BTL - how does it make money?
Discussion
c6r said:
in Japan prices dropped almost continuously after the bust in 1989 and only really started flattening out or going up a bit 25 years later. surprisingly enough, BTL is not really a popular thing there!
https://www.realestate-tokyo.com/news/world-real-estate-investment-2020/https://www.realestate-tokyo.com/news/world-real-e...
Groat said:
c6r said:
in Japan prices dropped almost continuously after the bust in 1989 and only really started flattening out or going up a bit 25 years later. surprisingly enough, BTL is not really a popular thing there!
https://www.realestate-tokyo.com/news/world-real-estate-investment-2020/https://www.realestate-tokyo.com/news/world-real-e...
superlightr said:
philv said:
Don't forget the ever more demanding EPC.
By 2030, a rental will require a B rating at a cost of up tp 10000.
And if labour ever get in, you might as well hand them the keys.
I dont think that is correct. At present nothing has been passed and the talk is about C rating from 2030. Current rating min is E so my bet would be that it gets watered down to a D rating in 2035By 2030, a rental will require a B rating at a cost of up tp 10000.
And if labour ever get in, you might as well hand them the keys.
https://www.gov.uk/guidance/domestic-private-rente...
I’d also reckon on D as near term, possibly C in the future mainly because even at C you’ll end up with many houses being subject to exemption which makes the whole thing pointless. Some of the EPC suggested improvements are already laughable in their payback times and represent things that neither an owner occupier or landlord could ever justify doing.
Push to B without and exemption regime and you’d be looking at only new/recent builds qualifying and a lot of stock out of the rental market as a result.
I recently sold a house to someone who bought it for btl.
260k purchase price, plus fees.
It was marketed for £1200/m then dropped to £1100/month. The return on investment just didn't seem worth it to me. Around 5% before any costs/agency fees/ tax/ maintainance. Not sure if it makes any difference that it was bought by a British citizen living in Bermuda?
There would have definitely been better yielding properties, equally I wasn't complaining!
260k purchase price, plus fees.
It was marketed for £1200/m then dropped to £1100/month. The return on investment just didn't seem worth it to me. Around 5% before any costs/agency fees/ tax/ maintainance. Not sure if it makes any difference that it was bought by a British citizen living in Bermuda?
There would have definitely been better yielding properties, equally I wasn't complaining!
I have a couple of btl’s that I’ve had for 3 & 5 years respectively. One owes me £112k the other about £130k. The repayment mortgage on each is approx £500 per month and the rental is £725. After tax and costs I’m about £100 per month up but each house is now worth £200k and they’ll be fully paid paid for in 9 years. In effect, by the time the mortgages are paid off, I will have built up over £500k of assets for little personal outlay other than mortgage deposits. Being credit worthy and having a little cash means someone else is buying me a house.
4Q said:
I have a couple of btl’s that I’ve had for 3 & 5 years respectively. One owes me £112k the other about £130k. The repayment mortgage on each is approx £500 per month and the rental is £725. After tax and costs I’m about £100 per month up but each house is now worth £200k and they’ll be fully paid paid for in 9 years. In effect, by the time the mortgages are paid off, I will have built up over £500k of assets for little personal outlay other than mortgage deposits. Being credit worthy and having a little cash means someone else is buying me a house.
This makes sense. I'd be interested to do this - have deposit, have good credit score, Is there some service where I can just put the money and let someone else take the hassle for a cut? Would a property fund do this?I successfully avoid managing people in my day job, and have made that a general rule for myself as i canae be arsed with people's issues. Getting involved in peoples private lives via a BTL (meaning if they won't pay or something happens and they can't pay etc sob stories and all that) is not my bag.
bmwmike said:
This makes sense. I'd be interested to do this - have deposit, have good credit score, Is there some service where I can just put the money and let someone else take the hassle for a cut? Would a property fund do this?
I successfully avoid managing people in my day job, and have made that a general rule for myself as i canae be arsed with people's issues. Getting involved in peoples private lives via a BTL (meaning if they won't pay or something happens and they can't pay etc sob stories and all that) is not my bag.
https://www.caledoniaportfoliobuilders.co.uk/I successfully avoid managing people in my day job, and have made that a general rule for myself as i canae be arsed with people's issues. Getting involved in peoples private lives via a BTL (meaning if they won't pay or something happens and they can't pay etc sob stories and all that) is not my bag.
https://www.caledoniaportfoliobuilders.co.uk/
Groat said:
Thanks, will take a look. Any personal experience? bmwmike said:
Thanks, will take a look. Any personal experience?
Lol....52 years worth. 
Davy and I have been partners, next door neighbours and friends for many years, though not necessarily all at the same time.
It's not for bulls
tters, timewasters or window shoppers though, as you'll very quickly find out if you make any serious approach. Edited by Groat on Friday 4th February 19:36
REIT is the net effect of good bad and ugly and fees etc.
The more you go it alone the more exposed to higher ROI and higher risk.
Everyone on PH bangs on about vanguard global trackers etc.
Moral hazard abound!
Obviously I’m playing devils advocate here.
I quite fancy a BTL or two maybe, using IO and buying stuff to do up to then rent.
But you need to have your eyes open on the risks which are out there.
Ie, what happens with IO if your interest rate goes up, rents go down, and property prices down?
It might seem unlikely but it’s a risk all the same.
The more you go it alone the more exposed to higher ROI and higher risk.
Everyone on PH bangs on about vanguard global trackers etc.
Moral hazard abound!
Obviously I’m playing devils advocate here.
I quite fancy a BTL or two maybe, using IO and buying stuff to do up to then rent.
But you need to have your eyes open on the risks which are out there.
Ie, what happens with IO if your interest rate goes up, rents go down, and property prices down?
It might seem unlikely but it’s a risk all the same.
98elise said:
I Disagree. It was part of a raft of punitive changes planned by Labour at the last election, including....
Rent controls
Land Value Tax
Long leases
Right to buy at a 25% discount (funded by the landlord)
Given that gross yeilds in the private rental sector are about 5% landlords would be fked. Value tax and profit taxes, no ability to raise rents to cover, and you're trapped letting a loss making asset. Add to that your asset is now worth 25% less if you want to sell (but your taxes are based on full market value).
It will only take a change of government.
I don’t know how right to buy at a 25% discount is possible. Rent controls
Land Value Tax
Long leases
Right to buy at a 25% discount (funded by the landlord)
Given that gross yeilds in the private rental sector are about 5% landlords would be f
ked. Value tax and profit taxes, no ability to raise rents to cover, and you're trapped letting a loss making asset. Add to that your asset is now worth 25% less if you want to sell (but your taxes are based on full market value).It will only take a change of government.
Let’s say house market has moved backwards from purchase price so the sale is say 75% or less than the LL paid.
Plus LL pays 28% CGT on any upside.
Plus let’s assumed it’s mortgages to the hilt & market has gone backwards & LL doesn’t have any savings or other assets how could they sell it 25% less than they bought it and not be able to clear the mortgage?
Would simply evict tenants.
Welshbeef said:
Got to wonder how anyone thought it was remotely workable.
All tenants evicted overnight
Why would that bother a regime who had decided to enforce BMV sale of private property? Especially as in their fantasy the evictions would be blocked by courts they controlled whilst the tenants were in process of becoming the owners. All tenants evicted overnight
Of course where the payment for the 75% of value purchases was to come from is another story. I suppose they could raise it from a 25% windfall tax on wealth/assets or even easier, simply print it and gift it.
Never mind, it only scared about 11 people into selling up, and 9 of them have bought back in again anyway.
Edited by Groat on Saturday 5th February 17:05
Rob_125 said:
I recently sold a house to someone who bought it for btl.
260k purchase price, plus fees.
It was marketed for £1200/m then dropped to £1100/month. The return on investment just didn't seem worth it to me. Around 5% before any costs/agency fees/ tax/ maintainance. Not sure if it makes any difference that it was bought by a British citizen living in Bermuda?
There would have definitely been better yielding properties, equally I wasn't complaining!
What if he bought it with a £52k deposit and mortgaged the remaining £208k at approx £350 a month? Likely coining in a 10% yield on his £52k before capital growth. Do that a few times and he can be financially independent whilst sitting on his backside in Bermuda. Not such a bad move?260k purchase price, plus fees.
It was marketed for £1200/m then dropped to £1100/month. The return on investment just didn't seem worth it to me. Around 5% before any costs/agency fees/ tax/ maintainance. Not sure if it makes any difference that it was bought by a British citizen living in Bermuda?
There would have definitely been better yielding properties, equally I wasn't complaining!
Edited by dmahon on Sunday 6th February 11:16
Groat said:
Would that be classed as an FCA regulated activity?Groat said:
Welshbeef said:
I don’t know how enforced right to buy at a 25% discount is possible.
Don't even waste 2 seconds thinking about it. It was unimplementable nonsense. Crackpot "policy" of an unelectable fool.Article 17 - EU Charter of Fundamental Rights said:
No one may be deprived of his or her possessions, except in the public interest and in the cases and under the conditions provided for by law, subject to fair compensation being paid in good time for their loss.
I'd happily sell any of my BTL's to my tenants (I'm not emotionally attached to them) but only at a fair market value. If Labour want to make that easier for tenants I have no issues, but not making me personally fund it.98elise said:
I'd happily sell any of my BTL's to my tenants (I'm not emotionally attached to them) but only at a fair market value. If Labour want to make that easier for tenants I have no issues, but not making me personally fund it.
it would have to be above market value as if you as the LL wanted to re-invest you would be hit by the 2nd home tax in re-purchasing plus solicitors fees and also the time and effort to find another property.superlightr said:
98elise said:
I'd happily sell any of my BTL's to my tenants (I'm not emotionally attached to them) but only at a fair market value. If Labour want to make that easier for tenants I have no issues, but not making me personally fund it.
it would have to be above market value as if you as the LL wanted to re-invest you would be hit by the 2nd home tax in re-purchasing plus solicitors fees and also the time and effort to find another property.Gassing Station | Finance | Top of Page | What's New | My Stuff