The joy of being a landlord

[volt9291]

A few people in this thread have said that rent shouldn't be so high/higher than someone could get a mortgage for.
I don't think that is the case unless I'm missing something.

Looking around my postcode:

a 3-bed semi built in the 1980's cost about £260,000.
The rent on that house is about £900 a month
if you put a £50,000 deposit down, a 4.5% 25-year mortgage would be £1,168 a month £268 more than renting!

a 3-bed new build is about £365,000
The rent on that house is about £1200 a month
if you put a £50,000 deposit down, a 4.5% 25-year mortgage would be £1,750 a month £550 more than renting!

Are people putting down £100,000+ deposits or getting mortgages with a 60-year term?

 

[Rroff]

Was just randomly comparing prices/rent around where I work - saw one place which looked suspiciously cheap, "needs updating" - flicked through the pictures - whoever lived in it last must have had some serious issues the place is a mess - everything broken, walls torn up (not DIY/renovations), mould and stains everywhere (looks like they've taken a dump here and there in corners and someone has done a half job of cleaning it up), rubbish everywhere, etc. etc. I don't think I'd be happy living there even after a deep and intensive cleaning and renovation.

 

[dowie]

Are people putting down £100,000+ deposits or getting mortgages with a 60-year term?

Either way you shouldn't ignore the cash too, that would otherwise be sat in a bank earning interest right? And at a similar rate if you lock it up. Or indeed invested.

If you take that cash and buy a property then you're losing that and should account for it too in addition to the mortgage costs.

 

[EvilRob]

The massive problem with everything the government do is that its completely focussed on maintaining these crazy high property prices. They aren't even trying to hide it either. Anyone with half a brain cell could see that a stamp duty holiday wouldn't save anyone any money. Quite frankly im astounded it passed even the most rudimentary of sanity checks.

Any government that was in power when the housing market collapses is onto a hiding. People don't care that they paid £400k for a house. If it was worth £500k at some point and now its only worth £400k again they will be ****** because people are fundamentally idiots.

I think it will be a bit better in a year (inflation + house price stagnation + more stock coming onto market) but is fundamentally screwed unless policies change to encourage more building.

 

[EvilRob]

Either way you shouldn't ignore the cash too, that would otherwise be sat in a bank earning interest right? And at a similar rate if you lock it up. Or indeed invested.

If you take that cash and buy a property then you're losing that and should account for it too in addition to the mortgage costs.

Agree but then you also need to count that if you buy you're building equity via paying down your mortgage and house price growth.

@volt9291 cheap mortgages made the equation much more attractive for buying vs renting than it is now. I expect it will become more attractive to buy again than it is now as landlords remortgage at higher rates and jack up rental prices.
Edited to add: Your assumption is about 4% gross yield for rental income - I think that's a bit low although it does depend on area.

 

[hurfdurf]

a black mark goes against the property and the landlords when the time comes to sell.

With the second point, We knew there were cracks in the slabs but not to the point where they were a trip hazard. We informed them prior to them moving in that it was something we planned to rectify in the new year when the weather improved but she (the wife) insisted it be rectified on her timescale. My wife had also recently lost her job and we were down to a single income leaving our funds somewhat depleted, we ended up having to use our savings to pay for work which we would not normally be required to do. My wife suffers from severe anxiety so the prospect of having Environmental Health on our backs was enough to nearly put her in hospital. Id rather not risk my wifes mental health.

You say they seem like non-problems when infact they are big problems considering the circumstances we found ourselves in. They may not have been an issue for you but for us it was almost breaking point.

Having drug growers and dealers in your property, and druggies turning up to purchase drugs is not what i would want for the sake of my properties well being, its neighbours quality of life, or for property values in the the area in general.

I would also not want the stigma of being a landlord renting to drug growers and dealers, letting a property used for prostitution and its derivatives, or the storing and distribution of stolen goods. Growers of drugs are not known for paying their bills, electricity nor rent, and leave the property owner open to at least police investigation if not financial liabilities. so all in all prostitutes and drug dealers et cetera are not what respectable landlords would want as tenants, or neighbours of their properties. But you know that....

You must only know really rubbish drug dealers if that’s your experience with them. Try moving in better higher quality circles.

 

[hurfdurf]

The agency is contracted to carry out 6 monthly inspections of the property, The tennants were always difficult to get hold of and would normally be very cagey and difficult when inspections were taking place. If the property was subsequently raided by police for drug offences then a black mark goes against the property and the landlords when the time comes to sell.

With the second point, We knew there were cracks in the slabs but not to the point where they were a trip hazard. We informed them prior to them moving in that it was something we planned to rectify in the new year when the weather improved but she (the wife) insisted it be rectified on her timescale. My wife had also recently lost her job and we were down to a single income leaving our funds somewhat depleted, we ended up having to use our savings to pay for work which we would not normally be required to do. My wife suffers from severe anxiety so the prospect of having Environmental Health on our backs was enough to nearly put her in hospital. Id rather not risk my wifes mental health.

You say they seem like non-problems when infact they are big problems considering the circumstances we found ourselves in. They may not have been an issue for you but for us it was almost breaking point.

Tell me more about this black mark system? Is this in the UK? What does a black mark equal?

I’m sorry about your wife’s condition. Landlordism sadly isn’t free money and comes with a cost, like any investment, and sometimes those costs can and will be variable.

 

[Freakbro]

A few people in this thread have said that rent shouldn't be so high/higher than someone could get a mortgage for.
I don't think that is the case unless I'm missing something.

Looking around my postcode:

a 3-bed semi built in the 1980's cost about £260,000.
The rent on that house is about £900 a month
if you put a £50,000 deposit down, a 4.5% 25-year mortgage would be £1,168 a month £268 more than renting!

a 3-bed new build is about £365,000
The rent on that house is about £1200 a month
if you put a £50,000 deposit down, a 4.5% 25-year mortgage would be £1,750 a month £550 more than renting!

Are people putting down £100,000+ deposits or getting mortgages with a 60-year term?

BTL landlords can go interest only to keep the mortgage payment down.

1) take the monthly profit
2) wait for the house price to appreciate
3) sell house and pay off mortgage capital
4) profit

 

[bigmike20vt]

BTL landlords can go interest only to keep the mortgage payment down.

1) take the monthly profit
2) wait for the house price to appreciate
3) sell house and pay off mortgage capital
4) profit

perhaps. but you have taken all the risk out of the equation. non paying tenants or ones which trash your house (of which 2 out of 5 of ours were (and at a guess it took 3 years to cover the redecoration and new kitchen and bathroom suites we installed because of those) - our bad ones were the 1st 2 we had on the bounce as well) and any maintanence on the property (and no not all landlords are slum lords who let the properties turn to ruin).
people here are acting like landlords should make zero profit when they have a good tenant. even with the best will in the world that is nonsense as they have to cover the maintanence, insurances, potential tenants from hell as well as the ever present tax man.
Even IF you feel private citizens should not be allowed to be landlords and it should be 1 property per person and forced government purchase of all the rest for state rental...... (and I know not everyone is that anti landlord ) but even if you are... that is still not the landlords fault. your beef should be with the government who put all this in place.

btw can lls really get 100% interest only mortgages? I wouldn't know as it's never something I considered but that is better than what I could get as a FTB for my home . it seems hugely unfair to allow LLs such a sweet deal. if so that is pants but again it's the system at fault imo not the LL.

 

[ci_newman]

perhaps. but you have taken all the risk out of the equation. non paying tenants or ones which trash your house (of which 2 out of 5 of ours were (and at a guess it took 3 years to cover the redecoration and new kitchen and bathroom suites we installed because of those) - our bad ones were the 1st 2 we had on the bounce as well) and any maintanence on the property (and no not all landlords are slum lords who let the properties turn to ruin).
people here are acting like landlords should make zero profit when they have a good tenant. even with the best will in the world that is nonsense as they have to cover the maintanence, insurances, potential tenants from hell as well as the ever present tax man.
Even IF you feel private citizens should not be allowed to be landlords and it should be 1 property per person and forced government purchase of all the rest for state rental...... (and I know not everyone is that anti landlord ) but even if you are... that is still not the landlords fault. your beef should be with the government who put all this in place.

btw can lls really get 100% interest only mortgages? I wouldn't know as it's never something I considered but that is better than what I could get as a FTB for my home . it seems hugely unfair to allow LLs such a sweet deal. if so that is pants but again it's the system at fault imo not the LL.

It may not be the case today, but there was a post in here yesterday with a LL saying they had 16 properties all on interest only mortgages.

Back in the "glory days", it was definitely possible to build up quite an empire if you had some capital in the bank.

 

[Freakbro]

perhaps. but you have taken all the risk out of the equation. non paying tenants or ones which trash your house (of which 2 out of 5 of ours were (and at a guess it took 3 years to cover the redecoration and new kitchen and bathroom suites we installed because of those) - our bad ones were the 1st 2 we had on the bounce as well) and any maintanence on the property (and no not all landlords are slum lords who let the properties turn to ruin).
people here are acting like landlords should make zero profit when they have a good tenant. even with the best will in the world that is nonsense as they have to cover the maintanence, insurances, potential tenants from hell as well as the ever present tax man.

Oh yea, of course. It was just a simple point about how BTL LL's can keep mortgage payments low to still be able to leverage their asset and make money. Like with all investments though there is also risk, "your capital can go down as well as up" nothing is guaranteed

That's where a portfolio of houses, like a spread of shares, minimises your risk, rather than people like you and me who have a second house to rent through circumstance rather than intent.

Like I said previously, LLs provide a necessary service in society, but due to lack of building leading to a shortage of available homes the market has probably got distorted somewhat. Not helped by the rise in people actively entering the BTL sector.

 

[Freakbro]

btw can lls really get 100% interest only mortgages? I wouldn't know as it's never something I considered but that is better than what I could get as a FTB for my home . it seems hugely unfair to allow LLs such a sweet deal. if so that is pants but again it's the system at fault imo not the LL.

The difference when it's your home is that you have to show how you will pay the capital off at the end of the term (like with the old endowment mortgages) because you can't just sell the house, as you need somewhere to live! Whereas it's just an easily sellable asset to a LL

 

[Pottsey]

A few people in this thread have said that rent shouldn't be so high/higher than someone could get a mortgage for.
I don't think that is the case unless I'm missing something.

Looking around my postcode:

a 3-bed semi built in the 1980's cost about £260,000.
The rent on that house is about £900 a month
if you put a £50,000 deposit down, a 4.5% 25-year mortgage would be £1,168 a month £268 more than renting!

a 3-bed new build is about £365,000
The rent on that house is about £1200 a month
if you put a £50,000 deposit down, a 4.5% 25-year mortgage would be £1,750 a month £550 more than renting!

Are people putting down £100,000+ deposits or getting mortgages with a 60-year term?

Then there is the running costs. Rent needs to cover maintenance, reinventions, insurance, and a pot of money to cover problems like renter skipping town. e.c.t Most of the anti landlord posters in here conveniently forget about the running costs of being a landlord and conveniently ignore the people who want to rent over buying there own home for a list of valid reasons. Its those anti landlord posters that are wrong and in some cases I find the anti landlord posters the immoral ones brushing good landlords who are helping under the same group as the bad ones.

 

[aVdub]

Then there is the running costs. Rent needs to cover maintenance, reinventions, insurance, and a pot of money to cover problems like renter skipping town. e.c.t Most of the anti landlord posters in here conveniently forget about the running costs of being a landlord and conveniently ignore the people who want to rent over buying there own home for a list of valid reasons. Its those anti landlord posters that are wrong and in some cases I find the anti landlord posters the immoral ones brushing good landlords who are helping under the same group as the bad ones.

Our tenants want to rent and are happy to rent and like the price we charge.
We have a builder and gas/electric guys that can be called out at short notice.

It is possible that the anti renters here only watch CH5 type programs about rouge landlords and not follow the Landlord forums and others, that show the good side of the business.

 

[randomshenans]

Does dowie work for you?

Only for 6%

 

[malachi]

Replacing the boiler isn't cheap, will cost at least £1000 and you have to do compulsory checks every year which can cost £80 to £120. Fail any of those checks then you need to pay, which cost is unlimited.

Same for electric too.

Not as simple as getting the rental income every month and "racking it in."

 

[dlockers]

perhaps. but you have taken all the risk out of the equation. non paying tenants or ones which trash your house (of which 2 out of 5 of ours were (and at a guess it took 3 years to cover the redecoration and new kitchen and bathroom suites we installed because of those) - our bad ones were the 1st 2 we had on the bounce as well) and any maintanence on the property (and no not all landlords are slum lords who let the properties turn to ruin).
people here are acting like landlords should make zero profit when they have a good tenant. even with the best will in the world that is nonsense as they have to cover the maintanence, insurances, potential tenants from hell as well as the ever present tax man.
Even IF you feel private citizens should not be allowed to be landlords and it should be 1 property per person and forced government purchase of all the rest for state rental...... (and I know not everyone is that anti landlord ) but even if you are... that is still not the landlords fault. your beef should be with the government who put all this in place.

btw can lls really get 100% interest only mortgages? I wouldn't know as it's never something I considered but that is better than what I could get as a FTB for my home . it seems hugely unfair to allow LLs such a sweet deal. if so that is pants but again it's the system at fault imo not the LL.

It may not be the case today, but there was a post in here yesterday with a LL saying they had 16 properties all on interest only mortgages.

Back in the "glory days", it was definitely possible to build up quite an empire if you had some capital in the bank.

It has been exceptionally simple maths for many years. I watched a colleague build a housing empire side of desk at work. He bought a house with 20% down on BTL; house prices rose, he then took out the equity of the previous property and put 20% down on another BTL - rinse repeat.

You're mad to have a rental property on anything other than BTL/interest only with the capital/equity periodically redeployed into more houses.

 

[randomshenans]

I think like anything, an investment is an investment. You could go all in on stocks, gold, watches, bonds, or property. Or, you could have a mix of them all. While property and real estate (both commercial and resi) comes with higher costs because of upkeep and wear, it also comes with the balance of general appreciation and the big part of it being a tangible asset that people use as a store of value. That store of value just comes with a cost to keep at the same time.

Not as simple as getting the rental income every month and "racking it in."

 

[NVP]

If you have an interest only deal you don't build equity as fast as you need for reinvestment in the same area.

 

[Deleted member 77746]

I think like anything, an investment is an investment.

I guess it is. Landlords must be working so hard.
Hats off to the land-lords and land-ladies and land-inbetweens.