BTL Landmine BOOM

[scooterscot]

If there weren't so many MPs with vested interests in BTLs I expect they'd have introduced additional taxes on them by now.

Do as they do not as they say and savings yeh shall have come rain or ray.

[scooterscot]

The point was a lot of the people going into BTL started off with a shortfall between their rental income and the mortgage. This was part of their investment strategy:
Buy apartment rent it out, pay the difference between rent and mortgage.
Sell apartment £50K profit, after extra mortgage payments still have profit. Simples.

I discussed this several times with people going down this route, they would not be talked out of it. They looked at me like I was trying to steal money from them.

Well that's just nuts.

Greed will imprison us all.

[fullyautomatix]

The point was a lot of the people going into BTL started off with a shortfall between their rental income and the mortgage. This was part of their investment strategy:
Buy apartment rent it out, pay the difference between rent and mortgage.
Sell apartment £50K profit, after extra mortgage payments still have profit. Simples.

I discussed this several times with people going down this route, they would not be talked out of it. They looked at me like I was trying to steal money from them.

Isnt it called flipping ? Pre 2007 crash millions of flippers in US would "book" a house while it was being built by paying a deposit of 10%. The idea was that by the time the house was completed the price would have zoomed by about 30% and you then sell it without ever having lived in it.

Great idea to make money, sit at home and watch the cash roll in.

[alreadypacked]

Isnt it called flipping ? Pre 2007 crash millions of flippers in US would "book" a house while it was being built by paying a deposit of 10%. The idea was that by the time the house was completed the price would have zoomed by about 30% and you then sell it without ever having lived in it.

Great idea to make money, sit at home and watch the cash roll in.

In reality what happened:
Builder went bust you lost your 10%
Market crashed, property was not worth what you agreed to pay for it.
House was finished but you could not find anyone to buy it. You could not afford it, into forclosure, and bankrupt.

I hope people have learnt their lesson this time.

[Lockhouse]

I've been renting out property in one form or another for 25 years. I sold up 18 months ago and will probably go back into the market early next year if nothing changes.

The way I see it, with inflation going up the way it is, house prices are effectively decreasing at the moment and whilst I don't think they will return to the absolute mean, I don't think they will substantially drop either (10-15% at most). There is still massive demand for the "right" housing in this country. I think inflation will erode their real value.

I also think the majority of landlords are OK, are amenable and have to deal with a lot of red tape and dodgy tenants. It makes me cringe when by providing a social service, i.e. decent rentable property, I'm supposed to be the spawn of the devil.

People talk about short term profit and loss but property letting is really for the long haul, you might make or lose a few hundred a month (and if you can't afford that you shouldn't be doing it) but at the end of 20 years someone has effectively bought you a house.

There will always be muppets, but they should not really be in the market and I do think they are only a small (but very vociferous) minority.

Just my 2p.

[BlasterBates]

It certainly is a big problem if a land mine goes BOOM on your property. It might be worth having it checked by the bomb disposal squad.

[PAH]

I don't think they will substantially drop either (10-15% at most). There is still massive demand for the "right" housing in this country. I think inflation will erode their real value.

Inflation could also affect the sale prices. It's down to affordability.

If people are paying more for basics like food and energy then they can't afford large chunks of their wage on a mortgage, or be able to save up large deposits the banks are (mostly) requiring. Even with rates historically low and no immediate sign of that changing.

Why else are there already significant drops in many areas of the country (according to Rightmove and PropertyBee)?

Must be affordability, which I can't see improving for the masses in the near term.

Though that does support the argument that more people will be having to rent for the foreseeable as it's the only way they can afford a place 'of their own'. So BTL isn't a dead duck, just got to invest for the long term and not short term capital gain.

[lukemg]

Lockhouse is right, smart people who can see the full picture have got a good chance of doing well.
Trouble with the bubble is that people can easily get carried away as it gains momentum, smart and not so smart and its these who usually get burnt.
Chap came to do EPG for selling my house, said he had moved into this from buying and selling houses/flats. Said he was stuck with a number he had bought off-plan, worth nowt and rent barely covering mortgage (when occupied), said he is hanging by fingernails and any interest rate increase will mean he is toast...

[PAH]

smart people who can see the full picture have got a good chance of doing well.

What's the current full picture and how can we do well?

[lukemg]

Pretty simple really - House prices in most areas will go sideways or edge down over the next few years (inflation means they are effectively going down if just flat) BUT there are massive variations across areas and types. Everyone knows high-end is doing well in that London (foreign money in readies, bonuses).
I don't think the cuts have really come in yet so still expect some falls as people hanging on by fingernails get shaken out.
BUT as with many investments, if you can think 5-10 years instead of months you can do well AND demand for rental property is only going up as mortgage approvals go down and the divorce rate stays high.
Wouldn't touch it myself, too much grief, will stick to stocks/shares etc.