Buy To Let. Is it worth it?

Carole said:

Then on my honeymoon in Barbados I was dealing with a boiler problem in Spain..

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I well remember being on the roof of a house in Ireland, trying to explain to a lad in Stafford, via a mobile phone call, just where the stop-tap was, as I could hear the water cascading thorough the kitchen ceiling.

The Government have changed the lending criteria for BTL properties as of December last year and the monthly rental figure required compared to the borrowing is astronomical, we have a second property that we have family living in and tried to reportage on the BTL when the term ended and despite it going up in value since we purchase and the outstanding amount owed reducing the figures didn't stack up and the interest rate had risen considerably.

Luckily the fact that we have family living there and our credit rating/income was sufficient we have managed to switch it over to a second residential mortgage and it has brought the repayments right down.

To get a buy to let now with any kind of mortgage you'll need at least a 50% deposit to meet the government issued lending criteria and to have the figures stack up, with a 65% LVT we needed the rental valuation to come back at almost £1000pcm which is ridiculous when the repayments on the mortgages weren't much more than half of that.

Also when you purchase a BTL you have to take into account the 5% stamp duty plus solicitors fees and you will be taxed on the income you receive, not to mention the cost associated with managing the property, annual boiler inspections, estate agent fees.

We had always planned on having a few properties to take us through retirement but the tax implications and lending regulations have made this very difficult and removed the majority of the profit in it.

I prefer the idea of buy to live

andy w said:

with virtually no return on money in the bank and no sign of that changing I am considering jumping on the Buy To Let bandwagon.

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Carole said:

if we don't buy into property...what exactly should we do with our money to invest for our future?

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This attitude is a significant problem. There are more options than put money in a savings account, or buy property. There are many investment options. Believing you need to purchase property to secure your future is like believing you need to buy a kit car so you can commute to work. Perhaps property is the right investment for you but it's not a foregone conclusion. Property is an active investment, there are passive investments that can (depending on your risk profile) offer equal if not better returns than property.

If you had placed £11,280 in an S&S ISA in 2012 (tax free limit that year) and then invested it in the Vanguard LifeStrategy 100% Equity fund you would now have approaching £20,000, from a completely passive investment, that's assuming you did not contribute any further after the initial contribution.

Property might be a great investment decision but if it's a decision being made because it's the only investment category you're thinking about then it's worth spending some time learning about other investment opportunities. I recommend starting here: http://monevator.com/category/investing/passive-investing-investing/

citricsquid said:

This attitude is a significant problem. There are more options than put money in a savings account, or buy property. There are many investment options. Believing you need to purchase property to secure your future is like believing you need to buy a kit car so you can commute to work. Perhaps property is the right investment for you but it's not a foregone conclusion. Property is an active investment, there are passive investments that can (depending on your risk profile) offer equal if not better returns than property.

If you had placed £11,280 in an S&S ISA in 2012 (tax free limit that year) and then invested it in the Vanguard LifeStrategy 100% Equity fund you would now have approaching £20,000, from a completely passive investment, that's assuming you did not contribute any further after the initial contribution.

Property might be a great investment decision but if it's a decision being made because it's the only investment category you're thinking about then it's worth spending some time learning about other investment opportunities. I recommend starting here: http://monevator.com/category/investing/passive-investing-investing/

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@citricsquid

I didn't phrase my question properly when I asked "where to put my money."

I just meant that at the time of buying our extra properties , it was the best way to invest. We more than doubled our investment in 7 years...and we're getting a monthly income.

We made much more than an ISA could because you can only invest so much per year in one.

However, we have also invested in ISA, bonds and other investments as we don't believe in putting all our eggs into one basket.

I think you're advice is good though for anyone interested in investing.

I'd still buy property and I don't regret it....my gripe is with people who say that I shouldn't invest in property because it stops them getting on the housing ladder and I still don't see the connection.

Carole said:

@citricsquid

I didn't phrase my question properly when I asked "where to put my money."

I just meant that at the time of buying our extra properties , it was the best way to invest. We more than doubled our investment in 7 years...and we're getting a monthly income.

We made much more than an ISA could because you can only invest so much per year in one.

However, we have also invested in ISA, bonds and other investments as we don't believe in putting all our eggs into one basket.

I think you're advice is good though for anyone interested in investing.

I'd still buy property and I don't regret it....my gripe is with people who say that I shouldn't invest in property because it stops them getting on the housing ladder and I still don't see the connection.

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It is slightly more complex than this, but when there are more people than houses (to buy) then it becomes a seller's market. i.e. the seller is able to sell to the highest bidder, ergo, house prices rise. The rental market has boomed to the point that 2017 could see more house rentals than house sales since the 1930s. Many of those with a portfolio of houses were also fortunate enough to be able to buy a property when banks were handing out mortgages like panini stickers, whereas now you will have to have saved a considerable deposit before you are taken seriously coupled with stricter rules on lending. (This in itself isn't such a bad thing.) Include the fact that affordable social housing stock is diminishing rapidly, it doesn't leave young people with much of an option other than to get under mum and dad's feet for a further 10-15 years while they try to save up. BTL isn't THE problem, but it does play a major part.

Sir BoD said:

Many of those with a portfolio of houses were also fortunate enough to be able to buy a property when banks were handing out mortgages like panini stickers, whereas now you will have to have saved a considerable deposit before you are taken seriously

Include the fact that affordable social housing stock is diminishing rapidly, it doesn't leave young people with much of an option.

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@Sir BoD

I can see what you are saying but if as you say, when the banks were handing out mortgages like..in your own words, "panini stickers", ..why weren't the renters taking the opportunity to buy when the going was good?

Those with a business head, or an eye on the future or those that just wanted more, took advantage of those opportunities that were available to many.

There are other people that inherited property and chose to rent out instead of selling.

I agree that it is not easy now to get on the property ladder compared to years ago, but the difficulties are present to both first time buyers and those choosing for investment. It's not what it was.


Also if affordable social housing is diminishing then that surely is a government problem.

Why should someone who has chosen to work hard, sometimes doing two or three jobs be blamed for others who say they can't get on the housing market?

Fundamentally before the current restrictions on buy to let finance were introduced then btl mortgages were cheaper than ordinary mortgages and there were other financial advantages in btl mortgages & purchases. This meant that btlers were able to pay higher prices for properties than ordinary buy to live purchasers who were priced out of the market, even when they had funding available..

The longer youth go without revolting


The larger the inevitable revolt


The more inadequate the ability to cope


The greater the loss of empathy

Noah said:

Fundamentally before the current restrictions on buy to let finance were introduced then btl mortgages were cheaper than ordinary mortgages and there were other financial advantages in btl mortgages & purchases. This meant that btlers were able to pay higher prices for properties than ordinary buy to live purchasers who were priced out of the market, even when they had funding available..

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Ok, now I understand.

Thanks, I didn't get it before.

And I now totally see your point. ... and the point of others.

However, for those that bought their property maybe 30 years ago and have since inherited money or a house, you can see why they would want to rent out....if you were in those shoes?

Carole said:

I can see what you are saying but if as you say, when the banks were handing out mortgages like..in your own words, "panini stickers", ..why weren't the renters taking the opportunity to buy when the going was good?

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They were. They became property magnets.

Carole said:

I agree that it is not easy now to get on the property ladder compared to years ago, but the difficulties are present to both first time buyers and those choosing for investment. It's not what it was.

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Surely you are not comparing the struggles people have attempting to buy their first property with those who presumably already have a property but have extra funds to invest further in property?

Carole said:

Also if affordable social housing is diminishing then that surely is a government problem.

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Yes it is. See my point that BTL is not THE problem but a significant part of it.

Carole said:

Why should someone who has chosen to work hard, sometimes doing two or three jobs be blamed for others who say they can't get on the housing market?

I was in fact only talking about this last night. I used to get up at 6.00 am, walk from Oulton to Stone to get a bus to Hanley. I worked from 9.00 to 5.00 and then I also worked in a bar a few night a week getting home at midnight.

I did that because I wanted to own my own property.

Some chose not to work hard or waste their money but each to their own.

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You're completely missing the point. It's not about your social background or how many paper rounds you've done. Whether you own more than one property or multiple, regardless of your upbringing, you're still part of the problem.

Housing Crisis 3.0

The spec of housing stock currently under construction is so poor there will inevitably be another homes scandal two decades hence

#hiddenfromthepress

I guess you could say Peter Rachman was an early exponent of buy to let.

A person who owns multiple properties completely clueless about the issues of young people trying to get on to the housing ladder *shocker*. Talk about being out of touch with the real world struggles of many.

@Sir BoD I salute you and your infinite patience to explain why those who hoover up property to rent out negatively skew the housing market for those at the bottom of the income brackets and how these poor people are then subsequently screwed by the BTL landlords.