Btl - R.i.p

[neilawuk]

Kent, one last point....if you have one BTL or are just getting into the game without much knowledge or having done much research then its risky as with any venture....I run this as a ltd company and put all my rents and mortgage payments thru my LTD company.....re voids I can honestly say Ive had a total of one property empty for two months in the 4 years Ive been in business. Now taking my couple of let properties I detailed previously as an example....The first one in SW16; I will be making a small margin but thats all about capital growth, dont care about income yields as long as I cover costs....The second one in EC1 (if you go back a couple of pages I detail it) that is yielding circa £1000 per month after all fees (mortgage and service chg)...so u can see that just using these two as an example, the one in SW16 could sit empty forever and the profit from the EC1 flat covers it and still gives me a profit....

anyway good chat and lets see where BTL goes, I personally dont see it dying anytime soon, you can still borrow on BTL and demand (in my experience) is still there. I have just signed up new tenants in a flat in sheffield and demand is growing again there after a stagnant year....

[DimPrawn]

Kent, one last point....if you have one BTL or are just getting into the game without much knowledge or having done much research then its risky as with any venture....I run this as a ltd company and put all my rents and mortgage payments thru my LTD company.....re voids I can honestly say Ive had a total of one property empty for two months in the 4 years Ive been in business. Now taking my couple of let properties I detailed previously as an example....The first one in SW16; I will be making a small margin but thats all about capital growth, dont care about income yields as long as I cover costs....The second one in EC1 (if you go back a couple of pages I detail it) that is yielding circa £1000 per month after all fees (mortgage and service chg)...so u can see that just using these two as an example, the one in SW16 could sit empty forever and the profit from the EC1 flat covers it and still gives me a profit....

anyway good chat and lets see where BTL goes, I personally dont see it dying anytime soon, you can still borrow on BTL and demand (in my experience) is still there. I have just signed up new tenants in a flat in sheffield and demand is growing again there after a stagnant year....

Boomed!

Get them BTLs now whilst they are rock bottom!

[Bagpuss]

Bagpuss let me use my latest purhase to illustrate.......

I have bought a 2 bed flat in SW16 for £185k, it was on the market for £215k...mortgage on 85% LTV is £157.5k. that is circa £750 per month on my tracker product and rental is £1000 valuation per month as per valuation from birmingham midshires. I need to spend about £10k to get it inhabitable....

thats how...

so it will cost you 195, Circa 37.5k of you own cash. If you put that in the bank, you are looking at circa 200 interest per month.

so £750 mortgage add 200 interest loss on your own cash = £950

£950 to get £1000 a month back.

assuming no voids, no repairs.

and this doesn't consider stamp duty, solicitors fees, mortgage arangement fees.

Your example proves at the moment BTL doesn't work.

You are willing to write this off for capital growth yet prices need to drop before the BTL model works again

[BlasterBates]

Hang-on 200K, and work to put up to scratch, and a senior member of the bank of England expecting house prices to drop by up to 30%.

You do realise that shares on average give you a 10% return,as I'm sure the same members of the BOE policy commitee will tell you.

Now think about this. Eminent economists are telling is that house prices will drop by 30% and that shares will rise by 10% a year ad infinitum. If everything works out well you'll get £250 per month max.

Wouldn't it be wiser to put the money in some exchange traded funds, and sit back and enjoy, than taking out a loan on an asset that will be worth 70% of its value in 3-5 years

[neilawuk]

bagpuss read my previous post, I have a portfolio, some give greater yields than others...If I had this one and only this one then I would be at risk of making a loss if I couldnt rent it and/or had to pay for repairs. However across my portfolio I am making a bottom line profit for this financial year........

Everyone is hanging BTL doesnt work on a speculation we will see a 30% drop...Remember you only make a loss if u sell....Even if I get a 30% drop across my portfolio I suspect my bottom line for 08/09 will still be pretty much the same....unless I had to sell one or two of them and even then its questionable I would make a loss based on previous year rises...

Not being funny but unless you are in the game its very difficult for you to argue these points. If you were BTL landlords (which would be a much more meaningful debate) we could discuss bottom lines and actual situations rather than speculative scenarios....

[Bagpuss]

bagpuss read my previous post, I have a portfolio, some give greater yields than others...If I had this one and only this one then I would be at risk of making a loss if I couldnt rent it and/or had to pay for repairs. However across my portfolio I am making a bottom line profit for this financial year........

Everyone is hanging BTL doesnt work on a speculation we will see a 30% drop...Remember you only make a loss if u sell....Even if I get a 30% drop across my portfolio I suspect my bottom line for 08/09 will still be pretty much the same....unless I had to sell one or two of them and even then its questionable I would make a loss based on previous year rises...

Not being funny but unless you are in the game its very difficult for you to argue these points. If you were BTL landlords (which would be a much more meaningful debate) we could discuss bottom lines and actual situations rather than speculative scenarios....

My assertion is BTL does not work in the current market. Yes if you have bought several years ago you profits from those properties can offset the losses you have now. But why would you want to lose money?
Anyone starting in BLT now will have to subsidise the property if buying using an 85% LTV mortgage, as you have proved. That has never been the way to run a BTL, it's a recent phenomenon that relies on the property boom continueing i.e. guaranteed growth in equity over yield, making a loss for presumed equity, which isn't happening now. How would someone now reinvest in new property with negative or no equity? Moreover, why would anyone get into BTL near the top of the market when prices are starting to fall?

I'm not anti BTL, well done on what you have made so far, but the model (mortgaged) is knackered until prices fall or rents increase or both.

[neilawuk]

bagpuss I still argue it does work....MY SW16 flat for £185 after spending £10k on rennovating it will be worth circa £240k (using current comparables of what has actually sold, not asking price). On that basis it would be returning a profit even after stamp, fees (which are about £3k anyway so hardly a big amount) if I had to sell....the beauty of buying to rennovate and let is that after its rennovated, I could remortgage back upto 85% to pull money back out for the next one, okay my mortgage would go up but that could potentially (if Im smart) offest that with profits from the next BTL....Its not as easy to make money granted, but I dont know of many businesses where it is easy or we would all be doing it. Creative business plans are the only way to make money...Its very easy to say "but what if this happens your screwed" etc etc...you could say that to any business at varying degrees of creativity.
You could say that to Mr Sugar with the iplayer and media centre emergence and the threats to his Sky box empire. I bet I know what his answer would be as would any business owner and entrepreneur...You adapt your business model to keep you in business and react to market forces. If you dont you die as a business, the same applies to my BTL business. If we get a drop of 30% I wont sell anything and ride the storm. If all hell breaks loss and we get a massive drop with nothing renting I will go to auction and buy as many bargains as I can, flip them (rennovate and sell) at a profit and pay off as many mortgages as I can on the existing portfolio with the profits to ensure I retain an income...thats one example of being agile...

If you buy wisely at the appropriate price, in the right area then it still works....for now..

At the end of the day "what if" people (not saying anyone here is) do not become entrepreneurs as they are inherently risk averse. If the likes of Mr Branson had been a what if sort of person we wouldnt have Virgin today....he took so many risks (read his biog its great) and if you ask anyone including Peter jones from dragons den you will get the same profile and answer "its not a dead cert but if it works I make a fortune" Unless you dip your toe in and see what its like and whats really going on you will never know. Its easy to pull together theoretical "this doesnt work, that doesnt work" scenarios but unless you are actually in the business yourself its very arrogant to tell someone else their business doesnt work, particularly if in fact they are operating quite nicely....

[Bagpuss]

At the end of the day "what if" people (not saying anyone here is) do not become entrepreneurs as they are inherently risk averse. If the likes of Mr Branson had been a what if sort of person we wouldnt have Virgin today....he took so many risks (read his biog its great) and if you ask anyone including Peter jones from dragons den you will get the same profile and answer "its not a dead cert but if it works I make a fortune" Unless you dip your toe in and see what its like and whats really going on you will never know. Its easy to pull together theoretical "this doesnt work, that doesnt work" scenarios but unless you are actually in the business yourself its very arrogant to tell someone else their business doesnt work, particularly if in fact they are operating quite nicely....

You aren't listening again, I am saying for new entrants the traditional model of BTL does not work in the current market. Your figures back that up, if you can flip the house at a profit all well and good but you do so in a hard market, hence your 20% 'discount'.

Anyone starting out now would have to be prepared to subsidise the purchase over and above the achievable rent. In a falling market that is stupidity. The BTL model does not work on subsidy.

"What if" is the only way to proceed, people that don't consider the downside tend to either spectacularly succeed or spectacularly fail.Of course in a bubble it's hard not to make money, but that doesn't mean those making money were astute. Making considered informed choices based on the range of outcomes and the current financial climate indicate BTL is a non starter as 85% LTV until the market drops, your protestations based on buying over several years do not alter the fact for first timers it no longer stacks up, for now at least.

[neilawuk]

i still think if you went to auction and/or bought wisely you could make the BTL model work...lets see if we get this spectacular drop...

[tim123]

philip get in the real world.....

Im sitting on a very large equity and I can tell you that remove 30% I can still retire.

Now you are contradicting yourself.

You said you were buying on 90% LTV.

In any case, you are in a very small minority of BTLers. Most will be sitting on large losses if prices drop 30%.

And why is it that you are here talking the market up? We are a small community of 'consultants' who have our own opinions on general financial matters and frankly, most of us don't give a toss that you have a mega million pound portfolio - in profit or not!

tim