Buy to let unethical ?

[Rovinghawk]

menousername said:

(in reality it will probably go to a BLT buyer who will outbid them)

Any evidence to support that?
As a businessman, why on earth would a LL choose to pay top dollar?

menousername said:

People need to be somewhere near work which is increasingly meaning they need to be near a station that services a big city.
Given how busy the country has become they NEED off street parking

If they're near a station , why the huge need for a car?

menousername said:

People will move less and so people are having to commit to that house that would have been the 3rd or 4th move in the first or second.

Or they could sacrifice & work their way up as many of us did rather than feeling entitled to a dream home from the word go.

Edited by Rovinghawk on Friday 22 September 21:07

[BoRED S2upid]

I've never rented to anyone who could afford to buy a house their only option is to rent: students, Romanians current couple 1 is bankrupt so the banks say no I said yes so how is this in any way unethical? The council sold off all their houses under the right to buy policy which was crazy so what options do people have?

[King Herald]

oilbethere said:

I know people who happily rent instead of buying, some are council Tennant's with lots of disposable income and savings.
If there's a market someone has to provide the properties. The biggest issue is the amount of deposit people now have to save before getting on the ladder.

The people who rented our place for 7 years had rented before that for ten years elsewhere, and when they left our place they rented another. I have no idea why, but many, many people do not want the ties and obligation of a mortgage and all that stuff.

[C.A.R.]

I think having a single BTL property, with modest rent, is fine. I have a problem with folk who have their own monopoly of properties, but its perpetual- it's the wisest thing to do if you have the money to make the initial investment. BTL mortgages should be much harder to attain perhaps, but I don't think the answer is easy.

I live in Hertfordshire, house prices are 180k upwards. I'm young (28), so would happily take on a project, even though I have a young family. Trouble is, the discount isn't realistic for a property with issues.

I think my income is relatively decent, I don't mind telling a bunch of strangers that I'm on 38k before any bonuses. My wife tops this up with her part time job, probably another 10k tops.

Rent is around a third of our joint income (take-home). Then there's bills on top of that.

Granted, I've just survived getting married, but even now I can't muster much more than £400 per month in savings. To get a decent deposit will take several years!

The sickening part is if we did get that initial capital together and had a mortgage, the monthly payments to service that mortgage would be around £200 per month less than the rent...

Keep working hard, get that bonus and I might get on that property ladder in the next decade. Maybe.

[mac96]

98elise said:

wormus said:

voyds9 said:

And if a person can't raise a deposit or show enough income for a mortgage would you say you are providing a service and roof to a person who otherwise not easily get one.

But isn't one of the reasons they cannot afford it down to supply and demand? Those who already have the security of capital can afford it whilst those never got the chance to get on the ladder don't.

Doesn't help the only sound investment is property so whilst I don't blame people for doing it, it doesn't mean it's right.

When I bought my first house back in '95, the decision was driven by the fact it was cheaper to buy than rent and I could get a 100%, no deposit mortgage.

Edited by wormus on Friday 22 September 19:04

Have you ever walked into an estate agents and they have no properties for sale? BTL puts one family in one home, no different to shared ownership or owned 100%.

The issue as ever is that we do not have enough supply of new homes in the right areas. If that was that case then property prices would be sensible, renting would be more of a choice, and BTL would really be a service satisfying demand.

The OP's holiday home has of course removed a house from the market, but not housed another family.

The second home question is interesting as it depends on what and where it actually is. Is it somewhere remote where there are no jobs? Was it built as a second home/holiday let, so it wouldn't be there otherwise? And is it too small to get planning permission as a permanent home?

Actually I don't know whether it is possible any more for a home to be too small to be legal- it certainly was in the past, but some of the stuff being put up now is hopelessly cramped.

That will be the next crisis, if we ever build enough homes to get prices in reach again- a large stock of tiny flats, houses with no gardens or hobby/parking space etc which most people don't want but have no choice.

Compare that with houses built in the 20s and 30s- proper rooms and space outside so your neighbour wasn't peering into your bathroom. I know it wasn't great for everyone but at least that was the aspiration for the future then.

[menousername]

Rovinghawk said:

r they could sacrifice & work they way up as many of us did rather than feeling entitled to a dream home from the word go.

I think thats the issue - they have to work harder than you ever did for next to nothing

Dont fool yourself - the ladder is broken - you took the rungs away to protect your investment on the way up

Now you want mortgage and credit card debt of the next generation to fund your retirement that you never earned

[drainbrain]

When our house sells we'll be moving into rental. I imagine we'll be able to rent a far better property than we'd ever be able to buy.

The hard bit'll probably be convincing ourselves to move back later on into something not as good if we do decide to buy again.

Don't quite get the ethical/unethical bit. I've sold properties to tenants before. Why not? There's no shortage.

[mac96]

menousername said:

Rovinghawk said:

r they could sacrifice & work they way up as many of us did rather than feeling entitled to a dream home from the word go.

I think thats the issue - they have to work harder than you ever did for next to nothing

Dont fool yourself - the ladder is broken - you took the rungs away to protect your investment on the way up

Now you want mortgage and credit card debt of the next generation to fund your retirement that you never earned

This doesn't need an intergenerational war attitude. It's really not working for anyone.

Low interest rates= cheap borrowing- pushes up house prices astronomically while other factors prevent enough building to prevent bubble- so younger people cannot get on ladder.

Same low interest rates- poor returns on investment- inadequate pensions, having to work beyond planned retirement date and still a poor pension- not so good for the older ones either.

The generation of 'rich pensioners' is over- these were people retiring on final salary pensions getting say 40/ 60ths of final salary + inflation. There are still obviously plenty alive drawing these sort of pensions, but not many new pensioners fall into this category.

[Kermit power]

98elise said:

Yields are about 4%, and a BTL mortgage is about 4%. How much cheaper do you think rents could drop to?

Bear in mind that you can no longer offset the whole mortgage and margins are getting pretty thin.

Well yes, that's sort of the point! Without Housing Benefit, BTL loses its financial viability, so BTL landlords have to sell up. Supply increases, so prices drop, and we get back to a more normal housing market where more people can afford to buy.

98elise said:

I won't rent to HB tenants due to the chances of non payment and trashing the place. I learnt some expensive lessons in that respect.

I've heard people say that before, but how do you know you're not renting to Housing Benefit claimants?

OK, so rent is usually paid in advance and HB in arrears, but so long as a tenant can afford to cover that gap, what reason is there for them to actually tell their landlord whether they're claiming it or not?

Something like 25% of households are now claiming Housing Benefit, and that rises to over 40% in London. Why is it that so many people seem to think it's just a tiny minority of the most feckless who claim it? It's not. It's a vast subsidy to private landlords, being funnelled through a large number of tenants.

[caelite]

I honestly don't know what to think, to qualify I am a potential first time buyer who's finances prevent him getting on to the ladder, but I see this as more as a product of my situation as I am a 3rd year student only working part time. I consider myself lucky that I have grown up in a very poor (potentially the poorest?) part of the UK just outside of Glasgow, where property prices are still potentially within a achievable level, I imagine those in areas of the south east where values have grown to insane levels are really feeling the pain.

I do agree that the price of housing in the UK is becoming beyond a joke, with values going from ~4x the average wage right up to well over 10x the average wage in some areas of the UK over a few decades, and I do attribute the excess of capital present within the market as a primary factor in driving these prices, it's much easier for those with money to buy above those who are accumulating it, weighting the system heavily in the favour of the older generations, who are coincidentally also those which vote in their droves.

But do I think its unethical? No. BTL is a sound, legal, investment, with almost guaranteed predictable returns, I envy those in the financial situation to buy, but at the same time if I myself where in that kind of situation I would likely commit to the same actions, however with that being said I do think that legislators should grow a backbone and do 'something' to try and weight the housing markets back into the favour of the current active workforce, rather than those using people homes to fund their retirement.

[drainbrain]

http://biblehub.com/isaiah/5-8.htm

[Rovinghawk]

menousername said:

I think thats the issue - they have to work harder than you ever did for next to nothing

Dont fool yourself - the ladder is broken - you took the rungs away to protect your investment on the way up

Now you want mortgage and credit card debt of the next generation to fund your retirement that you never earned

You presume an awful lot about me (& by implication other LLs).

I have a hard, unpleasant, highly skilled day job to back up the rental empire,

[Kermit power]

drainbrain said:

When our house sells we'll be moving into rental. I imagine we'll be able to rent a far better property than we'd ever be able to buy.

The hard bit'll probably be convincing ourselves to move back later on into something not as good if we do decide to buy again.

I don't get that? You pay a mortgage for 25 years, then you've got a house to live in for life. You rent, and you're paying forever.

[drainbrain]

Kermit power said:

I don't get that? You pay a mortgage for 25 years, then you've got a house to live in for life. You rent, and you're paying forever.

Nope I don't suppose you do get it. But I do. The mortgage paying days are over. They've always been IO. The 'capital' part was put to work elsewhere. So now the fairly substantial equity 'created' for nothing by inflation over the decades will get put to work and will pay the rent (forever maybe) on a far better property than we can afford to buy.

O I suppose one day if the 'right' property comes up we'll buy it. But it'll be surprising if it's as good as what we can afford to rent, so buying again will be a downward move in terms of quality so may not happen.

Mind you, these days it'll probably be hard for an OAP to get an IO mortgage. And it's probably not a great idea to sink a load of capital into a residence. So maybe it'll be rent for life. Kind of hope so.

[nikaiyo2]

AdamFX said:

I'd agree with it being a bit unethical, on the basis that (at least in my area) the rent is significantly more p/m than the mortgage payments would be on the same house. That's not providing a service at all; That's primarily the older generations - those with the equity tied up in their own house they bought for a fiver decades ago - leveraging (see: exploiting) their fortunate position to obtain BTLs at the lower end of the housing market. This increases demand, reduces supply and exacerbates the problem almost infinitely until the housing market takes a again with the looming rise in interest rates over the next 5-10 years.

Edited by AdamFX on Friday 22 September 19:40

How on gods earth would you expect rent to be less than a mortgage payment? Do you think you should be able to rent for less than it costs the landlord to service the debt?

It seems odd that you expect a "service," renting property is not a charity, it's a business, what other business is a bit unethical because it does not sell for less than cost.

If I want some cloud software developing, will you do it for free? Can I question your morals for not providing me a service?

[anonymous-user]

Looked at from the perspective that a LL can still borrow IO and on higher multiples than an OO, who is limited to a repayment mortgage then yes: the LL can essentially leverage the tenant's wages more than the tenant can to borrow more to buy the same house

The new PRA and tax rules pretty much put paid to that now so, currently, I think the balance is shifting back towards OOs.

Will there ever be a perfect market for UK housing? No. The government interferes too much

[98elise]

Kermit power said:

98elise said:

Yields are about 4%, and a BTL mortgage is about 4%. How much cheaper do you think rents could drop to?

Bear in mind that you can no longer offset the whole mortgage and margins are getting pretty thin.

Well yes, that's sort of the point! Without Housing Benefit, BTL loses its financial viability, so BTL landlords have to sell up. Supply increases, so prices drop, and we get back to a more normal housing market where more people can afford to buy.

98elise said:

I won't rent to HB tenants due to the chances of non payment and trashing the place. I learnt some expensive lessons in that respect.

I've heard people say that before, but how do you know you're not renting to Housing Benefit claimants?

OK, so rent is usually paid in advance and HB in arrears, but so long as a tenant can afford to cover that gap, what reason is there for them to actually tell their landlord whether they're claiming it or not?

Something like 25% of households are now claiming Housing Benefit, and that rises to over 40% in London. Why is it that so many people seem to think it's just a tiny minority of the most feckless who claim it? It's not. It's a vast subsidy to private landlords, being funnelled through a large number of tenants.

If a landlord sells up, how does that increase supply? The family already in the house need to move somewhere else, so 1 house added, 1 house removed ,= zero change in the market. If you have 101 families looking for a home and 100 homes, the way you finance it will never change the fact that 1 family cannot be housed.

Let's say those 100 homes are all BTL, and we switch them all to Owner occupier by forcing the Landlord to sell them for £1. How much extra supply have we created? The answer is none.

Landlords knows if the Tenant is on HB because you take up references. It's also something you have to let the Insurer know about. Every insurance I've taken out has asked if I've vetted the tenant and if they are on HB.

[red_slr]

Personally I think the ship has sailed now. You either need to be a cash buyer or invest elsewhere. Its a bit of a non event now for proper "BTL".

[Kermit power]

98elise said:

If a landlord sells up, how does that increase supply? The family already in the house need to move somewhere else, so 1 house added, 1 house removed ,= zero change in the market. If you have 101 families looking for a home and 100 homes, the way you finance it will never change the fact that 1 family cannot be housed.

Let's say those 100 homes are all BTL, and we switch them all to Owner occupier by forcing the Landlord to sell them for £1. How much extra supply have we created? The answer is none.

OK, I should've been more specific. To my mind, it depends on whether you're considering the property market overall or the owner-occupier property market, and it all comes back to Housing Benefit again.

As has already been said on this thread, BTL landlords aren't in it to provide a philanthropic service. They're in it to make a profit. There are also letting agents, managing agents and the like looking to make a profit.

How are you able to make a profit? By having your mortgage and other costs add up to less than the rent you can charge. How, in many places, are you able to do that? By having the rent artificially inflated by Housing Benefit.

Throughout the last couple of decades, any property coming on to the market has been targeted by two markets - the BTL market and the OO market. In many cases, the property has ended up going to the BTL market because that is effectively being funded by what end-users can afford as a monthly housing cost PLUS a top up from HB, whereas the OO market is funded only by the end-user's monthly housing budget.

If you remove HB from that equation, both markets are then funded only by the end-user's monthly housing budget, but the BTL market has to take out all of the additional costs of running it as a rental and still making a profit. You're correct in saying that there would be no overall change in the amount of property supply on the market, but the supply to the OO market would increase significantly, at the expense of demand from the BTL market.

98elise said:

Landlords knows if the Tenant is on HB because you take up references. It's also something you have to let the Insurer know about. Every insurance I've taken out has asked if I've vetted the tenant and if they are on HB.

I'm still struggling with this concept. If we were talking about social housing tenants where the council is completely fitting the bill, then I'd completely understand your reservations, and your above sentence would make complete sense.

Where it doesn't make sense to me is when you consider that almost half the households in London are in receipt of Housing Benefit.

I can understand why both a landlord and an insurance company would care to know if you've got a feckless tenant being fully funded by the council.

If, on the other hand, a tenant is, let's say, a receptionist or a nurse paying a rent of £150 per week that's being funded £130 by them and £20 by Housing Benefit, I don't understand why you or your insurance company would even want to know, much less care! How is that tenant any more likely to trash your property and do a runner on the rent than one paying the full £150?

You're also working on the assumption that people are actually telling you and their previous landlords that they're in receipt of Housing Benefit to give you accurate references, aren't you?

If I was one of the 40% of London households in receipt of Housing Benefit and I frequently came up against landlords who refused to have tenants who were claiming any amount of Housing Benefit, I'd simply open another bank account and have the council pay my Housing Benefit into that so that I could give you three months of bank statements with no payments from the council on them, and hey presto, I'm not a Housing Benefit tenant.

[King Herald]

C.A.R. said:

I think having a single BTL property, with modest rent, is fine.

Modest rent? I think anybody who rents out for profit will be eeking the maximum they comfortably can charge for rent.

Rough guess, quick calculation off the top of my head, but renting out for fifteen years before a property has even paid for itself means any investor wants to get the max return out of it.

We rented our place for £600 a month, a 150k 3 bed semi, but that looks below normal rent for our town.

I would dread having to start again, buying a first place, the way prices have gone in much of the UK, so I can clearly see why people do rent. Although prices in my home town don't appear to have moved much in ten years.