Wrong time for BTL

[nikaiyo2]

Considering adding a BTL, it’s a decent price for the mad market.

Is it a crazy time? Are we about to see a crash? Or are things going to be inflationary for a bit and in 6 months will I wishing I had bought it?

[83HP]

Leave it and give a FTB a chance instead

[BoRED S2upid]

Well if you need a mortgage in 6 months time rates may well be higher.

People have been predicting a crash for 20 years. I think slower growth is probably more accurate.

Markets are still hot so you would have no issue finding tenants there is just no supply.

There is the moral question though.

[TheBinarySheep]

83HP said:

Leave it and give a FTB a chance instead

There are properties not far from me that get ZERO interest from anyone other than landlords because people that can afford a mortgage simply don't want to live in these run down areas.

I keep reading that landlords are reducing stock for FTB's, but the truth is, there are loads of properties out there that FTB's are simply not interested in.

Example
https://www.rightmove.co.uk/properties/125494760#/...

https://www.rightmove.co.uk/properties/85738284#/?...

[Fusion777]

TheBinarySheep said:

There are properties not far from me that get ZERO interest from anyone other than landlords because people that can afford a mortgage simply don't want to live in these run down areas.

I keep reading that landlords are reducing stock for FTB's, but the truth is, there are loads of properties out there that FTB's are simply not interested in.

Example
https://www.rightmove.co.uk/properties/125494760#/...

https://www.rightmove.co.uk/properties/85738284#/?...

Wow- even the non-guide price properties are only £40k! 10.8% yield on one of them even at the current rent value of £360/month.

[TheBinarySheep]

Fusion777 said:

Wow- even the non-guide price properties are only £40k! 10.8% yield on one of them even at the current rent value of £360/month.

We sold one at auction a couple of month ago for £28k, the area is a bit of a dump, hence why FTB's have ZERO interest in these properties. There must be around 300-400 of these properties in that area.

[nikaiyo2]

BoRED S2upid said:

Well if you need a mortgage in 6 months time rates may well be higher.

People have been predicting a crash for 20 years. I think slower growth is probably more accurate.

Markets are still hot so you would have no issue finding tenants there is just no supply.

There is the moral question though.

LOL what is the moral question? Should Tesco answer a moral question for making money out of selling food? Should a farmer? How about clothing companies? They all make profit providing an essential.


Morally I am fine, I wish more people questioned the idiots making their ideological stand against BTL.

Before all the hatred become overt and the silly laws were passed renting was so much easier, for tenants. Sure some landlords took the piss, but most did not.

So many have pulled out of BTL over the last few years rents are rocketing, I have a flat that rented for £500 pcm for years. Just put it back on the open market now for £800. That change is over 3 years...

I could have let it 10 times over at that price.

[Fusion777]

TheBinarySheep said:

We sold one at auction a couple of month ago for £28k, the area is a bit of a dump, hence why FTB's have ZERO interest in these properties. There must be around 300-400 of these properties in that area.

Interesting. In North Notts/Derbys there are plenty of crummy areas too, but you're still looking at £75-85k minimum for somewhere (non-auction). Guess places like Peterlee suffer the double whammy of having lots of poor areas whilst being remote also.

Such a shame that we can't capitalise on the disparity in property/land prices more, but geography can mean everything when it comes to prosperity.

[dmahon]

nikaiyo2 said:

LOL what is the moral question? Should Tesco answer a moral question for making money out of selling food? Should a farmer? How about clothing companies? They all make profit providing an essential.


Morally I am fine, I wish more people questioned the idiots making their ideological stand against BTL.

Before all the hatred become overt and the silly laws were passed renting was so much easier, for tenants. Sure some landlords took the piss, but most did not.

So many have pulled out of BTL over the last few years rents are rocketing, I have a flat that rented for £500 pcm for years. Just put it back on the open market now for £800. That change is over 3 years...

I could have let it 10 times over at that price.

I make this point on most BTL threads. Every time a new regulation or cost comes in, people exit the market and prices get jacked up by remaining landlords on the next renewal. I am having a few renewals going through now and the agents have pushed all of the prices up by an extra £100 and still getting 5-10 solid applicants for each property.

I don’t consider regulation a business risk at all. Within reason, the more the better.

Edited by dmahon on Thursday 4th August 10:12

[BoRED S2upid]

TheBinarySheep said:

There are properties not far from me that get ZERO interest from anyone other than landlords because people that can afford a mortgage simply don't want to live in these run down areas.

I keep reading that landlords are reducing stock for FTB's, but the truth is, there are loads of properties out there that FTB's are simply not interested in.

Example
https://www.rightmove.co.uk/properties/125494760#/...

https://www.rightmove.co.uk/properties/85738284#/?...

I think a lot of FTB actually want to rent a nice place rather than buy a sthole.

Also a lot of renters have no choice. Never has a tenant of mine asked to buy the house they are in. Surely if you rent a place for years, spend your own money on making it your home then get in a position to buy you might want to buy that property?

[nikaiyo2]

83HP said:

Leave it and give a FTB a chance instead

Yeah its a nice slogan but idiotic. You want to further remove liquidity from the property market? Great idea. Lets push rents and selectivity over tenants up even more.

I dont think I have ever competed with an FTB to buy a rental property, usually its other landlords.

The properties that appeal to landlords generally (outside of London) are generally properties that FTB have no interest in.
There are thousands and thousands of converted Victorian flats dotted round the UK, places above shops etc that are not that attractive, can be a bit on the smaller side, dated decor wise or have an odd layout but they are safe warm and decent places to live.

Places people are happy to rent for 6 months or a year. These flats are not slums or in any way a problem, they are perhaps the Dacia of the housing market.

These are not properties people want a long term commitment to, they do not want to have 6 months trying to sell, SDLT to pay, solicitors fees, etc. I would not want to buy one to live in. I would happily rent one for 12 months of it fitted my needs.

The flat I mentioned in the previous post is exactly this, it has been rented to a guy working 3-4 days a week for BAE, who lives in Scotland with his wife and kids etc, who I presume did not want to relocate to the other end of the country. Prior to that it was a PhD student. Prior a couple of Chinese students.

If you kill BTL you kill those properties, they become empty, thus reducing the stock available. Sure the council/ HA might step in, and introduce a whole element of value judgements and bureaucracy. It will make a bad situation worse.

3 years ago ish a lad at work was looking to buy first place with GF, I was given a nod from the agent I use for my lettings, that a great 2 bed flat, close to town center/ nightlife, 2 mins to the sea front, a little outside terrace, parking & on a great road was coming up for sale. Got them to go and look at it, before it was put on Rightmove etc, it needed updating the kitchen was grotty, the bathroom pink etc.
Liveable but needing a bit of improvement, spend £20k to make it ok or spend £50k and make it stunning. It was on at £180-190, I recon worth £220 decent, £260+ stunning.
They paid £280ish for a new build house that is smaller, in a crap area, miles from anything.
Why did I not buy it? On a less good road, a bit further from the beach, a bit smaller likely no parking, flat would be £150k but get the same rent...

[anonymous-user]

nikaiyo2 said:

3 years ago ish a lad at work was looking to buy first place with GF, I was given a nod from the agent I use for my lettings, that a great 2 bed flat, close to town center/ nightlife, 2 mins to the sea front, a little outside terrace, parking & on a great road was coming up for sale. Got them to go and look at it, before it was put on Rightmove etc, it needed updating the kitchen was grotty, the bathroom pink etc.
Liveable but needing a bit of improvement, spend £20k to make it ok or spend £50k and make it stunning. It was on at £180-190, I recon worth £220 decent, £260+ stunning.
They paid £280ish for a new build house that is smaller, in a crap area, miles from anything.
Why did I not buy it? On a less good road, a bit further from the beach, a bit smaller likely no parking, flat would be £150k but get the same rent...

Exactly the same story with the under 30's I work with, all of them want a new build property. When I tell them all the issues with new builds they reply "Nah, (insert homebuilder name) houses are not like that, they are beautiful". They wouldn't even consider an older property, and would immediately dismiss anything that required even the slightest of work.

They are not prepared to even lift a paintbrush, they all want a brand new house, full of brand new furniture with a brand new car on the drive.

Back to the original question, when I bought my BTL five years ago I was worried it was the wrong time, five years on it is the best investment I have ever made in my life.

At the time it always seems a bad time, but in hindsight buying property is always a great investment long term.

[pork911]

83HP said:

Leave it and give a FTB a chance instead

huh? landlords tend not to want to pay more than intending owner occupiers

[Glosphil]

nikaiyo2 said:

BoRED S2upid said:

Well if you need a mortgage in 6 months time rates may well be higher.

People have been predicting a crash for 20 years. I think slower growth is probably more accurate.

Markets are still hot so you would have no issue finding tenants there is just no supply.

There is the moral question though.

LOL what is the moral question? Should Tesco answer a moral question for making money out of selling food? Should a farmer? How about clothing companies? They all make profit providing an essential.


Morally I am fine, I wish more people questioned the idiots making their ideological stand against BTL.

Before all the hatred become overt and the silly laws were passed renting was so much easier, for tenants. Sure some landlords took the piss, but most did not.

So many have pulled out of BTL over the last few years rents are rocketing, I have a flat that rented for £500 pcm for years. Just put it back on the open market now for £800. That change is over 3 years...

I could have let it 10 times over at that price.

So have your costs gone up by 60% or are you just taking extra profit? So renters find it even harder to save a deposit so they can buy.

[anonymous-user]

83HP said:

Leave it and give a FTB a chance instead

If a property comes up for sale, a FTB can buy it just the same as a BTL landlord can, at the same price.

Edited by anonymous-user on Thursday 4th August 16:15

[nikaiyo2]

Glosphil said:

So have your costs gone up by 60% or are you just taking extra profit? So renters find it even harder to save a deposit so they can buy.

No the market has rate has increased massively, why would I rent it for less than that ?

Would you sell your product at 60% discount to the market?

Would you put a property up for rent at a 60% discount to comparable property? You do realize why no one in their right mind would do this?

I intentionally make sure all my properties are advertised over what the market rate is...

[LooneyTunes]

BoRED S2upid said:

There is the moral question though.

Without a rental market, how/where do people relocating/separating/with poor credit history find high quality properties?

Few landlords have enough properties to move a market, but there will be many LLs out there serving the above groups who either can't or don't want to buy at market prices.

To answer the OP's question, from a pure investment perspective, I am very much of the view that it depends on:
1) How you're buying it (cash/high LTV mortgage/low LTV mortgage)
2) Whether you can ride out any period of under-/non-payment by tenants if they get further squeezed
3) What your risk capacity is
4) What your investment timeframe is
5) What your investment objectives are

[nikaiyo2]

LooneyTunes said:

Without a rental market, how/where do people relocating/separating/with poor credit history find high quality properties?

Few landlords have enough properties to move a market, but there will be many LLs out there serving the above groups who either can't or don't want to buy at market prices.

To answer the OP's question, from a pure investment perspective, I am very much of the view that it depends on:
1) How you're buying it (cash/high LTV mortgage/low LTV mortgage)
2) Whether you can ride out any period of under-/non-payment by tenants if they get further squeezed
3) What your risk capacity is
4) What your investment timeframe is
5) What your investment objectives are

1) How you're buying it (cash/high LTV mortgage/low LTV mortgage) would be mid LTV, enough cash to get into the decent interest rates. So I would think 60s LTV

2) Whether you can ride out any period of under-/non-payment by tenants if they get further squeezed. I can cope with this.

3) What your risk capacity is I am ok with risk.
4) What your investment timeframe is Retirement! so 20 years.
5) What your investment objectives are

My main fear is coming out of a 5 year fix, finding interest rates at 8% having tenants that cant be evicted because of increasingly bonkers regulation. I think things look really uncertain right now. I kind of worry if 2009 was just a taster and the one coming is going to be a big old hit to everyone.

[LooneyTunes]

It's not impossible to see interest rates at 8%, wind the clock back just 20 years and many saw this first hand (and felt good about them given what had come before!)

Hard to see a situation where you can't evict tenants because you want to sell. BUT if rates are up significantly higher then at present then you have the problems associated with:

1) A rise in repos
2) Potential fall in property values (although at 60% LTV it would take a serious drop to end up in negative equity)
3) Rental income falling (if the market gets dragged lower by falling property prices) and affecting ability to remortgage

I hope we don't see any of that but it's easy to see tenants running into difficulties. Eviction costs aside your financial exposure (putting aside any drop in house values) could potentially be 6mths rent plus the cost of refurb.

All that said, it would be a very bad times if after 20 years you were underwater. Some interesting stats/graphs from Land Registry to play with on this link: https://landregistry.data.gov.uk/app/ukhpi/browse?...

(pre-set to start average house prices in 1970 to give a long term view)

[xeny]

I'm rather wondering if the increased energy and other costs of living will apply pressure to encourage household coalescence, reducing the demand for property, both owner occupied and rental.