Buy to let's ...a bubble ?

[avinalarf]

I have been looking for BTLets in London and close suburbs
The prices asked are now at least 10% up on a year ago, almost impossible to get a one bed flat at £250K, so stamp duty at 3% kicks in . Lucky to get 4% yield .
Will this bubble burst soon ,who knows ?
Please discuss.

[gibbon]

I think the buy to let market may suffer, as you note, the yields simply are not attrative any more. I think large new build developments could struggle to keep pace with current growth, having said that i think period property be it a flat or a house will continue to climb, there is simply not much supply and a great deal of people wishing to purchase. Zone one and two will simply be populated by the wealthy, to some degree i think this is a correction rather than a bubble, note other similar capital cities, Paris, Manhattan etc.

[smckeown]

Rental v purchase price is not the only cobsideration for btl investments. Happy for prospective investors to think this way :-)

[avinalarf]

Thing is low interest rates are having a double whammy effect.
People desperate to get a half decent return on their money so lots more piling into property therefore increasing prices on a very small amount of stock for sale.
Lowish interest rates on mortgages make home ownership attractive to those with the deposit against ever increasing rental costs.
Looks like the shine is off of the market ?

[avinalarf]

smckeown said:

Rental v purchase price is not the only cobsideration for btl investments. Happy for prospective investors to think this way :-)

Please elaborate.

[zbc]

avinalarf said:

smckeown said:

Rental v purchase price is not the only cobsideration for btl investments. Happy for prospective investors to think this way :-)

Please elaborate.

Presumably capital growth is reappearing. If you had bought last year at 250k with maybe 100k capital and as you said prices have gone up 10% the flat would now be worth 275k and your equity 125k a 25% annual return assuming rental convers interest costs. Obviously the tax man would like a slice but it looks like more than a 4% yield still.

[avinalarf]

zbc said:

Presumably capital growth is reappearing. If you had bought last year at 250k with maybe 100k capital and as you said prices have gone up 10% the flat would now be worth 275k and your equity 125k a 25% annual return assuming rental convers interest costs. Obviously the tax man would like a slice but it looks like more than a 4% yield still.

Capital growth is obviously there historically .
What I am questioning is that as business always goes in cycles ,has this cycle finally peaked and will now stabilise for the next say 5/10 years.
I am also talking about the main market not trophy properties where different rules may apply.
Now I do not expect a definitive answer ,just an informed opinion.

[zbc]

I don't believe that there is really a bubble at the moment in the general market. There are certainly some geographic areas and property types that are overheating but as ever the winners in this business are finding areas where opportunity remains. Inevitably it is an ever changing landscape. I hope that one day it my drift so far that even my BTLs make some money

[smckeown]

Most properties will provide an excellent capital growth in the long term. Although a lot of new properties don't fit this category.

[dingg]

looking at a block of 6 flats for less than 250k

all let bringing in 25k per annum dss tenants

just concerned the gov is going to be hitting these people with more cuts - although the rent is paid direct to the landlord.

East Cleveland btw

too good to be true?(I dunno)

[princeperch]

If you are happy collecting the rent in an envelope with a baseball bat weekly crack on

[dingg]

Rent goes direct to landlords account - no interaction with tenants required

[eldar]

dingg said:

Rent goes direct to landlords account - no interaction with tenants required

The beware tenants fiddling their claims. Guess who the money will be reclaimed from. Then the calls at 2AM saying the leccys broken and the like....

Easy money

[Mobile Chicane]

dingg said:

Rent goes direct to landlords account - no interaction with tenants required

Good luck with that once 'universal credit' is rolled out to your area. Stories abound of people who have never had to manage money before pissing the rent up the wall.

[bogie]

Im always confused with all this talk of "yields" of 5 or 7% ....thats before tax isnt it? so another 40% to come off...

[Pistom]

Never understood the fascination of BTL.

FHLs seem to make so much more sense. Leave all marketing to a rental company and the money just flows in.

Long weekends and mid week breaks are increasingly common in the UK year round and for each split week charge a full week and you are seeing an even better return.

[dingg]

Mobile Chicane said:

dingg said:

Rent goes direct to landlords account - no interaction with tenants required

Good luck with that once 'universal credit' is rolled out to your area. Stories abound of people who have never had to manage money before pissing the rent up the wall.

Thanks Chic - thats certainly a game changer for this type of letting

[eldar]

bogie said:

Im always confused with all this talk of "yields" of 5 or 7% ....thats before tax isnt it? so another 40% to come off...

Usually, yes. Or as the amateurs say, what tax?

There is a decent return to me made if you get the right properties and tenants, and manage things properly. I'm currently making around 18% after tax, at the low end of the rental market. Get good tenants, treat them well and fairly and they stay, pay the rent and are content.

[UpTheIron]

Pistom said:

FHLs seem to make so much more sense. Leave all marketing to a rental company and the money just flows in.

Is this something you do, or just that it looks good on paper? I'm in the latter camp (with a couple of B2L's). Would be interested in being pointed at any good websites / info sources showing what I could buy, where and what it would bring in...

[Steffan]

bogie said:

Im always confused with all this talk of "yields" of 5 or 7% ....thats before tax isnt it? so another 40% to come off...

Investment yields have always been expressed gross. There may be individuals who pay no tax on those yields depending on their circumstances. Just the time honoured custom.