Is BTL still possible?
Discussion
Welshbeef said:
Because they have committed developments/planning permission & the return they yield from flats is higher. Also in London we see foreign buyers come in and buy the entire high rise outright off plan
Do you think they'll be in for a surprise when they find out 'flats are dead', or do you think the notion of 'flats are dead' is actually just nonsense?Groat said:
Welshbeef said:
https://www.google.co.uk/amp/s/www.housebeautiful....
Plenty of resources stating demand is for houses away from flats -> due to lockdowns obvs.
Humour me.Plenty of resources stating demand is for houses away from flats -> due to lockdowns obvs.
Go on Rightmove.
Search any town or city in the UK. Then 'houses to rent'. Note the number of results. Then 'flats to rent'. Note the number of results.
Compare the two.
See the problem with the 'flats are dead' notion?
How many builders are going to stop their multi storey build-to-rent project and put a handful of build-to-rent houses on the site instead?
At a guess I'd say NONE.
Ask yourself why?
Groat said:
Nope.
There are 10 times the number of flats because there are 10 times the number of people who can afford their rent.
People want houses not flats. There are 10 times the number of flats because there are 10 times the number of people who can afford their rent.
Sadly developers have been building high rise flats for a long time and continue to do so. A house with garden is better than a flat in every possible way
Welshbeef said:
People want houses not flats.
Sadly developers have been building high rise flats for a long time and continue to do so. A house with garden is better than a flat in every possible way
SOME people want houses not flats. There are even some people who can afford them too. Most can't, especially in SE, and anyway there aren't enough of them so they can want all they like.Sadly developers have been building high rise flats for a long time and continue to do so. A house with garden is better than a flat in every possible way
But as one who has moved from a house to a flat I can assure you that for me the flat is the far far better option, not least because my missus far prefers it.
Welshbeef said:
Groat said:
Nope.
There are 10 times the number of flats because there are 10 times the number of people who can afford their rent.
People want houses not flats. There are 10 times the number of flats because there are 10 times the number of people who can afford their rent.
Sadly developers have been building high rise flats for a long time and continue to do so. A house with garden is better than a flat in every possible way
I'm in the early stages of buying a flat to rent out. It's central in a picturesque village in the Chilterns on the overground line into Marylebone. Post tax yield is likely is only going to be 1.5% on flat value or 7% on my investment. I just want to add it as an asset and leverage myself up a bit.
I get LLs are bailing a bit probably due to increased overheads and legislation, and rising prices due to demand for houses.
So more demand.
Then I see lots of people selling houses and renting to move in this market.
I’ve seen two properties out of four, and the seller said they’d rent to let us complete fast.
So more demand.
Who knows where any of the sliders on interest rates, costs, demands on rent and demands on the property sale market etc will all end up.
All that said I’m about to pay £374,950 for a 4 bed house house to live in for a bit and then rent out later.
It’s hard gauging if £375k in ISAs is a better bet or not wrt income.
So more demand.
Then I see lots of people selling houses and renting to move in this market.
I’ve seen two properties out of four, and the seller said they’d rent to let us complete fast.
So more demand.
Who knows where any of the sliders on interest rates, costs, demands on rent and demands on the property sale market etc will all end up.
All that said I’m about to pay £374,950 for a 4 bed house house to live in for a bit and then rent out later.
It’s hard gauging if £375k in ISAs is a better bet or not wrt income.
Mr Whippy said:
All that said I’m about to pay £374,950 for a 4 bed house house to live in for a bit and then rent out later.
It’s hard gauging if £375k in ISAs is a better bet or not wrt income.
There are some obvious tax advantages to ISAs, but one of the reasons I like property is the way you can combine an indexation element with taking an income. It’s reasonable to assume that rents will broadly track underlying asset values in most markets so if you’re able to see say a 5% yield at current prices you’d hope to still be getting 5% of the relevant value 20+ years in the future. It’s hard gauging if £375k in ISAs is a better bet or not wrt income.
Whenever I look at increasing fund holdings it’s the ability to see the capital keep up with inflation (big concern right now) whilst also drawing an income that tends to be missing. I can either take an income or see the capital try to keep up with inflation. I’ve yet to have a wealth manager confidently suggest that they can achieve both. Some suggest it might be possible with some of the higher risk funds but obviously it’s higher risk, not guaranteed etc. There is some merit to the idea of putting more into funds until more income is needed from it but that always feels like kicking the problem down the road.
I don’t think I’d want a single BTL due to the hassle, tax if you buy it personally, and concentration (assuming that £375k represents a decent chunk of money). Also probably means you’ll be paying the higher sdlt on the house you then buy to live in.
FWIW, I’d also be wary about anyone who thinks they’re going to move in to rented to get a sale across the line. Some do, but to make it worthwhile you’re probably paying a premium for them to do so. There really isn’t much rental stock out there and demand is high. Given a choice between someone wanting to rent because 1) they’d sold and hadn’t found somewhere to buy; or 2) they wanted to live there long term, I doubt many would choose the first…
In that situation you may be able to put a let to buy mortgage on rental property to use to increase deposit on purchase.
Use a broker without any doubt though.
Usually a Let to buy mortgage will be at a higher rate than resi mortgage at the same loan to value, but higher deposit will result in better ltv on resi and therefor reduce interest rate on resi.
Use a broker without any doubt though.
Usually a Let to buy mortgage will be at a higher rate than resi mortgage at the same loan to value, but higher deposit will result in better ltv on resi and therefor reduce interest rate on resi.
Edited by Stevemr on Friday 20th August 23:27
It appears that where we are the rental market has gone bonkers and rents are on the up.
Most likely this is due to George Osborne’s attack upon landlords and local authorities’ property tax schemes, known as “licensing”.
There is a marked shortage of rented stock and an almost frantic response to anything that becomes available.
Most likely this is due to George Osborne’s attack upon landlords and local authorities’ property tax schemes, known as “licensing”.
There is a marked shortage of rented stock and an almost frantic response to anything that becomes available.
Zio Di Roma said:
It appears that where we are the rental market has gone bonkers and rents are on the up.
I've been watching the market where I live for the past 10yrs. This is the biggest jump in rental prices vs lowest amount of stock available I have ever seen. 2-beds which used to average £650-750/mth have increased to 750-900. There has always been a shortage of 3-beds, and one that came on recently at 1000/mth let almost immediately. The yield is still poor though - I know exactly where that 3-bed is and it's a £260-275k property. Without any voids/operating costs it is approx 4.5%yield AT BEST. Still better than money in the bank, and use leverage it's tight but still worth doing as a diversified long-term portfolio. IMO.Zio Di Roma said:
It appears that where we are the rental market has gone bonkers and rents are on the up.
Most likely this is due to George Osborne’s attack upon landlords and local authorities’ property tax schemes, known as “licensing”.
There is a marked shortage of rented stock and an almost frantic response to anything that becomes available.
More likely the combination of supply and demand with increased house prices also having an impact (you’re not going to buy/rent a place if the return is too low). For us it has nothing to do with George or licensing but you’re right that if there were increased costs people will look at passing these through if the local market can bear them. Most likely this is due to George Osborne’s attack upon landlords and local authorities’ property tax schemes, known as “licensing”.
There is a marked shortage of rented stock and an almost frantic response to anything that becomes available.
Phooey said:
I've been watching the market where I live for the past 10yrs. This is the biggest jump in rental prices vs lowest amount of stock available I have ever seen. 2-beds which used to average £650-750/mth have increased to 750-900. There has always been a shortage of 3-beds, and one that came on recently at 1000/mth let almost immediately. The yield is still poor though - I know exactly where that 3-bed is and it's a £260-275k property. Without any voids/operating costs it is approx 4.5%yield AT BEST. Still better than money in the bank, and use leverage it's tight but still worth doing as a diversified long-term portfolio. IMO.
Yes - huge shortage of 3+bed properties. Results in up to 20 inquiries for a typical family rental inside 24-48hrs, with at least 4-5 passing initial screening. Usually the first one through the door wants it (tends to only happen with down-sizers when the reality of what £x/mth gets dawns on them). We’ve seen the local market go from £695 to £750 inside the past 9 months or so. Theres also almost nothing available 4/5 bed so even bigger places (£750k+ value) don’t hang around in spite of rents being significant (£2500-5000) but the very top end ones seem to hang around.
Yield figures for us are in excess of what you’re seeing and in some parts of the country will be much higher (look at some of the stuff Groat has posted!). Landlords who bought when prices were lower will also be seeing much higher yields… the economics of that £260k-275k property @ £1k mth look much better if you paid £130-150k for it a few years back.
People, including so called financial journalists, still look at "yield," and compare to investment income, while losing site of the fact that, not only is the underlying asset going to increase in value over the long term, but the rental income is also going to increase, roughly in line with inflation.
If you look at the amount you need for an annuity with a fixed income, compared to the amount you need to achieve an index linked income, it gives you an idea as to how valuable this is.
If you look at the amount you need for an annuity with a fixed income, compared to the amount you need to achieve an index linked income, it gives you an idea as to how valuable this is.
There are also purchase costs, maintenance costs, periods where it might be unoccupied, potential hassles with tenants, interest on borrowing, capital gains, inheritance tax and other things to consider when liquidating properties. How long does it take to liquidate etc. There are other investments which are more easily accessible than properties. It isn’’t for everyone.
Stevemr said:
People, including so called financial journalists, still look at "yield," and compare to investment income, while losing site of the fact that, not only is the underlying asset going to increase in value over the long term, but the rental income is also going to increase, roughly in line with inflation.
If you look at the amount you need for an annuity with a fixed income, compared to the amount you need to achieve an index linked income, it gives you an idea as to how valuable this is.
An annuity is a very poor comparison.If you look at the amount you need for an annuity with a fixed income, compared to the amount you need to achieve an index linked income, it gives you an idea as to how valuable this is.
I have equal amounts invested in property vs stocks and shares.
My S&S I pay no tax on the growth (100% in 5 years) and very little on the money I withdraw.
I pay insurance, maintenace and repairs on my BTL, and what's left gets taxed.
I can also liquidate my entire S&S holdings in 24 hours. Not so easy with property.
You misunderstand me, I am not trying to compare annuities with BTL at all, just using that as an example of how valuable an increasing income is. Which does seem to be something that most articles comparing BTL with other investments does not seem to account for.
I totally agree BTL is not for everyone, and it’s getting harder and harder with increasing legislation, ie EPC s, electric reports, tax changes etc. etc.
I totally agree BTL is not for everyone, and it’s getting harder and harder with increasing legislation, ie EPC s, electric reports, tax changes etc. etc.
LooneyTunes said:
Landlords who bought when prices were lower will also be seeing much higher yields… the economics of that £260k-275k property @ £1k mth look much better if you paid £130-150k for it a few years back.
yes, absolutely. Interest rates in part have a lot to answer for. fwiw - the £275k (£1000/mth rent) property in my example above was £159k in December 2013.. and £163k in November 2005!
Have recently re let a property. Rent increased 17% since last let 3 years ago. Trouble is, so have the costs. LL now has to pay for check out and check in fees, credit checks for new tenants etc etc. It all has to be paid for. In many ways it’s a complete PITA but the combination of long term growth and income in the meantime makes it tolerable, but only just. Oh, and I’m not leveraged. If I was I don’t think it would stack up, net yield 3% assuming no voids or unexpected costs.
troika said:
Oh, and I’m not leveraged. If I was I don’t think it would stack up, net yield 3% assuming no voids or unexpected costs.
I think it depends on your circumstances. But I think using a mortgage whilst interest rates are this low isn’t a bad way of taking advantage of cheap borrowing to return you a fully paid-up property.Gassing Station | Finance | Top of Page | What's New | My Stuff