Buy to Let - Immoral?

Buy to Let - Immoral?

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Discussion

WinkleHoff

Original Poster:

688 posts

204 months

Monday 5th May 2014
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Might seem like an odd question this, but in the next year or so my wife and I might be lucky enough to buy a second property as an investment or pension fund, which we would let out. However, are people like me simply making a bad situation worse in terms of the market and negating young peoples abilities to get a foot on the ladder? It does trouble me, but I really cannot think of anywhere else to put our savings. We have a little boy, he is 1 year old, when the time comes for him to buy a house I just cannot see how he will do it without our help. I wonder how much BTL investors are contributing to the inflated market, lack of housing stock etc. In our small street of eight houses, two are landlord owned for the long term, very little comes up for sale here, and the prices in my general locality keep rising, as there simply is no supply and a pretty big queue of buyers.

Thoughts welcome.

davepoth

29,395 posts

168 months

Tuesday 6th May 2014
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Immoral would only be the case if you were buying with the specific intention of depriving people of a house. That's not happening (I hope!), and if this house purchase is with the aim of giving your kid somewhere to set up home in 18 years' time, it's laudable IMO.

The market situation right now is such that houses make good investments for anyone with a bit of spare cash. Interest rates are so low that it's very hard to make a decent return elsewhere.

HOWEVER

Interest rates will rise, that much is certain. They won't rise quickly, but a lot of people are quite heavily mortgaged on their BTLs, meaning they won't have too much room before they're making a loss on the property. What that will do to property prices is anyone's guess.

Again though, if you're in for the long term aim of giving your kid a property in the future, you will be exceptionally unlucky to lose money over that sort of timescale.

slybynight

391 posts

90 months

Tuesday 6th May 2014
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Buy to let with your own money..... totally morally correct. Borrow to let..... I think morally wrong, but at least comes with the risk of losing your shirt.

Simpo Two

76,071 posts

234 months

Tuesday 6th May 2014
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But someone will be looking to rent and if you don't buy the property they might not be able to... ie you can argue it every which way. Whatever you do, the market is not going to change, just like using a carrier bag twice doesn't change the climate.

fluffnik

20,156 posts

196 months

Tuesday 6th May 2014
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Build to let. smile

WinkleHoff

Original Poster:

688 posts

204 months

Tuesday 6th May 2014
quotequote all
Build to let is a nice idea, but not too many opportunities for that around here! Land is at a premium. Some interesting perspectives which make me feel less bad.

98elise

20,134 posts

130 months

Tuesday 6th May 2014
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BTL doesn't reduce the housing stock, it just shifts the ownership from one entity to another (unless you intend to leave it empty!).

Its a business so nothing wrong with doing it for profit, or borrowing to do it.

As you can guess I do BTL, and apart from it being a better investment than cash I also intend to leave my kids a house each.

BoRED S2upid

16,710 posts

209 months

Tuesday 6th May 2014
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A massive amount of people want to rent your providing a service - good quality housing at reasonable prices. Unless ofcourse your going to buy slums.

Squirrelofwoe

3,016 posts

145 months

Tuesday 6th May 2014
quotequote all
It's an interesting debate, and I could offer a tenants perspective on it.

A mate and I were renting a property from someone along similar lines to what you propose (i.e had just enough for a second property which they let to us). Very amicable, excellent landlord- charged us sensible rent but otherwise left us to get on with things.

After a couple of years she decided to sell the house- gave us first refusal on buying it (obviously would have saved her some fees) but we declined as it simply wasn't financially viable. A few months later and we are notified that the house had been sold- to a young Premier League footballer.

We get notified from his dad that they were willing to let us stay on as tenants- as long as we agreed to an increase in rent of nearly £200/month.

We (politely) told him where to stick his offer. From discussions with neighbours as we were moving it turns out his dad is very well known around the area as they have a large portfolio of properties- with the common theme that they buy the house and then increase the rent dramatically.

In my opinion, what you are proposing doing is not immoral in the slightest- but I do take issue with people such as the buyer of our house as the entire situation smacks of pure greed.

I am certainly no expert on the situation but it has always appeared to me that a cap on the number of properties one can own might be a way of curbing this and thus decreasing the effect it has on house prices for first-time buyers.

For reference I am on a half decent wage but have almost no chance of owning a house (by myself) as whilst I could comfortably afford to pay a mortgage but I simply cannot get a deposit together of sufficient size whilst paying living costs (rent).

I wouldn't say I'm particularly angry about the situation as I believe life is to short to worry about such things but I thought it might be of interest to people to hear the perspective from the other side so to speak! smile

johnfm

13,665 posts

219 months

Wednesday 7th May 2014
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Of course it is not immoral, whether you build, borrow to buy or pay cash.

The wibblings in the press about house prices and young people no being able to get on the ladder is a result of very cheap credit and increased multiples enabling people to borrow more and therefore bid more on properties combined with a shortage of housing stock in desirable areas.

You'd see prices drop to a sensible level if mortgages were back to 10%-20% deposits and 3x salary multiples!

As for youngsters not in the housing ladder - some of those without a deposit will be comforted by their gym memberships, £25/week Starbucks habit, new cars on PCPs and holidays in Dubai and The Carribean...

SamR380

634 posts

89 months

Wednesday 7th May 2014
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The way I see it, if you don't do it someone (meaner) else will.

Just try to be the best landlord you can. Look after your tenants and you'll be doing a service in that way.

heebeegeetee

27,160 posts

217 months

Wednesday 7th May 2014
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Squirrelofwoe said:
We (politely) told him where to stick his offer. From discussions with neighbours as we were moving it turns out his dad is very well known around the area as they have a large portfolio of properties- with the common theme that they buy the house and then increase the rent dramatically.
The property can only command what the market will bear. If the guy who bought 'your' property is readily able to rent out at the higher price, then your landlord wasn't charging enough. Which you may have known. smile

RealSquirrels

11,327 posts

161 months

Wednesday 7th May 2014
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davepoth said:
Immoral would only be the case if you were buying with the specific intention of depriving people of a house. That's not happening (I hope!), and if this house purchase is with the aim of giving your kid somewhere to set up home in 18 years' time, it's laudable IMO.
I'm not sure I agree with this.

You tacitly acknowledge that depriving people of houses is immoral.

therefore any acting that leads to this outcome, whether as a primary aim or a side-effect, is surely immoral.

for example, it's immoral to kill people. But imagine if I bought a jacket made of murdered-people-skin, because I liked it. my primary act is just to buy a jacket. that's fine. but as a direct consequence of my actions people are getting killed. therefore it's probably immoral to buy people-skin jackets. the same applies to your argument above, surely? (if you acknowledge that depriving people of the chance to own a house is immoral).

e.g.

a tram full of 10 buy-to-let landlords is running out of control downhill and in it's path you can see a first time buyer who has fallen onto the tracks. the first time buyer doesn't have time to get up off the tracks. you have a lever which will switch a set of points and divert the tram away from the first time buyer, but the tram will crash into a large lorry full of letting agents, killing all of the landlords. is it ethical to save the first time buyer, at the cost of the landlords?

Squirrelofwoe

3,016 posts

145 months

Wednesday 7th May 2014
quotequote all
heebeegeetee said:
Squirrelofwoe said:
We (politely) told him where to stick his offer. From discussions with neighbours as we were moving it turns out his dad is very well known around the area as they have a large portfolio of properties- with the common theme that they buy the house and then increase the rent dramatically.
The property can only command what the market will bear. If the guy who bought 'your' property is readily able to rent out at the higher price, then your landlord wasn't charging enough. Which you may have known. smile
Oh I quite agree, I would be very surprised if they were readily available to rent it out at that increased rate however. There were numerous properties available for let in the same area, of which only one was as high as the rent we were offered. And all of those properties were double-glazed and mostly end of terrace or semi-detached (ours was not double-glazed and middle row terrace).

It seemed very much to us that they were simply chancing it on the basis that it would be a lot less agro for us to stay where we were (particularly after having been there as long as we had), rather than move- and that we might be willing to pay a premium to do so. Possibly (cynically) fueled by the letting agent being well aware that we would easily have afforded the revised rents, based on the income figures we'd had to submit previously.

I'm sure if they spend no small amount fitting double-glazing, modernizing the electrics, and completely decorate the place then they may well get somewhere close to what they offered us. But none of that was on the cards when they made us the offer! Like I say, I believe they were taking a gamble on our price/laziness ratio and missed. hehe

CaptainSensib1e

1,404 posts

190 months

Wednesday 7th May 2014
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It's not immoral in the slightest, plenty of people will prefer to rent than buy and many landlords provide a valuable service.

However that you are making an investment and that has risk attached. Interest rates could rise, house prices could fall, and you could end up with an asset that you lose money on. If you're happy to take the gamble, then go for it, but its not a one way bet and you have to accept the chance it may not turn out as you'd hoped.

pacoryan

670 posts

200 months

Wednesday 7th May 2014
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RealSquirrels said:
davepoth said:
Immoral would only be the case if you were buying with the specific intention of depriving people of a house. That's not happening (I hope!), and if this house purchase is with the aim of giving your kid somewhere to set up home in 18 years' time, it's laudable IMO.
I'm not sure I agree with this.

You tacitly acknowledge that depriving people of houses is immoral.

therefore any acting that leads to this outcome, whether as a primary aim or a side-effect, is surely immoral.

for example, it's immoral to kill people. But imagine if I bought a jacket made of murdered-people-skin, because I liked it. my primary act is just to buy a jacket. that's fine. but as a direct consequence of my actions people are getting killed. therefore it's probably immoral to buy people-skin jackets. the same applies to your argument above, surely? (if you acknowledge that depriving people of the chance to own a house is immoral).

e.g.

a tram full of 10 buy-to-let landlords is running out of control downhill and in it's path you can see a first time buyer who has fallen onto the tracks. the first time buyer doesn't have time to get up off the tracks. you have a lever which will switch a set of points and divert the tram away from the first time buyer, but the tram will crash into a large lorry full of letting agents, killing all of the landlords. is it ethical to save the first time buyer, at the cost of the landlords?
Crikey.

I suspect depriving someone of accommodation was a more accurate statement. As the OP intends to let the property and thus provide accommodation to another who might otherwise not be able to afford it, I would suggest that BTL is utterly moral, circa 60% of German property is not owner-occupied (i.e. is tenanted) and they seem to have enviable stability/uncompromised morals.

Your human jacket analogy is somewhat flawed because the OP is not going to deprive anyone of buying houses absolutely, just this particular house.

The Tram analogy also seems to assume that a single event defines the rest of the market. Saving one FTB will not annihilate all the landlords.

Perhaps this FTB will don his Tram-proof human-skin suit and just bounce off it?

RealSquirrels

11,327 posts

161 months

Wednesday 7th May 2014
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sorry, the tram business is a bit of a spoof of a well known set of problems in moral philosophy.

TheJimi

20,579 posts

212 months

Wednesday 7th May 2014
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My only question is:

What's with all the squirrels?!

paperbag

RealSquirrels

11,327 posts

161 months

Wednesday 7th May 2014
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we just love ethical dilemmas

Type R Tom

3,236 posts

118 months

Wednesday 7th May 2014
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Buy to let do artificially inflate the local markets, I’m in a student area and every 3 bed house with 2 reception rooms become 4 or sometime 5 bed house and are rented for circa £400 per room per month. When a former student place comes on the market they are inevitably in bad condition and would require ££££ to make them liveable but usually get sold to another landlord who throws a load of white paint everywhere and the cycle begins again.