Reply to: Will the UK property bubble ever burst?

[Sysman]

The govt is massively reducing the amount of money it spends on rent for DSS claimants - what effect do you think that might have on the overall rental market?

That is an excellent point. 15 years ago I came across a flat for sale for 8K so could have paid cash. As things were then, all I needed to do was find an unmarried mother to live there and get the DSS to pay me direct. The going rent the DSS would pay in that area for an unmarried mother was something like 70 quid a week. Not a bad return on the investment, but it was really too far from home to sort out hassles.

[scooterscot]

Is that 0.9% guarenteed for life? No.
Can the mortgage company call in the mortgage when they want to, such as when prices have crashed, forcing you to sell at the bottom and realise hundreds of thousands of pounds in losses? Yes
An increase in yield as a result of government cuts? No the yield won't be affected; both prices and income will go down.
You've got to make the most of it now? Yes, by steering clear of dodgy investments such as housing.

The 0.49% is guaranteed for the life of the mortgage. I was laughing when rates were 4.5% or about as the rent easily covered the mortgage, now it is paying it twice over on BTL No. 1.

Both houses are listed in world heritage sites, not like you're new build wimpy fall down with cracks tomorrow crap.

[scooterscot]

A rate which can only move in one direction. And there are plenty of risks that could cause it to move sharply upwards.

How long do you think the tories can stay in power, given that we're almost certainly going to be in a deep recession at the time of the next election?

Are you planning on paying off the UK's debt anytime soon? The UK is Japan 20 years ago, ghost banks and companies for 20 years I'll bet. Rates are going nowhere fast anytime soon.

There is no way to pay £5k SDLT on a single purchase. The rate for purchases under 250k is 1% (so a maximum of £2,500) and the rate for purchases over 250k is 3% (so a minimum of £7,500). Good to see you've done your research.

Assuming you are talking about buying two flats at 249,999 each, the cost of capital at 0.9% would be £188 a month on each. If you are getting £1550 rent this is obviously a slightly different proposition to your original statement that a lossmaking BTL is a viable investment. But I suppose shifting the goalposts is what online debate is all about.

Well I did. The time honoured tradition of comparing a box room above a chip shop in Hackney with a home in Scotland never fails to amaze. Little wonder so many from the south are choosing to live up this way.

Where did I say in this thread I BTL was loss making? Been to specsavers recently?

Obviously assuming interest rates will continue at 0.9% for 25 years is rather stupid.

Where on this thread did I make this assumption? You must be a manager.

I'm betting it'll never return to the double digit figure of the 80's, only by then do I have to start revising me plan for world domination.

Wrong. Reduction in the rent paid to DSS tenants will mean landlords are forced to reduce their rents overall. A decrease in yield, demand, and profit (or in your case an increase in loss).

So what you're saying is if I'm unwilling to £80k for the DB9, Aston Martin will be forced to lower their prices. Wonder who's going to force them! You're cute, I'd keep you in a cage next to my pet American.

Or you can carry out some basic analysis to weigh up the risks and benefits of different investment options, and conclude that a lossmaking BTL is a pretty poor choice (unless you're an idiot, obviously - which leaves us back where we started).

He who dares profits, those that don't moan about it on a internet forum.

[KentPhilip]

And favourably it shall remain whilst the tories are in power. They're landlords at heart remember. The amount I can contribute to my pension via my Ltd co is about to be slammed. Even then once I pay in it's locked until the day I retire. With the BTL 0.49% tracker I can borrow cash at 0.9% while some else continues to pay off the mortgage.

An increase in yield? More demand more profit, lovely.

You're speculating what could happen whilst letting opportunities pass you by, you've got to make the most of it now.

Is that 0.9% guarenteed for life? No.
Can the mortgage company call in the mortgage when they want to, such as when prices have crashed, forcing you to sell at the bottom and realise hundreds of thousands of pounds in losses? Yes
An increase in yield as a result of government cuts? No the yield won't be affected; both prices and income will go down.
You've got to make the most of it now? Yes, by steering clear of dodgy investments such as housing.

[Freamon]

And favourably it shall remain whilst the tories are in power. They're landlords at heart remember. The amount I can contribute to my pension via my Ltd co is about to be slammed. Even then once I pay in it's locked until the day I retire. With the BTL 0.49% tracker I can borrow cash at 0.9% while some else continues to pay off the mortgage.

A rate which can only move in one direction. And there are plenty of risks that could cause it to move sharply upwards.

How long do you think the tories can stay in power, given that we're almost certainly going to be in a deep recession at the time of the next election?

I wouldn't call £5k (at the time) a huge up front bill when the rental income is £1550 a month.

There is no way to pay £5k SDLT on a single purchase. The rate for purchases under 250k is 1% (so a maximum of £2,500) and the rate for purchases over 250k is 3% (so a minimum of £7,500). Good to see you've done your research.

Assuming you are talking about buying two flats at 249,999 each, the cost of capital at 0.9% would be £188 a month on each. If you are getting £1550 rent this is obviously a slightly different proposition to your original statement that a lossmaking BTL is a viable investment. But I suppose shifting the goalposts is what online debate is all about.

Obviously assuming interest rates will continue at 0.9% for 25 years is rather stupid.

An increase in yield? More demand more profit, lovely.

Wrong. Reduction in the rent paid to DSS tenants will mean landlords are forced to reduce their rents overall. A decrease in yield, demand, and profit (or in your case an increase in loss).

Perhaps the headline "recently retired let rooms to Indians" Think about it, an income, friendly company round the clock, good food mmm curry, a service much better than would be offered by there fellow citizen complaining all the time. I know someone who has already done this, retirement has been fantastic for them.

Indians who would otherwise have been forced to rent a flat from a BTL "investor". Not likely to have a positive effect on rents, is it?

Own 2 (in UK), rent 1 (Germany). Savings not in the UK anymore.

You're speculating what could happen whilst letting opportunities pass you by, you've got to make the most of it now.

Or you can carry out some basic analysis to weigh up the risks and benefits of different investment options, and conclude that a lossmaking BTL is a pretty poor choice (unless you're an idiot, obviously - which leaves us back where we started).

[scooterscot]

You think BTL is not open to government abuse? BTL is currently taxed very favourably - there's a massive opportunity for the govt to tax it in the future. Pensions have already had a tax raid in recent years, so another is unlikely. Which option do you think would cost more votes?

And favourably it shall remain whilst the tories are in power. They're landlords at heart remember. The amount I can contribute to my pension via my Ltd co is about to be slammed. Even then once I pay in it's locked until the day I retire. With the BTL 0.49% tracker I can borrow cash at 0.9% while some else continues to pay off the mortgage.

Pensions have a huge tax advantage on the way in, particularly for contractors. BTL has a huge up-front tax disadvantage in the shape of stamp duty.

I wouldn't call £5k (at the time) a huge up front bill when the rental income is £1550 a month.

The govt is massively reducing the amount of money it spends on rent for DSS claimants - what effect do you think that might have on the overall rental market?

An increase in yield? More demand more profit, lovely.

There is a massive cohort of people who are about to retire, many of whom have poor retirement provision and live in houses far larger than they need. What effect do you think that will have on the housing market?

Perhaps the headline "recently retired let rooms to Indians" Think about it, an income, friendly company round the clock, good food mmm curry, a service much better than would be offered by there fellow citizen complaining all the time. I know someone who has already done this, retirement has been fantastic for them.

You probably already own a house, which probably represents the largest proportion of your savings. Why would you put even more eggs in the same basket, on a loss-making investment?

Own 2 (in UK), rent 1 (Germany). Savings not in the UK anymore.

You're speculating what could happen whilst letting opportunities pass you by, you've got to make the most of it now.

[Freamon]

Ahh you're in it for the short-term. You assume if you cannot profit every year it's a worthless investment.

All businesses sometimes see profit some years loss, by the end the BTL mortgage is paid off, I still have an asset and an income of my design not a pension whose funds are open to government abuse.

You think BTL is not open to government abuse? BTL is currently taxed very favourably - there's a massive opportunity for the govt to tax it in the future. Pensions have already had a tax raid in recent years, so another is unlikely. Which option do you think would cost more votes?

Pensions have a huge tax advantage on the way in, particularly for contractors. BTL has a huge up-front tax disadvantage in the shape of stamp duty.

The govt is massively reducing the amount of money it spends on rent for DSS claimants - what effect do you think that might have on the overall rental market?

There is a massive cohort of people who are about to retire, many of whom have poor retirement provision and live in houses far larger than they need. What effect do you think that will have on the housing market?

You probably already own a house, which probably represents the largest proportion of your savings. Why would you put even more eggs in the same basket, on a loss-making investment?

[MarillionFan]

If you can't see why an investment that makes you a loss every year, already has a massively inflated value, requires significant management and maintenance overhead, is entirely non diversified, is illiquid, is massively correlated to the future prospects for UK employment and economic growth, and is a ready-made opportunity for additional taxation by desperate governments is not a viable alternative to a pension, then I don't think I can help you.

Actually Freeamon regarding loss making vehicles you are incorrect. I have regularly invested in businesses with the sole purpose of ensuring they make a loss to offset elsewhere

In the case of BTL you could have in the past have purchased a property that could have made a loss each year on yield but would have increased in value considerably during the boom. In 2000 when I'd been contracting for a few years and had the accounts to prove it a large grade 2 listed dream property was up for sale at £450k where I lived. I could have borrowed and bought it, but needed to rent parts out (or all) and in doing so would have made a loss. It was up for sale again last week £1.2m. I'd have paid it off my now. :-(

[scooterscot]

Ahh you're in it for the short-term. You assume if you cannot profit every year it's a worthless investment.

All businesses sometimes see profit some years loss, by the end the BTL mortgage is paid off, I still have an asset and an income of my design not a pension whose funds are open to government abuse.

[Freamon]

Two posts later and still you are unable to say? 'I don't know' is allowed you know.

If you can't see why an investment that makes you a loss every year, already has a massively inflated value, requires significant management and maintenance overhead, is entirely non diversified, is illiquid, is massively correlated to the future prospects for UK employment and economic growth, and is a ready-made opportunity for additional taxation by desperate governments is not a viable alternative to a pension, then I don't think I can help you.

[scooterscot]

It's so obvious it's not even worth bothering.

Two posts later and still you are unable to say? 'I don't know' is allowed you know.

[Freamon]

That's it? No explanation as to why?

It's so obvious it's not even worth bothering.

[scooterscot]

Then you're an idiot.

That's it? No explanation as to why?

[Freamon]

I'd consider letting a viable alternative to a pension, even if the annual yield did not break-even.

Then you're an idiot.

[scooterscot]

I'd consider letting a viable alternative to a pension, even if the annual yield did not break-even.