How does Buy to Let END!

[HousePriceMania]

I think I know how BTL ends....it ends with desperate BTLers posting comments on the Daily Mail website that house prices are not going to crash. 

[With a crooked smile]

3 hours ago, HousePriceMania said:

I think I know how BTL ends....it ends with desperate BTLers posting comments on the Daily Mail website that house prices are not going to crash. 

There's a certain irony in that GB coming from someone who's posted thousands and thousands of comments online about the imminent house price crash. How far do prices have to fall to may your decision to STR breakeven? And do you think the government would actually allow that to happen?

[spygirl]

On 10/04/2021 at 17:20, spygirl said:

https://amp.theguardian.com/business/2021/apr/09/serious-office-conducts-raids-over-scheme-by-buy2let-cars-owner

IO BTLers face investigation from HMRC....

https://www.dailymail.co.uk/news/article-12128865/Supercar-dealer-withheld-information-fraud-probe-collapsed-car-leasing-firm.html

[Wight Flight]

https://www.property118.com/airbnb-hosts-face-major-hmrc-tax-crackdown/

[spygirl]

https://www.bbc.co.uk/news/business-65876570

Meanwhile, NatWest said it was increasing rates for new residential mortgages by 0.2 percentage points, and for buy-to-let mortgages by up to 1.57 percentage points from Tuesday.

[spygirl]

Paragon btl svr is 8.85%

 

[Wight Flight]

2 minutes ago, spygirl said:

Paragon btl svr is 8.85%

 

As I have consistently said, BTL at less than 10% yield is stupidity.

It seems i might have underestimated.

[One percent]

3 minutes ago, Wight Flight said:

As I have consistently said, BTL at less than 10% yield is stupidity.

It seems i might have underestimated.

Just put the rent up. Innit.  

[Wight Flight]

8 minutes ago, spygirl said:

Paragon btl svr is 8.85%

 

Can someone sober do the maths on this. Take a £500k property on an ambitious 4% yield at 75% LTV for a 40% taxpayer, fully managed at a 10% fee.

I have a feeling it is insomnia inducing.

[Wight Flight]

6 minutes ago, One percent said:

Just put the rent up. Innit.  

It doesn't matter what you charge if it isn't paid.

[AlfredTheLittle]

6 minutes ago, Wight Flight said:

Can someone sober do the maths on this. Take a £500k property on an ambitious 4% yield at 75% LTV for a 40% taxpayer, fully managed at a 10% fee.

I have a feeling it is insomnia inducing.

rent 20,000 less fee 2,000 = £18,000 profit. 

mortgage at 6% of £375k is £22,500. 

40% tax on £18,000 profit is £7,200 minus 20% tax credit on £18k = £3,600 tax.

So rent 20,000

less:

management costs 2,000

mortgage interests 22,500

tax 3,600

loss:

8,100

edit to add:  £8k isn't that big a loss on a £500k property if the value keeps going up 5 or 10% a year. The big deal is if capital value starts to fall - could lose £50k a year in capital value. 

Edited June 12, 2023 by AlfredTheLittle

[Wight Flight]

5 minutes ago, AlfredTheLittle said:

rent 20,000 less fee 2,000 = £18,000 profit. 

mortgage at 6% of £375k is £22,500. 

40% tax on £18,000 profit is £7,200 minus 20% tax credit on £18k = £3,600 tax.

So rent 20,000

less:

management costs 2,000

mortgage interests 22,500

tax 3,600

loss:

8,100

Good try. Mortgage is 8.85% as above, so an extra £6k ish on interest?

Edit to add the loss of £6k interest on capital employed.

looking at a £20k loss per annum, before voids, repairs etc.

Edited June 12, 2023 by Wight Flight

[One percent]

5 minutes ago, Wight Flight said:

It doesn't matter what you charge if it isn't paid.

The problem seems to be one of supply and demand. They seem to be able to do it.  

[Wight Flight]

2 minutes ago, One percent said:

The problem seems to be one of supply and demand. They seem to be able to do it.  

Until they can't. There is a ceiling and we are very close to it.

[One percent]

3 minutes ago, Wight Flight said:

Until they can't. There is a ceiling and we are very close to it.

I hope you are correct but I guess, based on talking to people, that you are not.  

[Wight Flight]

1 minute ago, One percent said:

I hope you are correct but I guess, based on talking to people, that you are not.  

How far above LHA do you think people can afford?

We are about £300 a month over at the moment. It will be £400 next year.

Where will people find that money?

What have you heard that is different?

[One percent]

7 minutes ago, Wight Flight said:

How far above LHA do you think people can afford?

We are about £300 a month over at the moment. It will be £400 next year.

Where will people find that money?

What have you heard that is different?

The problem here is swathes of property that’s not full time residential. Either fhl or second homes. 
 

re your question, my kids, people i meet. They are being pushed beyond the limit.  

[Wight Flight]

5 minutes ago, One percent said:

The problem here is swathes of property that’s not full time residential. Either fhl or second homes. 
 

re your question, my kids, people i meet. They are being pushed beyond the limit.  

They will downsize, pricing people on lower incomes out entirely.

it won't be pretty.

[tank]

3 hours ago, One percent said:

Just put the rent up. Innit.  

As long as there are jobs, then rent hikes will do the trick. 

It's if, or when, many of these service sector jobs disappear and unemployment spikes close to 10% that things get interesting for the highly leveraged landlord crowd. 

My guess is they'll keep juggling the plates with more immigrants and fiscal supports meaning nothing much changes, but if they fail then Durham's systemic collapse prediction becomes a possibility. 

 

[spygirl]

10 hours ago, Wight Flight said:

Can someone sober do the maths on this. Take a £500k property on an ambitious 4% yield at 75% LTV for a 40% taxpayer, fully managed at a 10% fee.

I have a feeling it is insomnia inducing.

Well ..... remmber that little thing called rental cover?

IIRC typically 150%.

We must be at a stage where BTL remoatrtgages have ended.

Theres no way, with SVR over 6%, that another bank is goign to take on BTL mortgages.

We shall be soon enterign the new statge of IO BTL - repo stage.

Remmeber - ~20% of LLs own ~80% of BTL proprety.

Unsurprusinly, Weve not heard from rms spys baby school BTL.

IIRc she was clearing ~100/200/month of ~3 BTLs.

That was ~5 years ago, a sub 4% SVRs.

At 8% shes need to be putting ~~3k/m cash.

 

 

 

 

 

[spygirl]

7 hours ago, tank said:

As long as there are jobs, then rent hikes will do the trick. 

It's if, or when, many of these service sector jobs disappear and unemployment spikes close to 10% that things get interesting for the highly leveraged landlord crowd. 

My guess is they'll keep juggling the plates with more immigrants and fiscal supports meaning nothing much changes, but if they fail then Durham's systemic collapse prediction becomes a possibility. 

 

The more you eanr, the more tax you pay.

Fotr the majotory who in PRS/LHA who are claimign HA/inwork benefits then thats also the more benfits you lose.

You are not goign to get people working more.

You are goign to see rentals comopress, 2 families going into one house.

Single poeple sharing.

 

[spygirl]

Bit of a thread crosser -

https://www.bbc.co.uk/news/uk-scotland-65855913

A tenant who took her landlord to a tribunal to win her deposit back has urged other renters to follow her lead.

Edinburgh Holiday and Party Lets (EHPL) was ordered to refund Adéla Koubová after a housing tribunal ruled her former flat was not a holiday let.

It means the legal relationship was that of landlord and tenant - giving Adéla greater protection.

The flat is owned by Mark Fortune, a businessman who has been refused entry to Scotland's landlord register.

Adéla, who is from the Czech Republic, said she had taken a stand "for the other people in this situation".

Now why dos the BBC suddenly find itself stating where peopel are from all of a sudden?

https://theferret.scot/mark-fortune-forced-fix-flat-fit-human-habitation/

https://theferret.scot/mark-fortune-tenants-demand-action-from-authorities/

 

[GTM]

10 hours ago, Wight Flight said:

Until they can't. There is a ceiling and we are very close to it.

There's a large house on my route home that came on recently at the same rent I'm paying. When we were looking to move (we moved in March) competition was still pretty fierce. We paid full asking on the rent. I've no doubt a few months ago this place would have rented quickly. They've just dropped the asking rent by £150 a month.

Seems like my next discussion on how much I'm paying in rent will be an interesting one.

[Boon]

Starting to see repos now in more 'premium' properties, like :

https://www.rightmove.co.uk/properties/86147814#/?channel=RES_BUY
Been on for sale for 10 months on the regular market with no takers.

It would just need a tidy and it would rent out the next day. This seems a deferred problem I can imagine lots of people who tried to shift their London flats but couldn't find a buyer just chose to rent it out instead, and while their mortgage was low it was free money. I even know someone who chose to rent her flat and the profit paid for a whole new place in a much cheaper bit of the country.

The problem is, this auction sale wouldn't be profitable at current rates at even quite low rates of leverage. The service charge is c.£6k.

You can see from the previous sold prices that these things actually sold regularly a few years  ago. But higher rates and service charges have killed all liquidity in developments like this. Lots for sale, but none selling.

If the numbers of these things get high enough wouldn't it be easier for the owner (the bank) to set up its own rental management business? One thing that is likely on the auction sale is that then it makes downvaluations of subsequent properties more likely.

[Wight Flight]

7 minutes ago, Boon said:

One thing that is likely on the auction sale is that then it makes downvaluations of subsequent properties more likely.

My understanding was that the prices of repo sales aren't published - purely to protect banks I guess.