Meaningful BTL Research – University of York

Graphs Everywhere! I do love a good graph - this will make some good reading with over 100 pages; Thanks Mark.

Hi Mark,

This is really interesting.

Having skimmed it today I am drawn to the conclusion that the Landlords who make good decisions on properties and tenants, manage their properties well and keep their lettings run as a business will be successful. Not really a surprise then !

The further you depart from this simple lexicon the more likely you are to take a bath and throw away your money. However the numbers who are in arrears or not making money are not huge so it must be fairly straightforward to aquire the relevant skills, as we might predict.

It can't be a surprise that it is the amateurs are often out of their depth, surely it only reflects the contents of this forum week in, week out.

If we look at the analysis on p71 Landlord 24 has four properties carrying £400k of debt and after outgoings makes a whole £175 a month. Which is a false figure because there is no maintenance included.

So as I am sure very little maintenance gets done the capital value of the properties is actually declining and so is their value in letting terms as they become less and less attractive to tenants.

What is the point of doing all this for less than 0.4% yield ? The £38k of equity they have thrown away would have made more in a Building Society, it probably would have made more if they had bought Premium Bonds.

In addition there is the time taken by the landlord managing the properties. They would have been substantially better off doing all those hours working part time at Tesco and would not have a lake of negative equity to drain.

Being a PRS landlord needs skills, determination, hard work and common sense, not everyone is cut out to make a success of it. Perhaps BTL borrowing candidates should have to take an exam before the lending is approved.

A bank wouldn't lend a substantial bag of cash to someone who just fancied becoming a shopkeeper or a car mechanic without some assurance they could actually make a dollar doing it. However that seems to be the way the PRS operates.

Its all very well in a rising market which covers everyone's mistakes. When the market falters the mistakes are rather more difficult to conceal. I wonder haw many BTL landlords will be put out of the game when interest rates start to rise.

I rather suspect the departing BTL landlords will be more than replaced by those seeking to invest pension pots now that you don't have to buy annuities.

Interesting times !

A recent article claimed that landlords should allow around 26% of the rent to go on running and managing costs!

http://www.allsop.co.uk/i/141/107/2153/property-is-the-pension-for-generation-landlord-

Reply to the comment left by "Vanessa Warwick" at "19/06/2014 - 11:28":

I'd say that about right, I tend to work off a budget of 25% for freeholds and up to 35% for leaseholds after factoring in ground rents and service charges.

Take an average 2 bed house in a relatively low value area such as Norfolk, rent say £600 pcm.

26% of this over three years produces a budget of £5,616 over three years.

Insurance will gobble up around £450 of that.

For redecorating and ongoing maintenance I'd suggest £2,160 (£60 pcm) unless of course you're handy in that department but don't forget to factor in the value of your own time if you DIY and compare that against what you could earn elsewhere.

Gas checks say £65 a year = £195

Lettings and management at say 10% of rent = £2,160

Add in accountants fees and there's not much left, if anything!

Oops! - what about void periods?

That's why it's so important to manage costs - tips here >>> http://www.property118.com/landlords-money-saving-tips/64261/
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From an initial skim read - if 338,908 represents 25% of the total number of UK B2L mortgages as stated on page 12 then by definition the total number is 4x = 1,355,632. It is generally agreed that the PRS comprises circa 5m dwellings so how can the report conclude that over 50% of the PRS is mortgaged - looks more like the generally accepted 30% to me!
On page 14 para 3 the report clearly confuses millions with billions on the matter of new mortgage advances - not good for an allegedly robust statistical report!
I will now read on with an open mind!

Very interesting read, thanks for sharing!