already gone bust.
At the end of the day its the easy option to have the downer on property at the moment. See it a lot on forums these days maybe from the people that were lapping it up in 2007 and got caught with their pants down? Unless banks revert to taking only the man of the households income into account then there is a lower limit to house prices and we've hit it round here.
Confidence will return at some point in the future just as it has done every time theres been a crash. Just remember a house is the numero uno commodity. Everyone wants one and there arent enough to go round.
The B of E know everyones tied up in property so when will rates go up properly? When the housing market starts heating up again. Sell a couple of your properties, pay down your mortgages on the rest of your portfolio. Boom.
If the market goes the other way and we end up with high rates and a still subdued market I think we will be in trouble long after half the population has already gone bust.
At the end of the day its the easy option to have the downer on property at the moment. See it a lot on forums these days maybe from the people that were lapping it up in 2007 and got caught with their pants down? Unless banks revert to taking only the man of the households income into account then there is a lower limit to house prices and we've hit it round here.
Confidence will return at some point in the future just as it has done every time theres been a crash. Just remember a house is the numero uno commodity. Everyone wants one and there arent enough to go round.
fridaypassion said:
I'd recommend re reading my post. 75% LTV I have no illusions is not great. But theres little point having a single B2L property is there? By decreasing LTV on subsequent purchases we are looking reduce our overall exposure when the rates go up.
The B of E know everyones tied up in property so when will rates go up properly? When the housing market starts heating up again. Sell a couple of your properties, pay down your mortgages on the rest of your portfolio. Boom.
If the market goes the other way and we end up with high rates and a still subdued market I think we will be in trouble long after half the population has already gone bust.
At the end of the day its the easy option to have the downer on property at the moment. See it a lot on forums these days maybe from the people that were lapping it up in 2007 and got caught with their pants down? Unless banks revert to taking only the man of the households income into account then there is a lower limit to house prices and we've hit it round here.
Confidence will return at some point in the future just as it has done every time theres been a crash. Just remember a house is the numero uno commodity. Everyone wants one and there arent enough to go round.
The B of E know everyones tied up in property so when will rates go up properly? When the housing market starts heating up again. Sell a couple of your properties, pay down your mortgages on the rest of your portfolio. Boom.
If the market goes the other way and we end up with high rates and a still subdued market I think we will be in trouble long after half the population has already gone bust.
At the end of the day its the easy option to have the downer on property at the moment. See it a lot on forums these days maybe from the people that were lapping it up in 2007 and got caught with their pants down? Unless banks revert to taking only the man of the households income into account then there is a lower limit to house prices and we've hit it round here.
Confidence will return at some point in the future just as it has done every time theres been a crash. Just remember a house is the numero uno commodity. Everyone wants one and there arent enough to go round.
fridaypassion said:
The B of E know everyones tied up in property so when will rates go up properly? When the housing market starts heating up again.
I think it will be more to do with inflation expectations becoming embedded and people demanding pay rises.fridaypassion said:
Everyone wants one and there arent enough to go round.
I think that is the common factor with every ponzi schemefridaypassion said:
Unless banks revert to taking only the man of the households income into account then there is a lower limit to house prices and we've hit it round here.
How can we have hit bottom when the MPC is bailing out homeowners with low rates, and banks are being leaned on not to repossess. Surely the bottom will come when housing looks like a good investment, but everyone is too scared to invest - i.e. the bottom in the 90s, when property was around half the price it is now, relative to earnings.I'd totally agree that property has been a ponzi scheme in the past. When all you had to do in 2007 to get a buy to let is sign a bit of Halifax bank's paperwork theres a clear bubble there. I think you have to be a bit more serious about it these days. Anyone that isn't being well good luck I guess!
I think you have to look at your motivation for getting into it. The days of 15% growth per year are going to be a way off but we just wanted some kind of investment that was safe over the long term and in years to come the income still bears up against inflation. If you go into it thinking you'll be driving a 911 with a cigar hanging out of your mouth in two years time I think your probably going to be disappointed.
I think you have to look at your motivation for getting into it. The days of 15% growth per year are going to be a way off but we just wanted some kind of investment that was safe over the long term and in years to come the income still bears up against inflation. If you go into it thinking you'll be driving a 911 with a cigar hanging out of your mouth in two years time I think your probably going to be disappointed.
Edited by fridaypassion on Friday 27th May 21:53
4.3 variable on a 2 years. In 5 years the world will be a different place. In 2 years time we should have an idea which way its going. Fixing on any type of mortgage right now for 5 years is a bit of a risk. We could well be in for a period of 2 years of sub 1% BOE rates. The BOE know they cant raise rates until the economy picks up almost regardless of what inflations doing.
Do you think an interest rate rise now would actually curb inflation?
Do you think an interest rate rise now would actually curb inflation?
The problem with that is that if interest rates are trending upwards in 2 years then the fix option will be (much) higher.
The expectation is of rates 0.5% higher by Xmas, which would mean the variable was 4.8. So variable or 5 year fix? (or are you saying temporary variable with the downside risk of higher fixed at a later date?)
The expectation is of rates 0.5% higher by Xmas, which would mean the variable was 4.8. So variable or 5 year fix? (or are you saying temporary variable with the downside risk of higher fixed at a later date?)
In January all the knowledgeable people were saying we'd be at 1% by about now. The way things are looking I'd be surprised to see any rate rise this year. Interest rate rise predictions have been about as accurate as that rapture guy so far this year.
I'd just say 5 years is a long time to commit in times as uncertain as we are in. I personally wouldnt not (and havent) committed for that period. There are other factors on the horizon too. Santander are coming into the market pretty soon. Get a couple of real players back into the market and your 0.5% rate rise is swallowed up by competition. BM have been the only real player through the whole of this year on b2L so the markets wide open for a bit of proper competition.
I'd just say 5 years is a long time to commit in times as uncertain as we are in. I personally wouldnt not (and havent) committed for that period. There are other factors on the horizon too. Santander are coming into the market pretty soon. Get a couple of real players back into the market and your 0.5% rate rise is swallowed up by competition. BM have been the only real player through the whole of this year on b2L so the markets wide open for a bit of proper competition.
Edited by fridaypassion on Friday 27th May 22:39
fridaypassion said:
We did a LOT of research before making the jump. Its in our local area which helps in researching but I went to the local agents for some no nonsense advice on the state of the rental market. Some agents were of course more candid than others.
Im sorry. I can not believe what I'm reading.I wanted to know If the long term effects of a cocaine habit were significant. I did my research, I asked my local dealer for some no nonesense advice. He told me It was safer than water. I have since dedicated the next 25 years to proving this.
You need to take a look around. Look at whats happened. Whats happening. The reasons its happening and read as much as you can from varied sources (Not newspapers) about what could happen to property "portfolios" in the next ten years.
Good luck.
I get the point of what your saying but its safe to say we didnt just ask the coke dealers/agents. Professional agents should be able to give some valid advice though. Granted we have one local agent that is dire and still living in 2007 but TBH the other 2/3 in my local area a pretty humble folks these days and prepared to give a real (pretty grim from their preservative) outlook on things.
You ask any estate agent what rental demand is like at the moment..........
You ask any estate agent what rental demand is like at the moment..........
fridaypassion said:
I get the point of what your saying but its safe to say we didnt just ask the coke dealers/agents. Professional agents should be able to give some valid advice though. Granted we have one local agent that is dire and still living in 2007 but TBH the other 2/3 in my local area a pretty humble folks these days and prepared to give a real (pretty grim from their preservative) outlook on things.
You ask any estate agent what rental demand is like at the moment..........
Im not realy grasping this sorry.You ask any estate agent what rental demand is like at the moment..........
You asked a bunch of people who's lifes, lifestyles, mortgages, mariages, jobs, everything. What their opinion on the housing market is. People who's lifes depend on selling houses. They said it was dire. So you bought in....
They say when everybody else laughs at property. Thats when you buy. Maybe your smack on the ball.
As I say I understand the point you are trying to make but no that was not the only research I have done. Estate agents can still give you useful information though and it would be foolish not to at least talk to local agents even if you go in eyes wide open to the fact that they may have a biased opinion. We actually found that they gave pretty realistic advice to be quite honest. Most agents these days are making enough of a killing on lettings not to worry too much about the state of the sales Market.
Keeping an eye on the local sales/lettings yourself is the best thing to do which is what we have done pretty obsessively for the last 6/7 months whilst considering this.
Ultimately for me it's better to try it and risk breaking even over the long term than to be sat here in 5/6/7 years time kicking myself because the figures don't stack up any more when prices recover. Its not for everyone. I am doing all the management/vetting so that will save me a lot of money over someone using agents. For me I might as well have my money in an interesting investment than just sat there earning no interest.
Keeping an eye on the local sales/lettings yourself is the best thing to do which is what we have done pretty obsessively for the last 6/7 months whilst considering this.
Ultimately for me it's better to try it and risk breaking even over the long term than to be sat here in 5/6/7 years time kicking myself because the figures don't stack up any more when prices recover. Its not for everyone. I am doing all the management/vetting so that will save me a lot of money over someone using agents. For me I might as well have my money in an interesting investment than just sat there earning no interest.
fridaypassion said:
Ultimately for me it's better to try it and risk breaking even over the long term than to be sat here in 5/6/7 years time kicking myself because the figures don't stack up any more when prices recover. Its not for everyone. I am doing all the management/vetting so that will save me a lot of money over someone using agents. For me I might as well have my money in an interesting investment than just sat there earning no interest.
To speak of the housing market, Talk of 5/6/7 years, and also speak of "investment". Thats a wild idea.Good work on the self management. It's very hard work at times. But it WILL save you money. I always self manage my BTL and seeing agents sticking the first person they find with a deposit in other peoples investments has kept me glad I do it. Theres no need to line anyone elses pockets.
rufusgti said:
Good work on the self management. It's very hard work at times. But it WILL save you money. I always self manage my BTL and seeing agents sticking the first person they find with a deposit in other peoples' investments has kept me glad I do it. Theres no need to line anyone else's pockets.
Can I ask how you price the time (per hour) you spend doing the self-management? In other words, what is your time worth per hour? Obviously, I don't know what you do, so you could be an unskilled manual worker (£7-per hour) or a semi-skilled anything (£10 per hour) or a skilled tradesman (£12-30 per hour) or a high level professional (£100 -1000 per hour). So what do YOU lose per hour working on the property project rather than at what you usually do to earn money?
groak said:
rufusgti said:
Good work on the self management. It's very hard work at times. But it WILL save you money. I always self manage my BTL and seeing agents sticking the first person they find with a deposit in other peoples' investments has kept me glad I do it. Theres no need to line anyone else's pockets.
Can I ask how you price the time (per hour) you spend doing the self-management? In other words, what is your time worth per hour? Obviously, I don't know what you do, so you could be an unskilled manual worker (£7-per hour) or a semi-skilled anything (£10 per hour) or a skilled tradesman (£12-30 per hour) or a high level professional (£100 -1000 per hour). So what do YOU lose per hour working on the property project rather than at what you usually do to earn money?
They then have my number and any work that needs doing they can phone me directly. I'll then either make arrangements to do the job or decide wether to send a tradesman round.
A tennant will hopefully stay a minimum of 1 year and the house was totally refurbed before I bought so things generally dont need work, Yet.
So the amount of time per year I usually need to dedicate to my btl is prehaps 3 weekends. This works for me as I try not to work weekends. I'm a carpenter and a weekends work is worth around £300-£400. Thats If I were to work. I'm not turning down work to work on the BTL, as i turn it down anyway.
But your right. It has to be calculated and considered. When I said self management WILL save you money. I'm reffering mainly to the option of selecting your own tenants. as oppose to the agency's finding the first group of lads who managed to pool a deposit together. The real savings are in not having voids.
What do you think.
Living the dream there rufus sounds like the approach we have taken. Part of my research seemed to indicate that letting agents are s(sometimes but not always) bad for Landlords (especially ones with only 1 or 2 properties) and bad for tenants in terms of getting stuff done/dealing with money etc. I can see the benefit for bigger businesses but the cost factor aside I want to take personal responsibility for something we've just stuck our savings into. We are not doing LHA (or DHL as a caller asked me yesterday!) so it should make our first crack of the whip a bit easier. Wouldnt rule out LHA at some point in the future though.
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