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Buy to Let

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    Buy to Let

    Is it dead?

    Does it make any sense at all to get a BTL mortgage now? Is it still a viable investment? At todays prices, will rents even pay an interest only mortgage?

    I ask as I have friends that are getting into BTL now and swear it is still the only sensible thing to do "for the future".
    First Law of Contracting: Only the strong survive

    #2
    Originally posted by _V_
    Is it dead?

    Does it make any sense at all to get a BTL mortgage now? Is it still a viable investment? At todays prices, will rents even pay an interest only mortgage?

    I ask as I have friends that are getting into BTL now and swear it is still the only sensible thing to do "for the future".

    "When the shoeshine boy starts giving you share-tips you know its time to bail out" etc etc etc

    Comment


      #3
      Buy to Let

      to let a property only makes sense if you don't have a mortgage on the property.
      so, the answer is no.
      Otherwise it is too expensive. Unless of course property prices rocket and you plan to sell.

      Comment


        #4
        Depends where you are - round my area (Berkshire/Hampshire) its been more or less dead for the last couple of years. My definition of dead is that I can't find properties that yield more than BoE base rate plus 1% of the purchase price.

        However, rental prices have been going up steadily this year, so the prospects aren't completely gone. Think that less then 0.5% of the BTL properties in my area would make any sense at the moment, though.
        Plan A is located just about here.
        If that doesn't work, then there's always plan B

        Comment


          #5
          Originally posted by s2budd
          to let a property only makes sense if you don't have a mortgage on the property.
          so, the answer is no.
          Otherwise it is too expensive. Unless of course property prices rocket and you plan to sell.
          I was speaking to someone with 50 BTL properties at the weekend and ownership is not the model they were working on. Say you get something for 150k on an 85% BTL = 22.5 deposit. The 127.5 is covered on interest only by rental income. House rises by 10% over two years and you sell

          Your 22.5 has earned 15k before deductions.

          So if you assume prices will rise 5% per anumn, you have a pretty good return on your investment!
          I remember the good old days of this site when people used to moan about serious contractor related issues like house prices and immigration. How times have changed!?

          Comment


            #6
            Most people who are doing BTL now are speculating on house
            prices rising rather than rents > costs, on average house
            prices double in value over 7years therefore a 350k house
            will be worth 700K in 7years (2014) that works out to be
            50K per annum, compared to cost of borrowing and rents
            350k * 6% = 21k - rent received (say 300 * 50) 15k = 6K Loss
            on BTL but given the rise in price this is a net gain of 44k
            this assuming that the price of the house doubles in 7years.

            Problem really is that if interest rates go up then it will
            mean that the 44k gain becomes Nil, people start exiting the
            market and house prices start to fall, this hasn't happenned yet
            as interest rates have been low and house prices have been going
            up, because people keep thinking that they will double every 7years............

            Comment


              #7
              Originally posted by Bright Spark
              Most people who are doing BTL now are speculating on house
              prices rising rather than rents > costs, on average house
              prices double in value over 7years therefore a 350k house
              will be worth 700K in 7years (2014) that works out to be
              50K per annum, compared to cost of borrowing and rents
              350k * 6% = 21k - rent received (say 300 * 50) 15k = 6K Loss
              on BTL but given the rise in price this is a net gain of 44k
              this assuming that the price of the house doubles in 7years.

              Problem really is that if interest rates go up then it will
              mean that the 44k gain becomes Nil, people start exiting the
              market and house prices start to fall, this hasn't happenned yet
              as interest rates have been low and house prices have been going
              up, because people keep thinking that they will double every 7years............
              You mean these people are not even covering the mortgage with the rent? Now that is madness!
              I remember the good old days of this site when people used to moan about serious contractor related issues like house prices and immigration. How times have changed!?

              Comment


                #8
                Originally posted by Numptycorner
                I was speaking to someone with 50 BTL properties at the weekend and ownership is not the model they were working on. Say you get something for 150k on an 85% BTL = 22.5 deposit. The 127.5 is covered on interest only by rental income. House rises by 10% over two years and you sell

                Your 22.5 has earned 15k before deductions.

                So if you assume prices will rise 5% per anumn, you have a pretty good return on your investment!
                If you assume house prices fall by 10% over the next two years, your 22.5K now becomes £7.5K?
                First Law of Contracting: Only the strong survive

                Comment


                  #9
                  Originally posted by Numptycorner
                  You mean these people are not even covering the mortgage with the rent? Now that is madness!
                  Sombody I know is in precisely that position. Recently bought the first house to let. Rent doesn't even cover an interest only mortgage. They live in the family home.

                  So, they are actively paying sombody to live in it gambling on capital values being enough to repay the subsidy plus transaction costs for entry and exit.

                  Comment


                    #10
                    Have a look at the BTL trend:

                    http://www.telegraph.co.uk/property/...pension219.jpg

                    330,000 BTL mortgages issued in 2006 (total BTL 850,000).

                    BTL is a self fulfilling prophecy. Is it sustainable?
                    First Law of Contracting: Only the strong survive

                    Comment

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