oh dear: Thinking of buy-to-let? Do the sums

[Pondlife]

The risk is greater because the possible Investment return can be greater

Agreed - as with all investments it's about your attitude to risk and how long you can survive through bad times.

[Phoenix]

Agreed - as with all investments it's about your attitude to risk and how long you can survive through bad times.

And I wouldn't call a small interest rate rise "Bad Times" or think that I have "Over stretched" But AtW and his attitude to alll things discussed on this forum, speaks volumes for his knowledge/experience.

Next!

[sasguru]

It's quite simple. Buy at the bottom or middle of a boom and sell at the top.
Problem is deciding when. Prices have been rising for 10 years now but the general economic outlook is worsening (inflation, oil prices etc.).
Some commentators have said we have a "new Paradigm" in housing but then they said that about the dot.com boom.
Does anyone have any examples of a boom that didn't turn to bust?
I think it's reasonable to expect a fall soon and hence am selling my 2 BTLs.

[Pondlife]

And I wouldn't call a small interest rate rise "Bad Times" or think that I have "Over stretched"

That wasn't what I was implying. But it is true that a lot of people have borrowed far beyond their means thinkinig that property was some sort of risk free investment (Dozy bint on the BBC site for example), rather than creating a balanced portfolio.

I think that some posters attitude of stuffing cash in their matress is short sighted though.

[bobhope]

I think the good news as displayed by this thread is that the housing market / economy in the next few years is screwed. If (supposedly) intelligent and logical people (aka contractors here) cannot work out simple terms such as yields and make logical errors such as "you own the house at the end of 25 years on a 100% IO mortgage," then there's no hope for the general public.

Personally, I'm thankful for the huge house price increases over the past ~10 years: I've benefited enormously. I've made much more from BTL than contracting.

It's simple:

(a) cost of Money = 6%. Gross yields 12% = good time to buy (1996)
(b) cost of Money = 5%. Gross yields 3-4% = good time to sell (2006)

[Phoenix]

That wasn't what I was implying. But it is true that a lot of people have borrowed far beyond their means thinkinig that property was some sort of risk free investment (Dozy bint on the BBC site for example), rather than creating a balanced portfolio.

I think that some posters attitude of stuffing cash in their matress is short sighted though.

Yup!
And I was refering to AtW not yourself with ref to the "Bad Times" comments

[Phoenix]

It's quite simple. Buy at the bottom or middle of a boom and sell at the top.
Problem is deciding when. Prices have been rising for 10 years now but the general economic outlook is worsening (inflation, oil prices etc.).
Some commentators have said we have a "new Paradigm" in housing but then they said that about the dot.com boom.
Does anyone have any examples of a boom that didn't turn to bust?
I think it's reasonable to expect a fall soon and hence am selling my 2 BTLs.

What will/has happend to the demand for rental in your investment area then Sas?

[sasguru]

What will/has happend to the demand for rental in your investment area then Sas?

Rentals seem to have increased quite a bit. The area I picked always has a steady demand as it's walking distance to the City - 1/2 bed flats in good nick are always in demand there.

[oraclesmith]

Re. house prices - aka investment returns. There is a practical but slightly flexible limit to house prices in that for the majority of the population they are linked to income. In the mid nineties when we bought our house, we didn't realise house prices would rise as much as they did, so we bought a good sized house which was eminently affordable. Our house would be worth well over twice what we bought it for, but we'd only realise a real gain if we sold up and pocketted the proceeds. If we bought a slightly bigger property, we would have to take out a much bigger mortgage. Although we feel well off living in an expensive property, in actual fact a slump in house prices would be better for us.

What's happened in the last few years is that confidence in the market has grown. In the eighties bubble, people's mortgages were unexpectedly absorbing very large percentages of their income because of steeply increasing interest rates AND confidence in the market was collapsing because of lack of first time buyers. This time it may be different in that the interest rates may rise more slowly but because of demand, confidence in property is still high - probably resulting in a levelling of house prices and an effective increase in affordability over time. Remember that negative equity is only an issue if you HAVE to sell and that is only a problem if you genuinely can't afford to keep up payments which in turn is only likely if you have exhausted all other means of reducing your outgoings - hence the fact that most people who payed the 15% rates in the eighties got through it without getting reposessed.

Also, people are more property-oriented nowadays with ordinary folk thinking about renovations, buy-to-lets and urban pads etc, so people are less scared of property purchasing than they used to be.

[Phoenix]

Rentals seem to have increased quite a bit. The area I picked always has a steady demand as it's walking distance to the City - 1/2 bed flats in good nick are always in demand there.

So what's the problem? Over 10 years your investment has provided an increase in saleable value, and , your market is still there to provide a rental income on the property.......What did you enter into BTL for?