Property Advice?

Expenses are, say, 2% total.

Letting agents as interested parties could be giving high rental valuation than can actually be achieved. Check the newspapers & websites like Asserta & RightMove to double check.

No need to lie - get a BTL mortgage.

I would not do BTL at all unless I could reasonably expect double the real risk free rate (say 9%pa total (income + capital) return at present) over the length of the investment

Well done - this statement alone places you above a lot of the numpty BTL crowd.

There's a lot to say - start by reading previous discussions on the subject . It boils down to the question; why property as opposed to cash, bonds or equities ? These are the 4 main investment classes. Then you need to factor in the risk and require a higher return the more the risk eg cash - little risk gives ~3.8% net therefore property should provide more.

Although you say you aren't bothered by it, the yield is the basic method of comparing the valuation of different investment classes.

See the long term (1970-Present) real house price graph at the bottom of the latest Nationwide report and ask yourself how reasonable it is to expect capital gains from property over your timescale -

The other major factors are -

- BTL is fashionable, this is reflected in prices

- we are in a property boom

People that know what they're doing can always find good deals, but the time spent might be better spent investigating other investments.

Links to other landlord forums on my webpage

hth

Daytona (Landlord & tenant)

Yes we are keen to have the price be competitive rather than market value, even 1 month void would mean paying much more (in a mortgage payment) than we would lose if we dropped the rent by £25-50 pcm.

Interesting point. Can I ask where you got 9% as your threshold?

Always. But one thing I've noticed is that whenever people talk about investments they have done well out of, they always mention thier own homes. And weak investments invariably boil down to "my friend gave me a stock market tip..." or "my company pension has gone down the tubes..."

Obviously a very generalised comment but one that keeps on showing itself over and over. Like you've pointed out, we are almost certainly coming to some kind of critical point in Britain's housing market, and those that have geared very highly may find themselves in trouble. Of course, we were saying that last year, and the year before, and...

BTW, thanks for your advice. I am finding this group to be a wonderfully informed and valuable one when the right posts come along such as this one on trackers a few years ago

The properties you mention let at just under 7% and just under 6% of their value. With returns like these you are better avoiding buy to let. Mortgage rates are around the 6 or 7% mark and your property might be empty for a month or two each year so, even if you are lucky enough to avoid much in the way of maintenance costs, you would lose money. The only way to make a case for buy to let with these properties is if you can convince yourself that the house values will go up.

Why lie? Why not just go for a BTL mortgage? Though they have the disadvantage of charging a slightly higher interest rate than what you call "personal" mortgages (i.e. for owner-occupation), there is an advantage in that they don't use income-multiples as a lending limit, but base the amount they're prepared to lend on whether projected rental income is enough to cover some multiple (around

Most BTL speculators tend to work on the idea that the rent will just cover ongoing costs (mortgage interest, insurance, etc) and that they will become millionaires not from rent but from geared property value growth.

Short and even medium term prospects for that are looking bleak and I would recommend to steer clear of high gearing. From that point of view it might make more sense to sell the inherited property and put the proceeds towards the purchase cost of the student hovel, together with savings, to mean you need to borrow less.

Alternatively, if the inherited property will be easy to rent out, why not do that, and *not* buy a student house but rent one instead. That will minimise your exposure to risk of negative equity should property prices collapse.

You could put the £340pm you collect, plus the £400pm you expect to get from student lodgers, towards the £600pm house, and have £140pm spare to go into a "special contingency" fund to buy books and beer.

He's still around, but now uses a nom-de-plume as a long-term experiment to see how this affects the amount of spam he gets.

I happen to know him personally and can get a message to him, if there's anything particular you think he could help you with.

"dp" wrote

Wait long enough and they probably will!

People's patterns of posting make it difficult for them to disappear even when they don't make blatant spelling mistakes:

uk.rec.sailing soc.culture.british uk.finance ed.general

...and so on.

Depending upon the competition 15% may be high. Itemise the services offered by all the local agents, decide what you want then ask what they'll charge.

Excellent thinking, which is followed by many experienced landlords. Most of the BTL numpties don't understand this.

I must say you seem more clued up about this than most beginners.

The main problem I can see is the timescale, given that you're starting in a boom. If you look at things in real terms ie stripping out inflation because your money/asset should raise with inflation simply to maintain it's value house prices can take a long time to recover -

From the 1972 peak - 1987 (15 years) From the 1989 peak - 2000 (11 years)

If your geared, it makes the situation worse.

Double the real risk free rate (using the cash savings rate as a proxy)

(Cash interest rate - Inflation rate) x My property risk factor compared with no/low risk cash + add back in inflation.

(5% - 1%) * 2 + 1%

OK - by all means be receptive to different ideas and opinions, but then go away and research them and see how the strategy would have worked in the past (back testing) if relevant. You need to make a judgement on whether the past is relevant to future returns.

See my long term property prices spreadsheet (with sources) and the Barclays Equity Gilt Property study on my webpage

Fair point - I certainly was. ISTM that it takes a mix of understanding the subject eg -

household creation (demand) property construction (supply) household mobility cost of credit (interest rate) availability of credit (eg 4 x salary)

and trading mentality (knowledge of how people react) eg -

consumer sentiment (eg retail sales)

I would place the split at 50:50.

The same can be said for usenet generally - it's a superb source of information.

Daytona

I don't think I've ever deliberately posted to s.c.b, so your method isn't foolproof because it can "detect" false patterns.

I'm sure I have unwittingly posted there, but only as a side-effect of following up to something that was already cross-posted.

I would also expand on the "availability of credit" point.

Namely that the UK lenders seem to be prepared to go to very high LTVs (even over 100%) compared to elsewhere. Abuse of self certifcation - there is no need for most employees to do so; in fact, the first Self Cert mortgages only applied to the self-employed and director/owners.

The extra equity created by theoretical property value increases has enabled parents to on-lend/gift the deposit to their children.

People have short memories. In the mid to late nineties you'd have probably got the opposite comments, shares and company pensions were doing much better than housing. In the late eighties you'd have got the same comments as now.

Buying into yesterday's winner is usually a good way to lose money, ask anyone who bought dot.com shares after they rose to silly levels.

Such is inflation, but if you don't expect prices to rise in the next 12 months, for example, you can't make the case for investing in property for