BTL after CV

Author
Discussion

Jon39

12,782 posts

142 months

Wednesday 1st July 2020
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R33FAL said:
..... (on a 10-15 year view how long can interest rates stay at 3-decade lows)??

( An experienced BTLer, who has carried out a current detailed study of returns and describes caution for the BTL future.
Fairly rare on here. )

3-decades

The Bank of England Base Rates are now the lowest since 1694, even before the formation of the UK in 1707.

Over 300 years. That must tell us something, perhaps a warning, but what this means for the future, I dont know.







Edited by Jon39 on Wednesday 1st July 12:22

Groat

5,637 posts

110 months

Wednesday 1st July 2020
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R33FAL said:
Seems a lot less hassle to just buy Fundsmith/Lindsell Train - which sure isn't foolproof but it's liquid and self-sustaining - but keen to hear where I am wrong.
There's a pretty active market for fast fashion wear, but you'd struggle to make it work in the Amazon jungle. High end supercar dealerships do very well in Kensington, but I'd hesitate to open one on Raasay. And a van selling lovely bacon rolls and craft beer might encounter all sorts of problems in Karachi.

Try thinking of btl the same way. Under certain conditions it can struggle and fail. Under others it can be super viable. (Not unlike just about everything else).

So

26,271 posts

221 months

Wednesday 1st July 2020
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Groat said:
And a van selling lovely bacon rolls and craft beer might encounter all sorts of problems in Karachi.
Damn [tears up business plan]

R33FAL

530 posts

167 months

Wednesday 1st July 2020
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Jon39 said:

( An experienced BTLer, who has carried out a current detailed study of returns and describes caution for the BTL future.
Fairly rare on here. )

3-decades

The Bank of England Base Rates are now the lowest since 1694, even before the formation of the UK in 1707.

Over 300 years. That must tell us something, perhaps a warning, but what this means for the future, I dont know.

Edited by Jon39 on Wednesday 1st July 12:22
Ha fair point, I meant to say "have been one-way trajectory for the last 3 decades" if not longer, from 15% in 1990 to now (or 17% in 1979). All I know is it seems there is more room for rates to go up than down... biggrin

R33FAL

530 posts

167 months

Wednesday 1st July 2020
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Groat said:
There's a pretty active market for fast fashion wear, but you'd struggle to make it work in the Amazon jungle. High end supercar dealerships do very well in Kensington, but I'd hesitate to open one on Raasay. And a van selling lovely bacon rolls and craft beer might encounter all sorts of problems in Karachi.

Try thinking of btl the same way. Under certain conditions it can struggle and fail. Under others it can be super viable. (Not unlike just about everything else).
Up north somewhere, maybe you can still make it work... South East... it looks like the math is stacked against BTL

Groat

5,637 posts

110 months

Wednesday 1st July 2020
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R33FAL said:
Up north somewhere, maybe you can still make it work... South East... it looks like the math is stacked against BTL
O I think it can be made a cock of (or a success) regardless of where you are. Don't think it's entirely geography that decides things.

And if your letting plan involves full management (and I'd suggest this is not an era for DiY landlording) then area (or even country/continent) matter even less.

Jon39

12,782 posts

142 months

Wednesday 1st July 2020
quotequote all

R33FAL said:
Jon39 said:

( An experienced BTLer, who has carried out a current detailed study of returns and describes caution for the BTL future.
Fairly rare on here. )

3-decades

The Bank of England Base Rates are now the lowest since 1694, even before the formation of the UK in 1707.

Over 300 years. That must tell us something, perhaps a warning, but what this means for the future, I dont know.

Edited by Jon39 on Wednesday 1st July 12:22
Ha fair point, I meant to say "have been one-way trajectory for the last 3 decades" if not longer, from 15% in 1990 to now (or 17% in 1979). All I know is it seems there is more room for rates to go up than down... biggrin

As you will know Rafal, it is a peculiar situation.
Traditionally interest rates have been used to vary demand. Lowering rates stimulates demand and vice-versa.

Rates were lowered immediately during the 2008 financial crisis. That helped minimise the anticipated unemployment, but with the high levels of corporate and consumer debt, there was then clearly reluctance to increase rates, as would have been normal, because disaster could have struck so many who were only just managing to service their debt.

Those same circumstances have continued, so how it can change I don't know.
The interest rate ecomomic lever seems to be unavailable at present.

If rates were to increase, we need to remember that, (say) 1% up to 2% sounds to many like a 1% increase. Of course the amount of interest actually paid on a debt would double !



dogz

332 posts

255 months

Wednesday 1st July 2020
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Jon39 said:
If rates were to increase, we need to remember that, (say) 1% up to 2% sounds to many like a 1% increase. Of course the amount of interest actually paid on a debt would double !

I know what you are saying but its a bit misleading. I'd wager a typical BTL mortgage is 3%+ so a 1% rise is an increase of 1/3. If rates went to 6% then yes the interest would double. I absolutely agree that rates are at an all time low and they can really only go one way in the longer term

I take all my BTL's on a cap repayment basis and usually over a 15 yr term which gives me a good trade off between interest paid, getting the asset paid off and affordability. Some will disagree this is a good approach but it works for me


dmahon

2,717 posts

63 months

Wednesday 1st July 2020
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I’ve been looking into BTL. I realised I wasn’t cut out for the volatility in the markets so I’m looking at BTL for a steady return and to protect me from myself. I think if you are realistic, 3% should be achievable in many places in the SE which isn’t spectacular but it sure as hell beats the bank.

The IO strategy obviously gives a much better yield, but it would feel strange having mortgages which aren’t being paid off so I think I’m going to put chunky deposits down with repayment mortgages and aim for them to be paid off around retirement.

It’s quite a reluctant move for me as I’ve never wanted the hassle, but it seems one of the few steady places to get a yield.

Think I’ll wait till COViD settles to make any big moves though.

Groat

5,637 posts

110 months

Wednesday 1st July 2020
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Have you ever thought about buying a provably successful fully managed portfolio?

So

26,271 posts

221 months

Thursday 2nd July 2020
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Groat said:
Have you ever thought about buying a provably successful fully managed portfolio?
This is an interesting consideration.

We have a portfolio of properties that we have owned for years and are selling off slowly via a local agent.

We are only selling it due to tax changes. We COULD continue to manage them for a new owner.

They are generating just over 10% gross, so the fat is there. It is just a matter of whether we would want to do it long-term.

Food for thought though.


Pit Pony

8,265 posts

120 months

Thursday 2nd July 2020
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I have a single BTL

Its in a nice area, with good schools, decent road links, and is a nice family 3 bed. Priced very carefully, self managed, with a view to paying off the mortgage by the time I'm 65.
The rent will be part of my pension. About 1/3 of what I need and 1/5 of what I want.

I tried to buy a similar house a couple of years ago, but wife kyboshed it, for no logical reason.

However last year I bought a house that I was planning to live in during the week, due to working away from home.

Now that work has dried up, we have 3 options. Rent it out. Sell. Use it as a holiday home and hope work comes back.

It's a weird house for a rental. 2 massive beds. 2 luxury bathrooms, 2 lounges one with Juliet balcony onto rear, and a dining room, small outdoor space (but nice) and a decent kitchen.
Parking on the road. 1847 build.

We are going to get a few letting agents and estate agents around to advise. And then ignore them.

The problem is the local area has industry that is making 1000s redundant.

ben_h100

1,546 posts

178 months

Thursday 2nd July 2020
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This is something I’m definitely looking to get into. Up north (north Wales to be exact) a rentable terrace can be had for around £100k and rent at £5-600 pcm. £30k deposit with a view to clearing the mortgage within 10 years. Ten year plan is to have 2-3 properties to supplement my income and eventually pension.

Phooey

Original Poster:

12,574 posts

168 months

Saturday 15th August 2020
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Has anyone recently done any research into which lenders are offering the best rates? I can easily find information for a standard residential mortgage online, but not for BTL. I'm trying to get an idea of how much per £100k of borrowing a repayment (Capital + Int) would roughly cost per month over a 15 and 20yr term.

Example property I've found is a 3 bed @ £230k which would rent for £900/mth. 4.5% yield before costs / voids. Before applying or wasting anyones time, I want to get an idea in my head of how much per month the mortgage will be? I'm not interested in discounted terms.. just looking for total cost of borrowing.

Cheers

dogz

332 posts

255 months

Saturday 15th August 2020
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Phooey said:
Has anyone recently done any research into which lenders are offering the best rates? I can easily find information for a standard residential mortgage online, but not for BTL. I'm trying to get an idea of how much per £100k of borrowing a repayment (Capital + Int) would roughly cost per month over a 15 and 20yr term.

Example property I've found is a 3 bed @ £230k which would rent for £900/mth. 4.5% yield before costs / voids. Before applying or wasting anyones time, I want to get an idea in my head of how much per month the mortgage will be? I'm not interested in discounted terms.. just looking for total cost of borrowing.

Cheers
Go onto compare the market as a starter for 10 and search on BTL's. Enter the property value, deposit and term and out will come the number. Just be careful as often the lowest APR isn't the best overall once you factor in fees

Once you have found a few lenders you like, look on their intermediary websites to understand lending criteria, rental cover etc and see what other products are available.

Phooey

Original Poster:

12,574 posts

168 months

Saturday 15th August 2020
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dogz said:
Go onto compare the market as a starter for 10 and search on BTL's. Enter the property value, deposit and term and out will come the number. Just be careful as often the lowest APR isn't the best overall once you factor in fees

Once you have found a few lenders you like, look on their intermediary websites to understand lending criteria, rental cover etc and see what other products are available.
I’ll do that, thanks. What I did earlier was a search for residential mortgages and then just added a bit on. I’m trying to refine it by total costs rather than introductory etc. Also need to find a lender which accepts dividends as income. The rest shouldn’t be a problem as no further debt and a good credit history.

Phooey

Original Poster:

12,574 posts

168 months

Sunday 16th August 2020
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dogz said:
Go onto compare the market as a starter for 10 and search on BTL's. Enter the property value, deposit and term and out will come the number. Just be careful as often the lowest APR isn't the best overall once you factor in fees

Once you have found a few lenders you like, look on their intermediary websites to understand lending criteria, rental cover etc and see what other products are available.
Just had a play on it - good site and exactly what I wanted. 100k over 15yrs is around £600/mth and over 20yrs roughly £470/mth. thumbup


Onetrackmind

813 posts

212 months

Saturday 22nd August 2020
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I’m about to pick up a 2/3 bed BTL house. The plan is to pick up a few more and eventually use them as a pension.

I’ve looked at the stock market and, at one point, was going to go down the road of using low-cost indexes as a pension to amass a sum to live off when I retire. It seems the returns from indexes will be higher than BTL, however, I would have to add monthly deposits to these indexes over a much longer period of time to reach my goal.

If I go for say 4 BTL properties, once the deposits are saved, the tenants are effectively paying off the mortgage so I won’t need to add monthly deposits to reach the goal. Of course, there will be repairs and vacant periods, but the bulk of the money injected to paying off the mortgages is down by the tenant.

I don’t really intend to profit off these for 15-20 years, but once I get to that point, the rental incomes, combined with some pensions should be a decent retirement income. At least that’s the plan.

Phooey

Original Poster:

12,574 posts

168 months

Saturday 22nd August 2020
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Pretty much the same thinking as me.

I'm not interested in HMOs or student/multi let properties. I was thinking along the lines of 3 bedroom modern semi-detached houses (seem more of a shortage over 2 beds) for approx 230k each. Rent will be approx £900/mth give or take. LTV them at approx 50-60% over 15yrs - repayment. Tennant is paying the mortgage effectively. Rinse and repeat x 4or5 = £40-50k/yr pension. Something for hopefully my daughter to inherit.

Ideally I would want to see a tax specialist who can advise whether the above^^ would be better to put into a Ltd co (SPV?) or not.

In theory should be simple, but because the gov don't like BTL, it needs to be set up correctly from day 1.


Onetrackmind

813 posts

212 months

Saturday 22nd August 2020
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Consider setting it up as a limited company if you’re a high tax rate earner.