Reply With QuoteHave small btl business, as a long term investment. I’m in for the long haul and the yields so purchase prices don’t concern me massively. Will be buying a few more next year when the dust settles.
Do we have any fellow property investors on the forum and if so where do you think the market is going at the moment and do we think the market is artificially inflated due too the lockdown.
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Have small btl business, as a long term investment. I’m in for the long haul and the yields so purchase prices don’t concern me massively. Will be buying a few more next year when the dust settles.
Wasting assets is where it is at, no CG’s.
Watches, cars etc.......
Pitch
I wouldn't be rushing to invest in property unless you are desperate for income and happy to accept that pricing risk is firmly on the downside so you will inevitably have a period when your asset is worth less than you paid for it.
The only commercial stock with any stability is either annuity product, so 20+ years blue chip, or certain supermarkets and warehouses, especially with RPI reviews.
I currently have 3 residential properties that I let, but at the point of exiting the process. One has just become vacant and has been listed for sale, another I plan to repurpose as an air bnb, and, as it is with a very long term and good tenant, the third will run as is. I plan to retire shortly so will go back to buy/renovate/sell, which has served me well in the past.
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The Government is set on killing BTL.
Exactly what I'm planning to continue with, the key to making good money is often how much you can do yourself, luckily between my business partner and I we can do most jobs bar gas and carpet fitting.Originally Posted by Robsmck
Also, its all well and good doing the work yourself but you need to turn projects around at a reasonable rate to make it worth while over getting in the trades, got to think of the latest middle class tax too as its now being termed..
Have a decent sized portfolio of buy to let properties which I'm reducing rather than increasing at the moment. Probably sold half a dozen over the past year, with a sale on a block of 22 pending. That's partly due to my time of life but mainly because of the ever-increasing hassle associated with renting out residential property, likely future tax changes, and a lack of optimism with regard to capital growth. It feels like there are far easier ways to get a return on your money at the moment.
I was in BTL for about 15 years and did well out of it due to a continuously rising property market and generous tax relief on the mortgage interest.
Good things tend to have a limited life span and really BTL is now purely a long term investment with loads of hassle due to changing tenants and repairs. Also property is not always easy to sell.
Today you would probably be better off just buying a tracker fund and then forgetting about it until things settle down a bit.
Pray tell. I would like to know the answer to this, without taking monumental amount of risk.
Probably one of the reason BTL is still alive. There are no relatively risk free returns. I know BTL isn’t risk free either.
I'm doing quite a lot of property-backed peer to peer lending at the moment. It's not totally risk free but if you ensure there's plenty of room in the LTV and invest with the right companies, the risks are heavily mitigated. I'm typically getting 6.5%-7% which is more than I'm netting on most of my BTL portfolio. If you want any further information or suggestions, drop me a pm. A lot depends on your personal circumstances and level of investment.
Weren't so long ago if you were prepared not to touch your cash for 3 to 5 years there were decent risk free fixed term savings products, 3 to 6 per cent was not unheard of, but they went the way of the Dodo to save the Banks or summat...
BTL and other forms of real estate works for me/us.
BTL will always work over the long term but it can be problematic with awkward tenants and sometimes it just ain't worth the hassle. I have an empty apartment in Spain which I will never rent out because the laws are strongly in favour of tenants who move in and then decide not to pay. If they have children it is bloody difficult to get them out. So it is a case of buy and forget until the market picks up.
With something like a tracker fund, you can invest and sell quickly and running costs are minimal. Yes there is an element of risk but the Footsy has always done well over the years.
I'm currently keeping my eyes open for anything I can flip but I'd say the current market on anything outside of London or the major cities is a bit of the high side due to the stamp duty holiday. If you want to take advantage of it then you'd have to get in there very sharpish as the sale times seem to be dragging at the minute due to high demand.
If the government decide to take up the ridiculous ideas being mooted for tax increases next year including bringing CGT inline with income tax then maybe you'll we'll more ex rentals being thrown on the market?
Wince, property in Spain, good luck with that one Mick....over a long enough term it might work though you'll have maintenance/other costs over the period and long term empty property is often targeted as low hanging fruit by thieves but it's striking how much the daft sods are still building MORE new stuff, even now...We sold our first house here 3 years ago and considered ourselves lucky to do ever so slightly better than break even and that was with a ruin we felt we'd got cheap and done a tidy job of redeveloping, costs were kept sensible, a small pool was added to increase desirability...you have to look at property here differently and factor in how living in it has saved you rent/mortgage over that period, they just don't appreciate like in the UK.
I'm not saying I haven't got some shares/stocks exposure, or that they aren't more easily liquidated, just that with them there are variables and factors I can have less direct input/ control upon and genuine price/value discovery is damn near impossible. The monetary expansion/QE led to a kind of financial repression, at least for the risk adverse savers and acted to drive more into the markets...following the herd seems intrinsically chancy to me.
Guess I've chosen to stick more cash into what I know/ understand but everyone's different, follows a different path.
Last edited by Passenger; 14th November 2020 at 14:05.
With mortgages at 2%, I would like to see the credit worthiness of individuals willing to pay 7% on a P2P, because they can’t get a mortgage at even 5 or 6%
You may think that is low risk, but something doesn’t pass the smell test here.
P2P lending with people who have the lowest credit worthiness in the middle of a pandemic. What could possibly go wrong? Banks don’t lend to very high risk people for a reason. Not sure I want to step in where banks have declined the business.
I think I’ll focus on keeping most of my capital preserved, albeit for a measly 0.6% savings rate.
Luckily most of my savings are still fixed and are still paying over 2% which feels like a big win in the current climate.
Last edited by noTAGlove; 14th November 2020 at 14:15.
Ah no, these aren't mortgages. They are primarily development loans to both individuals and companies. As such, they are short term - typically 12 months. Those nice 2% mortgages aren't available in such circumstances.
So a loan may be secured against the value of a piece of land which the borrower is in the process of applying for planning permission on to enhance its value, for example. Or a loan may be secured on a property which the borrower plans to renovate prior to selling on. The important thing is that LTV is typically 70% or less so if something does do wrong, there's an asset there to liquidate.
Ok, thanks for the clarification. But whatever they are, if the are willing to pay 7% on P2P (plus platform fees) when credit is effectively (almost) free these days, the risk must be high and unsecured.
Edit-this MSE article and latest updates of P2P does not fill me with confidence
https://www.moneysavingexpert.com/sa...-peer-lending/
Some snippets
WARNING: Peer-to-peer lending is an area yet to be tested by a severe economic recession, which we may well suffer due to the financial effects of the coronavirus pandemic. Who knows whether you will get your money back if borrowers fail to repay money en masse. So before investing in peer-to-peer, be VERY careful.
WARNING: The peer-to-peer lending has suffered during the coronavirus crisis. The first thing to be aware of is that some people who've invested are having trouble accessing their cash – usually you need to sell your loans to others, and in many cases the demand isn't there to buy them. We've heard waits of several months are common at some providers.
The other big thing to be aware of is that rates are a lot lower than they were before the pandemic, even as APRs borrowers are charged have grown. This is due to the providers expecting a larger proportion of returns to be lost to bad debt. Here's what's happened at the three big players in the peer-to-peer market:
Ratesetter: Temporarily reduced its monthly interest by half in May and it isn't expected to rise again until the end of the year. For example, its access account currently offers 3%, but you will now only receive 1.5% – the rest of the interest is being put into its provision fund. If you want to release your investment, this can now take months from the date you submit the request – as explained in our Ratesetter news story.
Funding Circle: Has paused new investing for retail investors, but says it hopes to offer this again in the future. This means existing investors aren’t able to add new funds or reinvest their monthly repayments in new loans, however they are continuing to receive monthly repayments of capital and interest from the businesses they lend to. Investors are also currently unable to sell loan parts to other investors.
Zopa: Continues to remain open to new and existing investors and is currently only offering new loans invested through Zopa Core at A* - B and Zopa Plus A*- C – effectively not lending in its higher risk categories. Its expected return rates have dropped from around 5% to around 3%.
Last edited by noTAGlove; 14th November 2020 at 14:26.
No, all the loans are secured against property at LTV of 70% or better! They're not unsecured.
I think you're perhaps confusing the loan rates available to someone who has a single mortgage on a house they live in with those available to developers. It's not the same market.
No income either - just maintenance and insurance expense!
Depends on how safe or risky the asset is which the money is secured against, and how that asset performs during a pandemic.
There is no such thing as a free lunch, or if something is too good to be true......
Following your edit - I'd be shocked if Moneysavingexpert didn't give a number of caveats. And quite right too. If it was without ANY risk, it would currently be paying less than 1%.
The three examples they give aren't really relevant to what I'm talking about here. I have accounts with all three, but they're not what I'm suggesting. The companies I'm talking about, exclusively secure their loans on property at valuations established by professional valuers, and then only lend a percentage of that amount.
Not all Ratesetter loans are secured on property, and their rates have always been relatively poor. I ran my holding in that down to zero when I realised this worked out the safest way forward. Zopa loans are pretty much totally unsecured, and again I have a tiny amount left in there now after figuring that wasn't for me. It's been fine though, but just not the best way forward for me. Funding Circle have paused new investing because they've got a ton of cash from the government to administer the bounce back loans and other schemes to help recovery from Coronavius, and didn't need piddling small change from us. Nothing to do with any difficulties, and no hardship other than I'm having to find a new home for money invested in there as and when the loans mature.
What you're relying upon is:
1. That a professional valuer has valued the asset correctly
2. That the realisable value stays above the LTV in the event of a default
You have to make a judgement on that, but you're quite right, if there was no uncertainty at all there would be no return.
This whole discussion came about in relation to a viable alternative to property investment/BTL, something I'm heavily involved in. In my experience the uncertainty, risk and potential for loss are far greater investing, say £500,000 in a couple of buy to let properties than they are in investing a similar amount in a portfolio of properly administered development loans through peer to peer.
Last edited by Jdh1; 14th November 2020 at 14:57.
The apartment is in a gated community and we have never had a burglary or act of vandalism since the place was built in 2006. The running costs are about 1000 euros pa. It is up for sale but thanks to Brexit and Covid, the market is slack. I am quite happy to wait for 10 years if necessary because it will increase in value eventually. The main thing is not to let it out as it is just to risky.
Lots of response but not really what I was looking for likes of is the market inflated and would it be worth waiting to invest.... I do have quite a large portfolio at the moment and possibly going too add.
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See I would say the opposite personally. Whilst I wouldn’t invest in any but to let’s right now (as I’d want to see how the next 6 months play out), I think long term with BTL’s, generally you know and understand the risks. With tax relief having been eroded and regulations, they won’t set the world alight, but they are a steady long term investment. With peer to peer and property development loans I think you are more likely to come unstuck going forward, default rates will only increase and the risk to reward may well not be worth it. Fine if it’s part of a good spread and diversification of overall assets, but I’d be very cautious to this type of investment vehicle right now.
We now have 7 mortgage advisers at work and 1 commercial specialist with over 30 years experience at high level borrowing at a major bank. They are all busier than ever but everything is taking far far longer to go through, lenders criteria is hardening overnight (even in the middle of applications ) and valuations are coming back lower. It’s just so much harder as banks (and Surveyors) are not optimistic going forward.
On the positive side, the housing market is probably the one route out of a recession (likes in the 30’s) and if it is, peer to peer could continue to be a good investment return. Not for the inexperienced though.
True rentals here are fraught with risk, seen it happen to friends even other Spaniards...It's not impossible to turn a few quid ... I've a good American friend, he is or was willing to put in considerable ground work/time looking and building relationships with estate agents. He did it with a tired but nicely located coastal property which he was able to improve, had the benefit of a good but still affordable builder, and eventuallllyyy flip but he'll admit that luck was on his side...the return for the stress/hassle wasn't as projected and he hasn't tbh had another bite.
Then again I know a fair few others who've watched apartments in developments gradually sink.
Still as you say over another decade or longer it may eventually increase and it's only costing you a 1000 p.a...,guess the costs were lower at the beginning and buying in '06 presumably it was cheap as...
GLWTS.
fwiw I dabbled in Funding Circle but am mostly nearly all out now, iirc end up ave 4 to 5 percent, a few Co's went under, but currently as noted it's on pause and I'm not doing any more.
Last edited by Passenger; 14th November 2020 at 16:31.
Your guess is as good as anyone's. If they could predict the future they would be winning the lottery every week.
Why is it "ridiculous"? It seems eminently sensible to me, especially as the Covid payouts will need to be recouped somehow.
You need someone with a crystal ball tbh the specifics of timing nobody knows hence why the sensible money is to drip into low cost tracker funds over time and make maximum use of the pension tax breaks if that's your cuppa. Have a look at the stock market thread in here, there's' some very insightful contributors.
Well I have both, and because I have a number of properties, the risk is spread. But if you're only in a position to buy one or two properties I'd argue that the risk is far greater. You have:
- Risk of tenant trashing your property
- Risk of tenant not paying
- Risk of tenant trashing your property AND not paying
- Risk that property will fall in value
Or in the case of peer to peer...
- Risk that one or more of the borrowers will default on their loans AND the property securing the loans has fallen in value below a figure which will repay the debt, AND the spread of loans isn't sufficient to still return an overall profit.
I’ve done four full refurbishments over the last 6/7 years of houses/flats. Admittedly bought them as run down and basically renovated to a high standard and made what I would call nominal gains vs the capital outlay.
I know I beat on about garages but to me they are the only property I’m interested in buying moving forward. The last block i purchased last year owe me £8k per unit (with new door/new roof) and are rented out for £120 pcm. 18pc yield. I’ve been offered £25k per garage if I want to sell. Very lucky to have bought 20 on this site.
I simply don’t see the return on investment with residential that I do with garages. I’ve just finished a 3 bed end of terrace that I paid £500k for and now owes me £675k. (Have put a kitchen diner extension on and everything new bar the brickwork), but I’d struggle to get £700k for it. I just don’t see the draw to residential unless I chance my investment stance with them. Buying to refurb and flip just doesn’t equate in the area I am. Too many buyers and not enough stock keeps demand high and buyers prepared to pay more...
As I said above, I’m firmly on the hunt for garage blocks moving forward. Rent them out so they are producing an income and if I want to sell one off for maximum price to an end user I can...not for everyone but the gains are simply superb.
Not sure it’s possible to give a response that applies to every area of the country and every area within a particular town or city.
That said, I doubt new housing completions will match the number of new households any time soon so demand is likely to outstrip supply for the foreseeable.
BTL is not an investment, it’s a business and needs to be managed as such.
Whole heartedly agree particularly watches and gold coins (legal tender) I just hope Rishi does not move the goal posts anytime soon....
But point taken in fact theres no revenue until disposal so its all asset appreciation...
I have friends with BTL and family in agents...some proper horror stories of non payment and people trashing places etc, then factor in maintenance safety checks etc, tax on income and at disposal it can look a bit grim, that said there are many who have been in for a long time with property acquired 20 years ago or more who are still enjoying nice revenues , but as for starting now I think there’s better investments....
But i guess a balanced portfolio would include multiple varied investments...property, watches, stocks, gold....
I have a couple of BTLs and I’m not adding at present.
Every time the government meddles with the market they create another blip. The current stamp duty holiday has created a mini bubble which will retreat when it’s done.
Then not doubt some other daft scheme with impact the market.
Pre COVID I was selling one house to put the money into funds and I got cold feet so renovated and relet. I think that has been a good decision... I could buy another house but it would require some borrowing to create enough leverage and I don’t fancy that now.
I’m in a bit of a holding pattern now .... maybe some opportunities kicking around if you fancy the risk but I’m sitting tight.
Sounds like it’s a good spread for you which is great.
Wouldn’t say so for the average investor, nor would the FCA. 10% maximum of investable assets to new retail investors to prevent harm. Their wording, not mine.
I don't take my own advice but getting a guarantor gives some mitigation.
Property obviously isn't a liquid asset but, while no one likes to see the paper value of assets stand at a loss, as long as teh rent keeps coming in, it might not be disastrous.
I don't think we've discussed a percentage of investable assets at all really. We've been talking about an alternative to BTL. You're right about the FCA guidelines.
I work in the mortgage industry and my experience is yes the market is artificially inflated and commentary from the “experts” is there will be a correction. Lenders have generally pulled out of anything over 75%LTV and are not keen on new build. Lenders are currently snowed under with applications. As said before they are changing criteria mid application and it’s getting harder to get an offer out.
However like others have said the market could go either way.
Does anybody have property in a partnership but runs a ltd company (not property related) and is therefore double taxed but knows the best vehicle too house the property?
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Indeed. In fact peer to peer loans of the type I'm talking about are a lot more liquid in that they're usually for a 12 month period. They do sometimes overrun, as is inevitable given their purpose. But even then, it's far more liquid thana property you've purchased, have a paying tenant in (or otherwise) and have transaction costs to cover before you can even think about recovering your investment from a sale.
Not sure what you mean. What double tax are you seeing?
Ok.... so the capital and repayment side in a partnership is seen as a profit on paying down the capital although you don’t actually see that income and then being a company director on basic wage and then dividends means that tax is paid at 45% so the tax is massive but the actual income isn’t that great
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Still not totally sure what you mean and maybe the partnership thing is a red herring.
I think you are saying that, if you have a mortgage on a BTL property, then you can only deduct the interest and not the capital element of mortgage payments. (And it's worse now as tax relief is limited to basic rate.) That means you are paying tax on profit you don't "see" because it's gone towards paying down capital.
eg Mortgage payment of £800 of which £700 capital (and so £100 interest) and rent £1,000.
Cashflow "profit" is £200.
Tax (assume higher rate) is 40% x £1,000 with 20% x £100 relief on the interest = total tax bill £380.
So your "investment" is actually costing you currently £180pm!
Of course your real profit is £900 (£1,000 less £100 interest) but that still means a tax charge of 42%.
I suppose it might help those that just want to buy property as a home? Anything that smacks as investment will increase in value and presently our property market is well overheated price wise. With average salaries in the UK at around 29k and average home price (to include all property types) being around 230k it may have been a bonanza for some but at the expense of the many.
I will admit that the older i get the less I like the idea of just chasing more money than that which is needed to live comfortably. I understand that we will have different ideas about comfort. Looking at my peers some have an awful lot more money than I do but I don't see them enjoying life as much as I do :0)
Last edited by redmonaco; 15th November 2020 at 14:36.
No. The Government has simply decided that only (their friends in) big business should operate private lettings businesses.
Private landlords have filled a gap that exists because of the lack of public sector provision. There are many people who either cannot afford or do not wish to be property owners. One trend is for older people to sell their homes to release capital and then rent.
If there's a problem, it's excess demand caused by failures of successive governments. Outside London and other hotspots where there is a competitive private rental market, renting is not a bad option for many people.
A very sensible approach, as long as you are happy with your lot, don't worry about others.
I still can't fathom Sunak trying to prop the housing market up in the short term with SDLT relief. Affordability is as you correctly identify a huge problem and whilst nobody wants to see the value of their main asset decline, a correction is unavoidable without strong wage growth which looks unlikely.
Not everyone wants to be a home owner. For a variety of reasons, there will always be a sizable proportion of the population who want to rent, and that supply has to come from somewhere. The government pretty much gave up on that a long time ago and private landlords have stepped in to fill the gap. It has to be profitable, otherwise why would you do it? I know from personal experience that legislation and tax treatments are making it increasingly unattractive in areas where property prices are stagnant.
That probably leaves large scale investment companies who are able to benefit from preferential tax treatment and economies of scale to take up the slack. That certainly makes everything easier to control for the government, but whether it gives a better deal for tenants remains to be seen. You'd like to think that 'professionalising' any industry should make it better.
I don't see it making property cheaper to buy though, while the demand to rent remains.
Wife bought a small flat near us for cash after an inheritance instead of stuffing it in the bank. Gets about 8% ROI + capital appreciation over 5 years. I’d say that’s a good investment. Still has to deal with tw@t tenants sometimes - bit of a PITA
Before dipping in wait to see what UK tax reforms are coming. There's a virtual war on the private landlord.
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