Buy to let investment advise

Nothing in that question asking about the moral self righteousness expressed as a reply on this thread.

1 Like

Very true. It’s an Anglo-Saxon culture thing as well. Canada, Aus and NZ have the same ridiculous house price inflation mania and rental problems.

HH - respectfully, careful with the thinking that BTL is a way to making a ‘quick buck’. It isn’t nowadays - or shouldn’t be if a landlord operates to current legislation/controls, noting the costs to entry are now higher than they’ve ever been. There are many other factors driving the BTL market - and that for ‘holiday lets’ as flagged by @anon4216120 .

The greater evil over the last 10 years or so, is the new economic paradigm which has emerged, often referred to as ‘modern monetary theory’ (MMT), whereby borrowing costs are on the floor & money has been printed with abandon, in the process inflating asset prices across the board (pretty much).

There’s no political observation in here, as the US, UK and the eurozone have all done this in tandem with each other. One can only think that Keynes and Friedman would have found such approaches way out of their respective comfort zones.

But it’s all ‘affordable’ – until it isn’t !

6 Likes

The problem with that is you then put your whole faith in one person’s opinion and in my experience, good professional advice is extremely hard to find. It’s like finding a great dentist. It’s difficult and often too late.

I agree, there’s a lot of rubbish talked on forums, but at least if the person is relatively intelligent, they can take what they want from many peoples opinions and ignore the rest.

6 Likes

I agree. Twice in the last 2 years I have sought Independent Advice. In the first case he wanted all our pensions put into his name before he could evaluate them, what I didn’t realise was that that would pay him commission. The last advice I got a month ago, was given by someone with a good rating. He came around and presented us with a fund management scheme that would fit our needs. It wasn’t until the end of the meeting that he asked us to do a questionnaire on assessment of our risk level, and it didn’t match his plan, but he didn’t shift. I stuck with it and asked him for a full plan. He contacted only 2 (the biggest) out of 4 of our pensions, got the name of my wife wrong, didn’t listen to a few things we said, and in the end I had to politely decline. His response was

I can’t help but feel this has been a bit of a waste of time given how much effort I have put in for free.

So much for “professional” independent advice. So sometimes I feel you do need to hear what other peoples experience have found, and judge each one accordingly

1 Like

Looks like rates might rise according to the papers today

1 Like

Been saying this for a couple of months now.

Because both parties (tenant and landlord) agreed to the terms of the rental agreement at the outset. Why should the goalposts be moved years down the line to penalise one of the parties to the benefit of the other?

By all means change the tax law to allow right to buy for future tenancies but retrospective tax changes are just as morally unfair as the ‘greedy landlords’ mentioned previously.

1 Like

I disagree, as I do with those occasionally seeking medical advice on this forum.
The financial advisors you engaged with were clearly neither professional nor independent. There are some very good ones out there as I found more than a decade ago. They should start by assessing your needs and your attitude to risk to establish a financial strategy tailored to you. Attitude to risk was defined for us on the basis of our responses to a fairly long series of questions. This is reviewed annually as are any changes in personal circumstances and financial objectives. All investments are discussed and fees payable disclosed. Much, or perhaps some, of this is supposed to be regulated by the FCA in the UK. Perhaps we have been lucky with our advisor, but you certainly can’t be too careful in deciding whose advice to follow.

Not sure what you disagree with, and in fact I fully agree with all you say (apart from the disagree bit). I do realise there are good ones out there, it’s just that in my experience I haven’t found one yet, and the point I was perhaps badly making was that asking other people on a forum may build that confidence back, or offer alternatives that you hadn’t considered.

It’s probably the case that if the OP is asking such basic questions, then buying a property to rent out is really not for them. There is a lot to think about - rental income, void periods, taxation, level of deposit and borrowing, interest rates, maintenance and all sorts. A friend of mine is a builder who can basically do most things, or knows someone who can. He maintains the house to an incredibly high standard and fixes any issues immediately. He vets the tenants carefully but even then things go wrong and it can be a lot of work when tenants change. Wine on the carpets? Holes in the walls? Leaks that haven’t been reported? All these need to be costed, especially if you can’t do it yourself, and annualised in order to ensure that the income covers the loan, especially when interest rates return more to normal. On a big mortgage, base rates moving from 0.1% to 2.5% make a heck of a difference to monthly expenditure.

Fair enough. I agree! Not sure I disagreed with anything really other than perhaps the merits of seeking any sort of professional advice on a HiFi forum ( except perhaps about HiFi).

1 Like

Not even sure about HiFi! :stuck_out_tongue: :laughing:

5 Likes

I don’t think there are any ‘basic questions’ when evaluating investing (plunging!) in to the BTL market for the first time as, as the rest of your post highlights, there are so many factors , sprinkled with a high degree of emotional commitment too, as it’s not nice to see a property you own trashed by tenants for no apparent reasons. You really have to treat BTL management as a business but, sometimes, things don’t always work this way, as some tenants seem to think you’re the landlord of The Ritz, and others don’t seem to realise what living in a house, how to care for it and how things take time to fix, is all about.

To respond to another question raised by @popeye around the future performance of the BTL market:

My view is ‘who knows’ save, as some of the posts above highlight, there will always be hotspots, where local supply & demand factors change. Atypically, London & SE has seen lower rental yields than the rest of the country, as it was expected that capital growth would compensate in terms of overall BTL return but this has been upset by Covid & Brexit to a degree. Obviously, landlords have also been in the politicos cross-hairs.

As the years go by, I cannot help but think that house prices cannot elevate any more, yet in some parts they do (in some parts of London they have raced up). This all has echoes of 1989/1990, when the bottom of the market especially was hammered.

It strikes me that if you do invest in the BTL market at the present time (new single asset), then you’ve got to recognise it could be a c.10-year haul given the need to amortise the up-rated SDLT charges et al. If you’re of a nervous disposition and/or struggle to contain emotional disappointments when seeing your possessions injured, then perhaps best avoided.

It would be wonderful to have very accommodating tenants, who commit to a longer term rental (say 2Y) but this often isn’t the reality of the (AST-driven) market in many cases.

If somebody came onto the forum and asked a few basic queastions about HIFI equipment you wouldn’t advise them not buy a HIFI because they only have basic knowledge

I arranged the letting of my dad’s house a few years ago; it was a piece of cake.
I didn’t have any contact with the tenants; I put in the hands of a letting agent. He advised what needed to be done to the house to make it suitable for letting. He vetted the tenants, any problems that needed sorting he got one of his tradesmen to sort it out. (at very reasonable prices). He visited the property every six months to inspect it. He collected the money and passed it onto me, less his 10% management fee.

Not everybody takes out a mortgage to pay for the property, which I aggre probably isn’t a good idea for a novis. But, the money could come from an inheritance or a pension fund.

1 Like

couldn’t agree more - the rules have changed too much to favour residential investment

1 Like

Just one observation regarding the tax relief for mortgage interest on residential property, which I don’t think has been covered - if you are a higher rate taxpayer (and that will be calculated before mortgage interest expense) you will pay tax on property rental profits before the interest cost at 40%, but only get interest relief at 20% (that is a bit of a simplification as there are other restrictions on the level of relief…). So if you aren’t making a lot of pre-tax profit after interest, the post-tax return can very quickly go negative.

So if profit before interest is say £18,000 pa and interest is £15,000, the tax would be ((40% x £18,000) - (20% x £15,000)) £4,200. But pre-tax profit is £3,000 so post tax income is minus £1,200. And with the current talk that inflation is going to continue, the property may well get capital gains and higher rent in the longer term, but in the short term the annual post-tax loss will grow, causing negative cash flow before you start thinking of repaying the mortgage

Buy-to-let, along with second/holiday homes (and increasingly, people buying homes in order to put them on Air BnB), are both contributing to the UK’s housing crisis.

If you have a buy to let or a second home you are contributing to the crisis. It’s as simple as that. You have no excuse.

4 Likes

Low interest rates are the primary drivers for high property prices, not buy-to-let or holiday homes.

1 Like

A different angle on property rental (with apologies to the OP): Listening to news today about UK Gov initiative to push heat pump replacement for gas boilers, and associated talk about insulation, made me think what is needed is to force people to install insulation. That led to pondering why on earth people don’t, especially faced with ever-increasing energy costs. And of course there are two particular factors there - one low income, and inability to afford insulation (though given the grants that have been around for many years now that is an uncertain factor. The other is the rental market: given that some landlords, according to recent TV reporting (public sector as well as private landlords), don’t seem interested in fixing major damp/water leak problems, what chance they would bother with insulation? Maybe landlords should be compelled by law to insulate to a defined minimum standard.