Buy-to-let: It’s simply not worth it says leading market commentator

A respected financial journalist has warned that getting into buy-to-let with borrowed money is a risk not worth taking.

Merryn Somerset Webb was commenting following number crunching by Brewin Dolphin, and a campaign by the Telegraph.

Both have pointed to how current profits made by landlords could turn into losses once a new tax regime kicks in.

Somerset Webb says the figures are “scary”.

But she also adds that many people, including landlords, simply don’t get it.

Our columnist Vanessa Warwick has raised a similar question before, wondering if letting agents ffully realise the potential threat to the market.

EYE has so far come across very few agents who are proactively tackling the subject head-on, for example with seminars co-hosted with local accountancy firms.

However, we would be very interested in knowing your views, including whether this could be a business opportunity.

http://moneyweek.com/merryns-blog/buy-to-let-dont-do-it/

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12 Comments

  1. mrharvey

    It may be harsh to say this, but any landlord who hasn’t already considered his options, and then finds him/herself making a loss when the tax changes are fully implemented, kind of has it coming.

    The PRS is propping up a ‘failing’ property market and the demand and rents will be sky-high by the time the changes come around – there’s no necessity to get out of the B2L game, but there is an obligation to find the most sustainable business model in these upcoming, trying times.

    My humble prediction? The number of landlords operating in the UK will not significantly decrease in the next five years, in spite of media coverage. There’s just too much juicy rent available!

     

    Ladies, gentlemen…thoughts?

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  2. Eric Walker

    A friend has a good portfolio and isn’t making much from it. That said, the value has increased by £2m in the last 18 months. He doesn’t seem too upset.

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    1. Will

      He will be if there is a market crash!

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    2. smile please

      Well said Eric. A lot of investors are more interested in the capital equity as opposed to the rental income. As long as the property “Washes its face” there is little to worry about.

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  3. Will

    I no longer suggest B2Let as a sound investment for the average Joe. The Government has made it so complex that self management is now almost impossible as it is full of Government introduced traps enthusiastically used by councils due to their own housing problems. The excessive anti-landlord drive by Shelter, Generation rent etc and hostile landlord bashing by Government and the media adds to the unnecessary pressure. Add to that the exploitation by rogue councils like Croydon  who use licensing as a gravy train ticket to raise funding. Of course it will take a few horror stories to hit the press as there is always a time lag for the  uninformed public to get up to speed with the reality of what is happening.

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    1. Peter Green

      Will, as you say, it is rather disconcerting at present with all the landlord and agent bashing that’s going on.

      However, these “things” are usually fairly short-lived (as they are often politically driven), whereas (as you know) property investment is over a much longer time frame. As a landlord myself for the last 15 years I’ll probably stick with it…… crash and all !

       

       

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      1. Will

        As will I Peter as a LL of 20 years but that is because we are well informed and less likely to become a cropper.  But there are a lot of regular Joes who will be caught out and will potentially cost them dearly.

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  4. LandlordsandLetting

    Perhaps my blog comment may be of interest: http://www.landlordsandletting.co.uk/Blog/the-demonisation-of-the-private-landlord/

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  5. surreymac

    Asking Merryn Somerset Webb for her views on BTL is akin to asking a vegetarian for their thoughts on a rare fillet steak. The answer is so predictable that asking the question is utterly pointless. She has been actively forecasting the death of BTL for the past 15 years. Whilst talking up all the investments that led to people migrating to BTL in the first place. We all pitch our own agendas and she is no different.

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  6. Typhoon

    Well said surreymac. BTL has never been for just anyone, but what she seems to be missing is, new tax legislation apart, is equity growth. That is where BTL investors make their real money. And for as many years as I can see ahead, the “bank of bricks and mortar” will be a reasonable investment vehicle for most, when looked at over a medium to longer term period.

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  7. ringi

    I think in the south “BTL with borrowed money” is becoming too grate a risk, as the yields are so low, then when with tax changes on top……

    But “go north”, or don’t use borrowed money, then BTL still makes sense.

    I expect that rents will go up a LOT in the south and/or property prices will reduce, but it will take time for the market to sort its self out.

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  8. a.mellor

    “EYE has so far come across very few agents who are proactively tackling the subject head-on, for example with seminars co-hosted with local accountancy firms.
    However, we would be very interested in knowing your views, including whether this could be a business opportunity.”
    At homes4u in Manchester we have been keeping up to date with these regulation changes, addressing new legislation changes head on and taking a proactive attitude in helping our landlords better understand the effects of the changes as well as any new requirements.
    http://www.homes4u.co.uk/news/landlords-attend-homes4u-property-management-seminar/
    We recently held a free seminar for not only our landlords that use our property management services but also our let only service where we discussed such issues as smoke and carbon monoxide detectors, right to rent, retaliatory evictions and prescribed information to be given to tenants. This was in association with Pannone Corporate.
    We intend on making this a regular occurrence with any pressing issues that arise and affect the industry as it is something that not only affects our customer base but ourselves as well.

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