Why can't I make letting profitable? Is it all worth it?

[Legion]

What am I doing wrong?
Because I cant seem to make any money at this letting malarkey. Yes I can see profit when the value of the property rises, so is that it? only buy rental property when house prices are on the up. If I look just at rental income then I’d be much better off putting my money in the bank (even after CGT and selling costs) at least I can get 5 or 6 % (at the moment)
I tend to keep my rent just below the max for the area and property type, I do all the maintenance work myself, however after deducting the costs of gas & electric checks, Insurance and maintenance materials I’m loosing big time. How others can afford to pay managing agents and maintenance people I just don't understand.
I read a post on landlordzone recently suggesting I paint the outside every 4yrs, the inside every 5yrs, fences a & sheds 4yrly and replace furniture every 4 to 5 yrs.
What with all this, the increasing hassel of managing them and bloody Christmas on the way---move over Mr Scrooge cos nobody’s getting nothing this year, including me!:(

[Mrs Jones]

I suspect you are like many of us who are paying mortgages on our rental properties. The bigger the mortgage, the less your income. However, you do have to look at the long term benefit. Property is always a long term investment. Yes, house prices have dropped now, but they WILL go back up. It is a struggle right now, I will be lucky to break even on my property portfolio this year - but I am just determined to ride it out!! Don't lose courage Legion..

The landlords who benefit all the way round are those who have been able to pay outright for their properties - their rental income will cover all expenses and give a healthy income. Their properties are true investments - i.e - they have invested their savings in a vehicle (a property) which realises both income AND potential capital growth. I still believe this to be one of the best ways to invest your money.

[King_Maker]

Yes, without a decent Yield, property "investment" is more a gamble on increasing prices than an investment.

Unfortunately, media hype (and other Vested Interests) etc overlooked the fact that property prices can (and do) decrease.

And this credit crunch/recession has got a long way to go yet.

[Sorrel]

I agree, major players who can afford to buy mortgage free are the real winners. Iv just got another 8 townhouses on up here with a value of about 4,000,000 all of which were bought mortgage free and yield anything from £1000 to £1500 a month (minus my fee of course:p)

Makes the mind boggle as to where all the money is coming from and how it can be so readily available from some and about as hard as finding an law abiding scouser for others!

[RomansProperties]

I agree with the yield comment.
To be honest if its below 10% its not worth touching
My portfolio is about income and to be honest any capital appreciation is a bonus.
Buytolet borrowing is now at 6-7% so you need at least 3% to make it worthwhile

[Rosa Klebb]

It all surprised me too. I've got a house. It's done up very well. It's even paid for. Why aren't I earning more? I think it's just expenses.

People have an unreal idea of landlords and it doesn't help when you become one. the only landlord who does exceptionally well I think is the Queen... Quite a lot of upkeep there.

We're beginning to think the same way - money would do better in a good savings account. It's a very long-term investment as you say. Looking to when you/your children can sell.

[lorenzo]

I'm sorry if this sounds like 'hindsight' but as a recent newcomer to the biz [4 years in play] I have to say the most important thing I ever learnt and still practice to this day - you make money when you buy, not when you sell.
So basically, we want 50% off from where we are now..... :cool:

[rajeshk4u]

Most people were caught up in the madness of the property boom.

For instance, I met a friend who said that he wanted to buy 5 properties. When I worked through the numbers, I explained that he will not be accumulating properties, but accumlating debt! He never listed and joined the property boom at the peak of 2007!

The good old of days of rental returns of 15% return are gone, but at time no one was interested in property! But alas, I was a pennyless student!

[agent46]

The reason is simple - BTL was nothing more than a giant "get rich quick" scheme that sold the dream of immense riches and semi-idleness for those people who were stupid and greedy enough to fall for it.

Anyone with an ounce of common sense could see that the whole thing had all the economic integrity of a pyramid selling scam and the long term sustainability of a particularly rickety perpetual motion machine. It was obvious that the moment the housing bubble burst and recession/unemployment followed hard on its heels, the whole thing would come crashing down around everyones' ears (especially for the people who arrived late at the BTL trough).

I've been predicting this scenario for years, but until recently I was dismissed as either a Cassandra or a Marxist.

When are people going to realise that there is no such thing as a free lunch or that if something looks too good to be true, then it usually is? Perhaps now people will realise that a house is somewhere to live, not a pension fund/bank account/income generator and will go back to making stuff, or offering worthwhile services that can be sold to others, and then (and this is the important bit) invest their money in companies that do likewise rather than trying to beat the system with investments based on the hopelessly optimistic (and ahistoric view) view that house prices continually rise without interruption and there will always be plenty of tenants willing to pay a rent which is equal to or greater than the mortgage repayments.

[jta]

Right! That's it! You've gone and got me dander up now.:mad:
Like many of the posters on LLZ, I got to be a LL by accident, buying a freehold commercial property with a regulated tenant in situ. sheer hard work building the business from scratch and then paying off the bank loans means that today I am still living largely from the rents that property produces. If that means I am on a pyramid then it's WORK that got me there.
For all your obvious intellect you seem unable to see that. I doubt that you have ever had any seriously hard times in your life so you are able to indulge in the fashionable social consciousness of the times, which appears to say that everyone should work as hard as they can but not take rewards for it. I grew up in hard times, it shaped my thoughts, to this day I still work for the things I need. Since I don't have the physical fitness to do it the way I used to, I do it through the medium of btl. I would far rather do it my way than trust to the vagaries of the Stock Market, at least I am in control of my investments.
I know you think I'm a hopeless Tory, and I probably am, but you pouring scorn on those of us who have worked very hard to be in the position we are is not gaining you admirers.

[agent46]

Like many of the posters on LLZ, I got to be a LL by accident, buying a freehold commercial property with a regulated tenant in situ.

I am not talking about you as an individual, I am referring to general economic and social trends and phenomena at the level of markets and/or society as a whole. Your post amounts to nothing more relevant than a "my grandad smoked 40 a day and lived 'til he was 90" rebuttal of a claim that smoking is unhealthy.


sheer hard work building the business from scratch and then paying off the bank loans means that today I am still living largely from the rents that property produces. If that means I am on a pyramid then it's WORK that got me there.

Exactly how hard is it to apply for a mortgage and then place an ad on Gumtree, sign a tenancy agreement etc? It's not exactly as physically draining as working down a mine or as intellectually and emotionally demanding as conducting brain surgery is it? You make BTL LLs sound like some kind of latter day working class heroes or Dragons' Den style entrepreneurs when most BTL'ing consists of little more than a bit of form-filling!


For all your obvious intellect you seem unable to see that. I doubt that you have ever had any seriously hard times in your life so you are able to indulge in the fashionable social consciousness of the times, which appears to say that everyone should work as hard as they can but not take rewards for it. I grew up in hard times, it shaped my thoughts, to this day I still work for the things I need.

You have no idea how wrong you are. There have been times when my wife and I couldn't afford to heat the house or had to raid the pennies jar in order to buy a bag of chips. Moreover, I worked full-time and also helped raise 2 young children whilst studying for 7 years, which meant I was doing 90 hour weeks and sleeping less than 5 hours a night. Thankfully those times lie in the past, but I have led a far from pampered existence as you seem to assume.



you pouring scorn on those of us who have worked very hard to be in the position we are is not gaining you admirers.

Thankfully I'm not seeking admirers, so don't expect me to soft-pedal my views.

[jta]

don't expect me to soft-pedal my views.

Lord forbid that! That's what makes it so much fun!:D

[Izzycam]

Guys, don't get tetchy, we're all in this together, it's a hard time at the moment, am I wrong in thinking we should maybe try to help each out!

[mind the gap]

Guys, don't get tetchy, we're all in this together, it's a hard time at the moment, am I wrong in thinking we should maybe try to help each out!

Tetchtosterone has a lot to answer for!

[Perplexed]

Perhaps now people will realise that a house is somewhere to live, not a pension fund/bank account/income generator and will go back to making stuff, or offering worthwhile services that can be sold to others, and then (and this is the important bit) invest their money in companies that do likewise

Excuse me, but I thought providing tenants with a decent place to live WAS a service!

And in case you don't know it, it involves a lot of work, too.

So, are you saying that after forking out the capital to buy the property, investing a lot of time on managing the property and paying for maintenance, repairs and insurance, a landlord is 'greedy' for expecting a modest return?

My god, you ARE a Marxist!

Would YOU ever consider working for NO salary? In fact, would you pay your employer for the privilege of working for them?

Because that's what you are expecting landlords to do!! :eek:

[jta]

My god, you ARE a Marxist!


I don't know about that, but if Agent 46 ever gets to be a Judge then I think there are going to be a few Landlords with their gruntles dissed.:D

[Perplexed]

I don't know about that, but if Agent 46 ever gets to be a Judge then I think there are going to be a few Landlords with their gruntles dissed.:D

OMG, judging from his reasoning, he probaly IS a judge!

[mind the gap]

My god, you ARE a Marxist!

The horror encapsulated in your exclamation makes Marxism sound like a shocking intellectual/moral deviation or something. It's actually a rational and logical (if not entirely practical), political and moral standpoint.

We don't put people on trial for it in this country, Mr Mc Carthy!

[Perplexed]

The horror encapsulated in your exclamation makes Marxism sound like a shocking intellectual/moral deviation or something. It's actually a rational and logical (if not entirely practical), political and moral standpoint.

We don't put people on trial for it in this country, Mr Mc Carthy!

I haven't put anybody on trial. But I will call a spade a spade, Mr Stalin!

As for the alleged political and moral merits of Marxism, it produced poverty, famine and the cold war - not to mention the concentration camps!

Carl Marx compared the worker to a caterpillar who spun and spun, only to see his cocoon taken away from him. Maybe that was true in his time, but in a modern capitalist society virtually anybody can build a business or start a property portfolio if they bother to save and put in the sheer hard work it takes. However, in a Marxist society you just can't do that because that is where your cocoon will always be taken away from you. The STATE owns your cocoon and you're just a slave.

[mind the gap]

I haven't put anybody on trial. But I will call a spade a spade, Mr Stalin!

As for the alleged political and moral merits of Marxism, it produced poverty, famine and the cold war - not to mention the concentration camps!

Carl Marx compared the worker to a caterpillar who spun and spun, only to see his cocoon taken away from him. Maybe that was true in his time, but in a modern capitalist society virtually anybody can build a business or start a property portfolio if they bother to save and put in the sheer hard work it takes. However, in a Marxist society you just can't do that because that is where your cocoon will always be taken away from you. The STATE owns your cocoon and you're just a slave.

Actually it was Karl Marx, and I think you have comically misrepresented his caterpillar analogy!

[agent46]

Excuse me, but I thought providing tenants with a decent place to live WAS a service!

And in case you don't know it, it involves a lot of work, too.

So, are you saying that after forking out the capital to buy the property, investing a lot of time on managing the property and paying for maintenance, repairs and insurance, a landlord is 'greedy' for expecting a modest return?



I've posted numerous times on this subject and I can't be bothered re-hashing all the socio-economic arguments on the damage that BTL has done, and is doing to the UK, all over again. If I can motivate myself to do so, I will post up a couple of links on the subject.


Excuse me, but I thought providing tenants with a decent place to live WAS a service!

And in case you don't know it, it involves a lot of work, too.

Absolute rot! I worked in a letting and management agency when I was studying and even though the firm managed around 150 properties, I, along with the other staff, spent most of our time reading or staring out of the window.



My god, you ARE a Marxist!

No I'm not. Marxism is a discredited ideology, just as unfettered capitalism has shown itself to be.




We don't put people on trial for it in this country

What a pity! Because (apparently) I'm a Marxist, I would probably enjoy a nice show trial.

Speaking of which, not to pre-judge the outcome of any forthcoming public inquiry and without jumping to any media-led simplistic conclusions, have those social workers resigned yet?

[agent46]

As for the alleged political and moral merits of Marxism, it produced poverty, famine and the cold war - not to mention the concentration camps!



And by the same measure capitalism has produced widespread starvation in Africa, virtual slave labour in Asia, wars too numerous to count in every corner of the globe, not to mention Guantanamo Bay, Bagram Air Base, Abu Grahib and the so-called "Black Site" prisons stretching from Eastern Europe to Afghanistan.

Glasshouses and stones etc

[jta]

You really should not compare Agent 46 to Stalin! I enjoy his viewpoint, there wouldn't be much point to this forum if we all slavishly agreed with each other.
My argumentative skills are as nothing compared to his, that does not stop me having a go at him if I think he's wrong on something. Higher education is not the answer to everything ( I promise I won't talk about the 'school of hard knocks')

Anyway how can he compare to Stalin? Look at the record;

Stalin - Murdered millions in his purges.

Agent 46- doesn't know our addresses.:D

[arusha]

How can Agent46 say being a landlord isn't providing a service? I have heard many people argue this but I have never heard anyone saying what the alternative is for all the renters if they didn't have private landlords to rent from. Contrary to popular belief many people don't want to buy a house! I rented as a student, and as a young professional when I moved about a lot. Even now as a homeowner and landlady in Sheffield I am also renting in Bristol where I currently work as a consultant, so live here midweek.

It is absolute rubbish to say you aren't providing a service by being a landlord.

[jeffrey]

How can Agent46 say being a landlord isn't providing a service? I have heard many people argue this but I have never heard anyone saying what the alternative is for all the renters if they didn't have private landlords to rent from. Contrary to popular belief many people don't want to buy a house! I rented as a student, and as a young professional when I moved about a lot. Even now as a homeowner and landlady in Sheffield I am also renting in Bristol where I currently work as a consultant, so live here midweek.

It is absolute rubbish to say you aren't providing a service by being a landlord.
Agent46 has fairly entrenched views. Nothing you say is going to alter them!

[lorenzo]

If an LL is not providing a service, what exactly is he/she providing?

Of course it's a service.

[arusha]

I want agent46 to answer my question. What would students, young professionals and consultants or other people who do short term jobs do if they didn't have private landlords to rent from?

(Not to mention the people who don't want to buy a house because they like renting, and those who can't buy a house because of bad credit rating, irregular or low income.)

[agent46]

It is absolute rubbish to say you aren't providing a service by being a landlord.

I'm not sure I ever said that landlords are not providing a service, although I can see how the hard of thinking might have misinterpreted one of my comments in this thread. In any case, just because an activity provides a service, it doesn't necessarily follow that when weighed in the balance, that activity or service is beneficial to society.

My point is that, in conjunction with other factors, BTL has done and is doing enormous damage to society and the economy. As you, and a number of other LLZ'ers clearly exist in an innocent state of almost touching naivety, I will dig out some of my posts which outline the arguments later today and paste them into a further post.

[jeffrey]

I will dig out some of my posts which outline the arguments later today and paste them into a further post.
No more, no more! Cap'n, the ship canna take it...

[arusha]

You haven't answered my question? Where would people like me have lived without private landlords?

I am a member of society and I have benefited enormously from the existence of private landlords.

I am well aware of many of the problems buy to let has caused but you sound like you are saying society would be better off if private landlords didn't exist at all? Are you saying that and if so what alternatives are you suggesting for people who rely on the services provided by private landlords.

[lorenzo]

In any case, just because an activity provides a service, it doesn't necessarily follow that when weighed in the balance, that activity or service is beneficial to society.

If this is the case, we must turn our attention to many other enterprizes in our society.

Tobbaconists
Bottle Shops
Betting Shops
Fast food outlets
Brazenly consumerist retailers
and many more

The fact is, private landlords are essential to the way the economy works.

That BTL LLs have been complicit in pushing house prices to truly absurd and unsustainable... snd sociologically damaging levels, is not the fault of BTL. OOs have had a hand in that as well and onlt the most committed Marxist would put forth a case that home ownership is evil.

It is the collective fault of Central Bank and Government policy which allowed truly ludicrous levels of debt and promulgated a speculative mindset over capital values.

[Mrs Jones]

People in the UK are often criticized for being too fixed on the importance of owning their own homes and have been compared unfavourably with other European countries where people rent rather than own their homes. In most of these European countries, although there may be a small element of "social housing" such as in the UK, the majority is provided by private landlords. Why is this situation so "OK" for these other countries, and so "not OK" for the UK???

[arusha]

I often hear criticisms of landlords and the buy to let industry in general but I have never heard any one suggest an alternative for all the people who use it, even if I ask directly.

I was hoping Agent46 would have a suggestion as he/she seems to have strong opinions on the matter.

Local authority housing clearly isn't appropriate in some cases. E.g. For people like myself who work away from home midweek for temporary contracts. People like me are good for the economy as we fill in the gaps in skills and can be sacked easily and cheaply when we are no longer required. There would be far fewer temporary, flexible workers if there were no private landlords and that would not be good for society or the economy. Flexible workers are just one example of people who use private landlords, there are many more as I have mentioned earlier in this thread.

Private landlords help workers be mobile. They also enable people to study in a different city or to work abroad.

It's easy to point out all the negatives of any particular industry, it is a lot harder to suggest a viable alternative for the people who use it.

[agent46]

Whoa - one at a time ladies and gentlemen.

To answer the various visceral howls of protest, please just read the linked threads, below. If you take issue with anything therein, and have any NEW points to make in rebuttal of my arguments, then please post them in this thread.

Please read the threads carefully and in full and please note the use of the word "NEW" in the above sentence.

http://www.landlordzone.co.uk/forums/showthread.php?t=14032&highlight=trough

http://www.landlordzone.co.uk/forums/showthread.php?t=13417&highlight=trough&page=4 (especially the summary in post #48)

http://www.landlordzone.co.uk/forums/showthread.php?t=11361&highlight=trough&page=3

http://www.landlordzone.co.uk/forums/showthread.php?t=8821&highlight=bootstrapping&page=7 (especially the summary in post # 62)



I think that's more than enough to be going on with for now.

[lorenzo]

Whoa - one at a time ladies and gentlemen.

To answer the various visceral howls of protest, please just read the linked threads, below. If you take issue with anything therein, and have any NEW points to make in rebuttal of my arguments, then please post them in this thread.

Please read the threads carefully and in full and please note the use of the word "NEW" in the above sentence.

http://www.landlordzone.co.uk/forums/showthread.php?t=14032&highlight=trough

http://www.landlordzone.co.uk/forums/showthread.php?t=13417&highlight=trough&page=4 (especially the summary in post #48)

http://www.landlordzone.co.uk/forums/showthread.php?t=11361&highlight=trough&page=3

http://www.landlordzone.co.uk/forums/showthread.php?t=8821&highlight=bootstrapping&page=7 (especially the summary in post # 62)



I think that's more than enough to be going on with for now.
I think you are confusing two totally separate issues. This is understandable as very few BTL landlords separate the two either. These are:

1/ Providing long term accommodation for fair reward.

2/ Property speculation.

One is about in income and one is about capital values.

I only have a couple of BTLs I bought years ago. I bought them at a price where I could supply a rental at a fair market rent which was a fair return on my capital, and that would be a hedge against inflation. That means I want to buy at a fair value. The reason I didn't buy more was that I didn't see fair value anymore so have stood aside.

I don't give a toss about the capital values except that they roughly keep on terms with inflation over the long term. I fully expect the 2007 value to drop by 40% (or more)... and that will see me in line with inflation. If it overshoots to the downside, I don't care, it will correct.

Consequently, there is no pressure on me to raise rents, mine are below the general area, but still is fair return on what I consider to be the current intrinsic value of the properties.

For me the yield must add up. It hasn't done that in recent years, so recent BTL investors must be property speculators, a whole 'nuther bowl of wax. Strong capital gain is ESSENTIAL to make the figures work. Bugger that. Give me liquidity for that sort of caper (i.e. financial markets).

You will find a lot of old time LLs with the same attitude... not interested in paying inflated values. They just wait till value presents itself. In that sense, "proper" landlords don't force FTBs to pay too much or rent forever etc.

Property speculation, collectively does, but that is a separate issue to landlording.

[agent46]

I think you are confusing two totally separate issues. This is understandable as very few BTL landlords separate the two either. These are:

1/ Providing long term accommodation for fair reward.

2/ Property speculation.

One is about in income and one is about capital values.

.

I am not confusing the two. In fact, I think the "long term" model does equally as much damage as short term speculation because it takes property out of circulation and thus effects the market for decades. In either case, the effect is the same - an inflationary bubble, inevitably followed by collapse.

Moreover, if;

(a) BTL succeeds so far as LLs are concerned, then without a vast increase in supply (ie: more building) to keep pace with demand (in order to retain stasis in the market), BTL can only succeed at the expense of people who seek to be owner occupiers but end up becoming tenants against their will. This is because they are priced out of the market and then forced to rent from the BTL LLs. See my bootstrapping argument in post #48 in the links referred to above

(b) BTL fails, then it has the potential to deepen and/or lengthen the housing market crash (and thus the recession) as a result of all that locked away property coming back on the market in a relatively short space of time.

In short, BTL (amongst other factors) has distorted the market.


And before anyone jumps in with simplistic arguments along the lines of "what about students and newcomers to a location?", you will note from the linked threads that I do not believe there should be no privately rented accomodation whatsoever, I simply believe there should be a lot less than there is.


I only have a couple of BTLs I bought years ago. I bought them at a price where I could supply a rental at a fair market rent which was a fair return on my capital, and that would be a hedge against inflation. That means I want to buy at a fair value. The reason I didn't buy more was that I didn't see fair value anymore so have stood aside.

I don't give a toss about the capital values except that they roughly keep on terms with inflation over the long term. I fully expect the 2007 value to drop by 40% (or more)....etc etc

As I end up saying in virtually every thread on this subject, I am not talking about individuals and the perfect and, in their eyes, ethical or sensible investment decisions, I am talking about a phenomena at the level of markets and society as a whole.

[jeffrey]

I am talking about a phenomena at the level of markets and society as a whole.
A phenomenon (= singular).

[Poppy]

Question: When Mrs Thatcher was contemplating permitting council tenants to purchase their homes, did she expect/foresee/want private landlords in turn to buy up properties?

Another question: Should the government/councils stop selling off council housing stock?

[lorenzo]

I am not confusing the two. In fact, I think the "long term" model does equally as much damage as short term speculation because it takes property out of circulation and thus effects the market for decades. In either case, the effect is the same - an inflationary bubble, inevitably followed by collapse.
We'll have to agree to disagree on this point.

Cause ==>> Effect

Inflation is not caused by people buying houses. The ONLY fundamental reason for inflation is the creation of excess money. In other words, loose credit.

Economics 101.

The BTL boom is a symptom, not the cause.

[Lawcruncher]

All markets are complex and no one understands them. If people understood them they would not work. ALL investment is a risk. The only people who are guaranteed to make money out of markets are the middle men who do not take risks.

[agent46]

Inflation is not caused by people buying houses. The ONLY fundamental reason for inflation is the creation of excess money. In other words, loose credit.

Economics 101.

The BTL boom is a symptom, not the cause.

In one sense you are correct that excess money is the root cause of inflation, but that is a vast oversimplification and also slightly disingenuous because you speak of the BTL boom as though it was something which occurred in isolation from the rest of the property/wider economy or was the end point in a chain of events, and somehow was not in itself a contributing factor in other phenomena ie: house price inflation and the other problems outlined in the linked threads. Of course the BTL boom was enabled and then powered by the ready availibility and low cost of credit (ie: BTL mortgages) but the fact that easy credit is at the root of the problem doesn't absolve BTL LLs of their responsibility for the problems they have caused and are causing any more than the easy availiability of guns absolves an armed robber from the consequences of their actions.

[lorenzo]

but the fact that easy credit is at the root of the problem doesn't absolve BTL LLs of their responsibility for the problems they have caused and are causing any more than the easy availiability of guns absolves an armed robber from the consequences of their actions.
Well, we are on the same page there.

People (including BTL LLs) didn't have to bid up house prices 3 sigmas above the mean. But they did, and it's been very sociologically and financially damaging.

But the real villains in my estimation are those who played the "buy now or you will miss the boat" psychological card. Example - Krusty Allslop and Phool Spencer. They're still playing it and will cause more damage before they are totally discredited.

This too will change, however.