Buy-to-let is booming – but things are about to get complicated

Fools rush in where wise men fear to tread.

BTL is dead. Who would listen to Connells's - bunch of con-men.

BTL is a risky business the only place where there appears tio be a call for BTL in some quantity are student cities however this market is getting smaller as Liberty and other develiopers are picking up land to build large student blocks taking away the need for private housing.

I never dreamed of housing DSS it is now a strong reality that one has to consider this sector I am not wanting to sound a snob but the weay the system has been built the cheques go to the tenant if they prefer to spend it elsewhere this is tough nuts on the landlord hence causing issues.

I would say to anyone considering BTL think carefully because it could be the biggest headache you have ever had its great when the house s gaining value as you get it both ways .

BTL is like any other amateur investment. It will continue until the last idiot is in when it will crash. When the crash is complete and the last idiot has been flushed out the market will get back to normal.

To ensure easy lets and or capital gains it has always been and will always be all about location, location and location whether it be buy to let or buy to live.

Even if this estate agent (with a vested interest) is right and BTL is booming it is only because rates remain artificially low. Whilst I understand occupancy rates are reasonably good I also understand from landlords in the north that rent arrears are increasing. Anyone who thinks BTL is a sound investment when yields are sub 5% in many cases (a figure that ignores costs, arrears, voids etc) when capital values remain vulnerable is a fool.

Yes - location, and price, and potential demand. In the SE commuter belt it is hard to see a decent return on buying a property unless you are only looking at a capital increase some years down the line - especially if you have a mortgage to pay. Will student demand fall off a cliff now that studying is going to be so much more expensive? It would seem that housing benefit landlords are going to be squeezed too.

Housing Benefit payments have risen over £10 billion per annum in the years since 1997, that is £10 billion each year that has gone directly to BTL landlords from the tax payer - effectively subsidising & supporting inflated rents and pushing up house prices. At last with a realistic cap on these payments, rents have to fall, arrears have to rise and as a result property prices will return to realistic levels.

My son, very middle class with a degree and a massive debt, has finally managed to find a job of course only on close to minimum wage. I tell him he is lucky to have a job, he says am I? If I work, I have £70 a week to live on after paying for rent, council tax and travel, if I don't work I have £50 and my rent paid... need I say more...

I see we have lots of negitive feelings again

But what can one expect from folks havent a clue

I am makeing more money now than I have ever done before and thats a fact

Im Buying more and more property over the next 5 years because its fantastic time to buy yeilds have never been better and thats a fact

I recive calls every day from folks wanting to rent

The goverment is cutting back on council houseing and houseing ass are also cutting backs

So where are folks going to go to rent yes you have guessed it Private Landlords

open your eyes guys you may not like what you see but the bigger private landlords are going to get bigger and bigger

You need to have a gross yield of at least 8% plus, 10% is still better, it can be achieved if you buy at Auction. A loan, to sensible Valuation figure, of no more than 75% but 60% is better.

Absolutely no DHSS tenants ,until such time as rent is paid direct to Landlords. If all Landlords stuck by this the Councils would soon learn that there are more bad tenants than bad Landlords and would pay rent direct to Landlords. Check all references three times insist on speaking to last and other past Landlords.

Know your tenants get on first name terms with them, if they are having a tough month or two try to help them by letting them pay a bit late or in extremis give them a month rent free but no more. Assuming you have chosen reasonable people Its harder for them to rip you off if you are friendly

to them

But most important of all you need about 20 years experience of the Property Game. I have been doing it for 45 Years and I still learn things all the time and

very occasionally still get caught out.

FAO H Kane

well done a landlord who talks sence its nice to see it on citywire

what sort of property do you guys buy and rent out - cheap terraced houses in salford etc? I would genuinely be interested to know. The only way to get a decent yield it seems to me is to build a block of flats yourself or buy houses in dodgy areas that rent out to DHSS for those yields above 7-8%. Have you thought about how you will eventually realise your investment? Who is going to want to buy your portfolio of props in poor areas where there is no owner occupation? Probably only another landlord, but who is going to be in a postion to fork out the paper millions it is worth?

FAO N Headley

I buy property in the areas i grew up in and know well

when you buy in a small area you get to know the prices just like estate agents

I buy property in good areas the areas that at one time fist time buyers would buy in

I have never sold property why would I when I make yeilds of 8% to 45% yes i have not made a mastake I now have yeilds from property I first bought in 1985

this is a long term investment at least 20 years

I know landlords who have sold and made a lot of money but as I say its not for me

Hopefully my son will take over when I leave this earth and hopefully he will pass it on to his children subject to TAX???

I want to see First time buyers come back in the market most proffesional Landlords will tell you we cant beat a FTB when 95% mortgages do come back

I like to see a mix of houseing and in the areas I buy in it is mixed I only buy small two bed flats (NOT NEW BUILD) or three bed small houses as I say the houses FTB would normaly buy

at present its only purchases with large deposits that can buy and for this reason Im Buying this window will not last for ever my guess is 5 years

So to recap buy in areas you know and areas you would live in is my golden rule

hope thgis helps a little

Dyslexic Landlord - do you measure yields relative to the purchase price of the property as opposed to its current capital value?

What would that 8-45% range be if you measured it relative to today's prices?

Do your yields make any allowance for maintenance, voids etc?

Thanks in advance

There is no property in any place i would want to live, in this country that currently yields any more than 4%. I know, i've looked. I live in the midlands and also know the north west. My landlord paid 240K for a flat that he rents for 800/month. I'll happily pay that as i see it as a good hedge against the falling house prices since i sold in 2007. Today you cannot buy a property where i live for less than 100K and those would rent out for 500/month tops. I cannot see how you are buying property today and getting the yields you say unless they are in poor areas or very distressed sales. All credit to you if you've made a living out of it - beats the 9-5!

A friend of mine gets the yields you say on his props in yorkshire - mainly DHSS and lapdancers.

Times are good

I live in the South East and I have a couple of one bedroom flats I bought about 8 years ago. Their values have gone up and on current values I would say the return is about 3% - but I use an agent to let and manage, insure them as comprehensively as I can and look on them as an inflation-proof income for my old age. They are purpose built with easy access to trains, buses, and town centres. I only let to working people and always instruct the agent to get repairs done promptly. I probably will not buy more property as shares are a more liquid investment and easier to buy and sell. I bought one bedroom flats as they are very easy to let and there is a shortage of them, as opposed to two bedroom flats. I'm sure prices will go up but if you have to get a mortgage you should allow for a steep increase in interest rates at some point to give yourself a margin of safety. Look very carefully at the maintenance charges on flats too - the landlord has to pay them.

Did you ever consider remortgaging and releasing some of that equity to buy some more?

Yes, but I don't want the hassle.

it'll reduce your IHT liability

FAO Annonyouus

I measure my Yeilds on the Purchase price Only the capital value dosent bother me a great deal

The yeild is the gross yeild so you have to take voids repairs and insurance of the gross yeild

Im in a very comftable postion positive cashflow so in a strange way I look forward to doing reapirs and voids it brings my income tax bill down and at the same time improves the property

Thanks

Interesting... having just returned from nearly seven years living in Australia, having let out my 2 bed flat in Oxford for all that time, I find myself wanting (but not neccesarily _needing_) the capital from that property to find and buy a new one in the area I now plan to live in.

With the current climate am finding it hard to get a buyer so I'm contemplating re-letting the property instead of selling, for many reasons, that's the better of the two options, i mean, who doesn't want to start building a property portfolio, but it does put me in a small cash-flow situation for purchase of the new place... using an agent to let it out has meant that while I was away, although the property accrued in value, I actually am ending up paying money into it despite getting a fair rent.. painfully the property is a flat so having to pay management fee for the leaseholder's (bad) choice of company who (mis)manage the development has also drained me...

If it sells for a reasonable value in the next month, all the better, if not, then BTL is a _very_ real possibility, but i think starting to manage it myself and repair myself will make it more viable... perhaps the BTL mortgage will also make things better, though on the surface that sounds crazy, the residential mortgage i have is not very competitive...

So yeah, my mortgage is currently a residential mortgage, with some extra loading because I let it out... thinking that perhaps re-mortgaging with BTL is what I will be forced to do, and it may even be better terms....

Essentially though, I would be in it for the long-term, though i expect it has (had) nearly accrued as much as it would be able to, so if I had got out earlier, i would have been in a decent position and able to perhaps buy something else which would have room to grow..

Complicated times, but if you have the patience, time and inclination, I'm sure you can still make something out of it.. especially with a larger portfolio.... There are always risks though eh ?

Interestingly, Australian rental values almost NEVER cover the mortgage (or are even close!) which was one reason that we never bought while we were there..... it seems that in and around Sydney you have to be incredibly lucky or have invested YEARS ago to be able to see a real return on your mortgage with a tenant in the property. Shocking.

There are two things you can do to get at the equity. 1. sell 2. remortgage

I would suggest talk to your existing lender to see if you can can get to give you a further advance as there LTV is probably higher than a standard BTL lender.

They may lend up to 90% of the new value which is way better than a standard 75-80% LTV BTL deal

it would b a pity to sell and get rid of the asset.

by taking a further advance/ remortgage you can get your money and keep the assest

Have your cake and eat it!

Dislexic Landlord

I agree with what you say to get the best yields as I said before buy at Auction

I like small units Studios.1 Bed and two Bed.Only bigger if I think that there is an angle as below.

Best something that is in very poor condition, with possible development possibility . By this I dont mean knock it down I mean,sweat the Built Envelope go into roof, extend on the side or back. If its a large flat look at the possibility of converting to two small units, a house into two flats. For this you need some knowledge of Law, Planning, and Construction. If you can deal with some of these items yourself the costs go down. But you need experience and some reliable Polish Builders.

In my earlier mail I missed three things, you must buy close to good Transport Facilities, I operate in London and only buy within 15 mins walk of a Tube Station. You cannot manage Residential Property more than an hours journey from your home/office. Every time that you are close to one of your properties divert and drive past it stop and just have a look. If you follow my advice in earlier mail and get friendly with your tenant you can knock and ask if everything is OK if you can get in have a look around and check that every thing is as you would wish.

Be very selective with what you buy, you cant build up a big portfolio in 5 minutes I dont buy more than 1 or 2 units a year some years nothing at all.

But above all its not easy its a serious business unless you start as very wealthy person you cant be an absent Gentleman Landlord. You need to get in there and sort things out yourself . In the end you cant really rely on Agents its not their money that they are squandering.

I do agree - don't rely on agents, although in fact I do. But they are just as dodgy as some of the tenants. I was recently told one of my tenants wanted the flat repainted so I made an appointment to go round myself as I have a friend who would do the work. When I met the tenant he said the agent had said the flat needed repainting and he would go and stay with his sister if we wanted this..... Obviously the agent thought they would get to organise the repainting and make a turn on that. But they are all the same so no point in making too much of it.

Two flats in London....bought them for a retirement income. Retired, now...and they do well for me. Always check on potential tenants, though.

Two flats in London....bought them for a retirement income. Retired, now...and they do well for me. Always check on potential tenants, though.

Hello all.

Enjoying the points raised. Thanks to all.

Isnt it wise to wait fior the property market to fall further before stocking up on more BTL property? as this will increase yeilds and % profits?

Most people are talking about buying this year when property prices are falling, why??

Any advice welcome.

Many thanks

Hi Martin

I remmember a Stock broker saying you cant time a market Its called poundg cost avarageing buying at low time and buying at hight times

I do the same with property as long as the yeild is good I buy if its not I dont but my feeling is the property market will cont to move lower over the next 5 years

so now is a golden time to buy and to rent its all about yeild not the capital property cost