Greed of ‘buy to let’

[LittleLottieChaos]

When did people start to think that they should profit from housing? It all feels incredibly Dickensian. Pees me off when I see housing being listed as buy to let investments rather than ‘here’s a house for a nice young family to live in’. Especially with the market so horribly skewed right now.

It is shocking that people seem to think they have a right to profiteer from those less fortunate by whacking on high rents, that more than cover their mortgages. Legit: you need one house, one house only. Or maybe I’m missing something... or these are genuinely just bad people.

Interested to hear how people justify it? Do you just think, fuck ‘em I want to be rich? Do you not think about the morality?

(I rent but am saving to buy an appropriate house to live in... not to profiteer from)

@Zenithbear
Since interest rates went down to almost nothing on savings. If I could get 4 or 5% on a savings account I would put my money in that instead of looking for another rental property to let out.
But 0.4% isn't good enough.

Why wouldn’t you go for historical 10%ish average returns of major equities - eg S&P500? A hell of a lot less work than property, similarish returns, easier access to money and probably a lot more ethical.

[quote supermoonrising]If I invested money in the bank I would get very little interest.
Stocks?
www.woodruff-fp.co.uk/property-vs-investment-portfolios/[/quote]
These are likely very high risk stocks. Average growth is significantly lower than property return.

[quote supermoonrising]@Zenithbear
Since interest rates went down to almost nothing on savings. If I could get 4 or 5% on a savings account I would put my money in that instead of looking for another rental property to let out.
But 0.4% isn't good enough.

Why wouldn’t you go for historical 10%ish average returns of major equities - eg S&P500? A hell of a lot less work than property, similarish returns, easier access to money and probably a lot more ethical.[/quote]
In what way is it more ethical though? Just had a quick look at the companies on there. Fair number of energy companies, airlines and real estate all in the first part i looked at. How is making a profit from energy companies ok when people can't afford to heat their homes?
Just playing devil's advocate here. I have stocks and shares but I wouldn't claim it to be more ethical

It's not any better or worse than any other investment. You could say stocks a "profiteering" off the labour of the poor. You can argue it is exploitation but I don't think it is the cause of rising prices.

I don't think BTL has led to price inflation, that's because house building hasn't kept pace with immigration and a trend towards more people living alone.

We now have more people going after the same number of houses so prices have risen. Whether the occupants buy it or rent doesn't matter too much, it still puts upward pressure on house prices.

BTL doesn't create its own demand, the investment potential is a function of demand for rentals. It's a method of financing accomodation expenses for those that can't or don't want to buy. If landlords refunded all rental receipts to tenants today, I don't house prices would fall.

We now have more people going after the same number of houses so prices have risen. Whether the occupants buy it or rent doesn't matter too much, it still puts upward pressure on house prices
It does because you can only live in one house, but can own as many as you like.

So in affect the more people investing in buy to let the more profitable it becomes as fewer people can buy.

The LL needs to pay the mortgage, pay for maintenance and make sure they have a enough money to cover gaps in tenancies, of course they need to charge more than than covering the mortgage.

@Petronius16 (and others)
Grandson and partner live in a cheap area. Finally they've been able to buy a house. Their mortgage is £100 less than they were paying rent. Similar house. That’s what’s wrong.

It sounds like your grandson was probably getting a very good rental deal indeed!
You haven't factored in any of the cost of repairs and maintenance and all the other costs that the landlord would incur! Annual insurance, costs of electrical and gas safety checks, annual chimney sweep, boiler service and repairs, sporadic repairs to roof, doors, locks, windows, fencing, broken toilet seats or having to call in a plumber for a leak or a new washer- the list is endless but does occur on fairly regular basis even in well maintained properties. A new central heating boiler is about £3500 for a one bedroom flat (that's three years 'profit' gone straight away!). Then there's replacement of any white goods provided- a fridge or fridge freezer, a washing machine, tumble drier, a dishwasher. On top of that, there's money that should be set aside for routine maintenance and replacement, such as painting inside and outside the house, and replacing carpets from time to time. Flats have regular service charges to pay too, borne by the landlord and all rental properties should meet current fire precaution regulations. When tenants change. landlords have to pay the council tax and all utility standing charges.
And finally, the landlord is taxed on all of any profit that is made at their usual tax rate of either 20 or 40 percent.
So, the landlord in this case is likely to be making a loss if they have a mortgage to factor into the equation as well. In fact, they'd be hard pushed to make a profit at all even if they didn't have a mortgage!
The grandson in this example WILL be spending more than an average of £100 a month if he maintains his new house adequately, and also needs to be aware that interest rates will rise again at some point, meaning his mortgage alone could be £500 a month or more.
Landlords have invested a capital sum in buying the house, and they also carry the risk of their tenants not paying the rent, or even the property being trashed.
These are all the realities of being a landlord. It's really not unreasonable that they make some return on their investment. There have been fundamental changes in recent years to how landlords are taxed, and it's now much less favourable to the landlord, to the extent that many have sold up.
I'm sick of reading about the unfair bashing of all landlords on here, without any recognition or understanding of the costs and risks involved. I know it's very difficult for some to get onto the property ladder, but private landlords are really not the main reason for it.

supermoonrising

If I invested money in the bank I would get very little interest.
Stocks?
www.woodruff-fp.co.uk/property-vs-investment-portfolios/

With the pandemic, and Brexit since 2016, most stocks have decreased and you'd be in loss on the stockmarket. Most companies didn't pay their annual dividends in full or at all either.
Stocks and shares are risky and fortunes are easily lost as well as made. Investment in bricks and mortar is more solid (literally).

Tiny violins for all those not making a suitable return on their cash... why can't you invest in a pension or business, just lazy and immoral to buy a flat and then watch some poor sod slog their guts to pay your mortgage/pension.

How is that any different to a company director watching their employees slogging their guts out to ensure they receive a healthy dividend each year? They're just different businesses. Many people prefer to spread the risk in their investment portfolio but lots of landlords will also invest their rental profits in pensions, stocks and shares etc to generate a bigger return on those profits.

Tiny violins for all those not making a suitable return on their cash... why can't you invest in a pension or business

I've got pensions, stocks and shares and cash ISAs, premium bonds, other investments and my dp has a business.
I'm not too fussed about the rental income it's the long term gain. Roughly on average houses double in value every 10 or so years. That's hard to beat.

@Zenithbear

Tiny violins for all those not making a suitable return on their cash... why can't you invest in a pension or business

I've got pensions, stocks and shares and cash ISAs, premium bonds, other investments and my dp has a business.
I'm not too fussed about the rental income it's the long term gain. Roughly on average houses double in value every 10 or so years. That's hard to beat.

That, and the fact that eventually the mortgage will be paid off and that chunk will be profit.

I'm paying my landlord £9600/year in rent for a flat that was bought for £110k in 2015. Repairs (what repairs?!) and other charges notwithstanding I'll have paid off the mortgage for them, in full, in 11.5 years - all because I can't get a mortgage of my own.

The fact banks claim you can't afford a £600/month mortgage when you've been paying £800/month rent is an absolute shitshow.

These posts come round every month
Landlords are greedy
Landlords are making profit.
Landlords push up house prices
Landlords are bad bla bla bla
Look around if it wasn’t for private landlords there wouldn’t be enough houses.
So the next thing is the conservatives sold off the housing stock
Conservatives are bad
Conservatives caused the issue. Bla bla bla

Yeah maybe they did. But for a lot of families this did let them get into home ownership. And they should have invested more in social housing.

But when Labour were in power I can’t remember seeing them putting up the funds for more social housing.

People don’t like paying taxes so governments keep dropping taxes then they have less money to spend so they just don’t have the money to build houses to rent out cheap to people..

I’m all for putting the tax up for everyone if the money is invested into housing stock for rental but the rent would have to cover the costs of the build and repairs to make it viable which would mean the rental costs would probably be in line with private rent prices anyway.

Some people need to take off their rose tinted glasses off and face reality

I'll have paid off the mortgage for them

That isn’t directly what you’re paying for though, is it, you’re paying to have free use of the property for X amount each month. How the person who owns the item chooses to finance it doesn’t matter to you what so ever.

If you choose to lease a car, do you also get angry that the leasing company will own the car at the end of the term but you’ve pretty much paid for it? It’s the exact same thing. It probably infuriates people less because my example here the car depreciates rapidly, houses don’t, they do the opposite but the idea is the same. It’s just misdirected anger.

Is it somehow more acceptable if they don’t have the property mortgaged? Would you feel like you’re not ‘paying someone else’s mortgage’? What do you call that? Free money?

I think you’re also only giving part of the story if you say you can’t get a mortgage for £600 after paying £800; it depends on your age, deposit amount and income too not just your monthly payments. You can rent until you die you can’t get a mortgage after a certain age.

The property will at some point need repairs and that isn’t going to be your responsibility, we just had the tender ripped off and reapplied with the correct material nearly £8k. Renting is far less stressful generally in terms of unexpected costs.

@MadinMarch

supermoonrising

If I invested money in the bank I would get very little interest.
Stocks?
www.woodruff-fp.co.uk/property-vs-investment-portfolios/

With the pandemic, and Brexit since 2016, most stocks have decreased and you'd be in loss on the stockmarket. Most companies didn't pay their annual dividends in full or at all either.
Stocks and shares are risky and fortunes are easily lost as well as made. Investment in bricks and mortar is more solid (literally).

Stocks and shares don’t give you control over someone else’s life in the way that being a landlord does. If it’s a choice of renting you happily agree to that control. If it’s forced renting your probably not happy about handing that control of your life over.

That’s where the business transaction argument falls down.

@caringcarer if only more landlords were like you🙏
of course I believe there are good landlords, mostly I blame the game not the players

I have tried both - shares ( made big losses - my husband got my £100k portfolio on our divorce which was then worth £30k and we sold our buy to lose 2 outer London flats in about 1996 for huge losses about 50% losses I think it was, never mind the loss on the rents over the 13% mortgage interest). It is why I continue to plough my furrow working full time unto death as I am the worst UK investor...laughing as I type).

My aim in helping the 5 children buy a first property even if they let it out is to ensure they have a home or at least some security. it is not some wicked aim to damage the less well off. However there is no way of convincing some people that having the one buy to let property which is the average number of UK landlords is fine. They think it is morally wrong.

We can debate it until we are blue in the face but there it is. There will always be some dreadful landlords and some dreadful tenants and on the other side lots of nice ones.

I get the point about control over lives but for the young people we have tended to let to they are in control. They want a flat in London for a year or so and then they move countries or cities or they want to have a fresh start every year - I am not making this up. It is our experience. I have never had a tenant stay as long as I would like. Eg my son's ones in January signed up for a year. We would have agreed 2 years or more but they only signed up for one year. One is from abroad so may be they plan to move back. My other son's again only signed up for a year and moved out last year - one back to the homeland abroad (relationship split up despite having a small child so very sad all round). They wanted the flexibility of no commitment beyond a year.

however there may be two market s- very low income benefits claimants and then these kinds of people on about £40k plus who can pay over £1000 a month rent.

Roughly on average houses double in value every 10 or so years. That's hard to beat
And unsustainable

If you choose to lease a car, do you also get angry that the leasing company will own the car at the end of the term but you’ve pretty much paid for it? It’s the exact same thing
Exact same thing?
Ya think?
Vehicles depreciate, property appreciates, in my book that makes them very different things

@Miasicarisatia thanks for pointing out a car is different to a house; I hadn’t realised not like I wrote exactly what you said in my PP but w/e

The principle is the same that your paying for free use of something that doesn’t belong to you. Like I said, it’s misplaced anger that the item gains value whilst you use it rather than loses. Renting artwork, is that a better example since that can gain value over time? cries as artwork goes back to gallery ‘ but I’ve rented it dammit!!! I got to use it for all that time and now it’s yours!’

I used to have a rental property, we got it to help a family member out. We charged them what it cost us in mortgage and service charges. We ended up paying out more than we earned, but after we sold it, 4 years later we got £5k profit so just over £1k per year profit. It certainly wasn't a big money spinner and in fact was a pain in the arse.

I've rented all my life until I was nearly 40.i couldn't afford a deposit but could have afforded a mortgage. It's the mortgage market affordability tests that are a mess not the BTL landlords.

My mortgage broker told us about a client who wanted to remortgage but was told that he couldn't afford it, according to the new affordability tests, even though his new mortgage payments would have been £200 less than his current mortgage! In fact as they wouldn't remortgage him, he was actually having to pay more once his current deal ran out, so was going to be paying £300 more a month than they felt he could afford.

@Meme69

I used to have a rental property, we got it to help a family member out. We charged them what it cost us in mortgage and service charges. We ended up paying out more than we earned, but after we sold it, 4 years later we got £5k profit so just over £1k per year profit. It certainly wasn't a big money spinner and in fact was a pain in the arse.

I've rented all my life until I was nearly 40.i couldn't afford a deposit but could have afforded a mortgage. It's the mortgage market affordability tests that are a mess not the BTL landlords.

My mortgage broker told us about a client who wanted to remortgage but was told that he couldn't afford it, according to the new affordability tests, even though his new mortgage payments would have been £200 less than his current mortgage! In fact as they wouldn't remortgage him, he was actually having to pay more once his current deal ran out, so was going to be paying £300 more a month than they felt he could afford.

I think the last point is more about shady lending practices. Some mortgage firms seem to suck you in with promises of low rates on a fixed rate deal, as a loss leader, in the hope of you being "trapped" with them due to a change in circumstances (i.e. lower income, lost job etc) when the fixed rate deal comes to an end. Same way a lots of people have found themselves trapped to a mortgage when there has been a house price crash and they've found themselves in negative equity.

It's such a shame we lost all those more morally respectable local mutual building societies that disappeared in the 90s.

Exactly

If you choose to lease a car, do you also get angry that the leasing company will own the car at the end of the term but you’ve pretty much paid for it? It’s the exact same thing

No there’s a choice.
You can choose not to have a lease car, you can choose that old car, you can choose not to have a car at all.

You can’t choose not to have a home

I just looked on Rightmove got a 5 mile radius of my home. Only 3 rentals and all overpriced in my opinion. I am a btl LL and tent out a house 3 doors down from one advertised for £170 more pcm. The houses are more or less identical. I personally know 2 good LL's who sold up their property in last 6 months. They were both coming up to retirement and feared Sunak would increase capital gains tax. One family found another rental but it was far more expensive and the other had to move back in with parents with a 4 month old baby. She paid them off to move out as it would have been harder to sell if only to another btl owner as most are not increasing portfolios and many are reducing them to avoid getting hit with large tax. Over past 5 years LL's can no longer claim mortgage tax relief on interest, and must also have new electrical certificates. This has meant new consumer electrical units in every property. Nothing wrong with old ones, one only 4 years old but not metal as new building regs say must be installed for renters. Our own home does not have a new consumer unit as we judge it is fine. The reasons LL's are increasing rents is to keep up with new government legislation. Recently had to get an energy certificate. Never mind house on both sides have them and they are C. All houses built at the same time and only about 14 years old. It is just another cost that means rental will have to increase. I only charge enough to cover mortgage, insurance, boiler insurance, gas, electric, maintenance and now energy certificates. They are rented out at under market value, that is my choice, but I choose my tenants. I put in people I like.

my aim in helping the 5 children buy a first property even if they let it out is to ensure they have a home or at least some security. it is not some wicked aim to damage the less well off.

I have told wealthy friends to do the same for their children. Whatever happens with their education or career choice, they will need a home when older.

One person doing that is not going to change, but 100’s doing it and multiple times, will and that’s the issue. Everyone has their reasoning, and they are damn good reasons you can’t argue with. But it all adds up to whatever this shit housing crisis is now.

I’m not even sure we should call it a straight forward housing crisis but an affordability crisis and as a vaguely separate issue a social housing crisis.