BTL Rent

There is a discrepancy in the current house rental system, and it’s causing all kinds of issues for young people. Here is a conversation I had about it:

Brian: that is great news regarding millennials renting.

Darren: Think about the renters though…. This was my comment under the article.

Darren: The renters are predominantly renting from BTL landlords who have BTL mortgages on the properties, and the reason rents are going up is because the landlords are making 7% per annum on the house, and the rent has to cover everything. If the renters can afford to pay MORE THAN the BTL mortgage, then they can afford a mortgage. It is therefore the system that is wrong.

Brian: Agreed. AND landlords have to fix things continuously…AND they live in safer homes than me!

Brian: Landlords pay for boiler services replace carpets etc

Darren: There used to be a time when landlords owned the houses outright and the rent was lower because there were no mortgages to pay. The way it is now, I can see it being a massive political gain for a party who stamps out the current scenario.

Darren: The point you’re making is: if you don’t own the house outright, you can’t afford to be a landlord

50 Brian: Gearing makes it work….free market economy etc. Many people don’t have the deposits

Darren: The system would change to accommodate people who don’t have deposits

Brian: So who takes the risk of mortgage payment defaults?

Darren: You miss the point. If you need a mortgage on a property to rent out, you can’t afford to be a landlord

Darren: There will come a time when the government insists that only houses that have NO mortgage on them can be rented out

Darren: I bet you ten quid

Brian: Enter communism

Darren: OK, make it a fiver as you’ll lose all your houses and be destitute under the system I propose 🙂

Brian: Propose all you like. It’ll never happen.

Darren: There are about 5 factors all working together that will see rentals being very low again…

Darren: Of course it won’t happen. If it worked, we’d see more council houses.

Brian: Rent caps would kill….

Darren: The issue is BTL

Darren: The next issue is: landlords can’t actually afford to be real landlords

Darren: ANYONE with a spare 50 grand can now be a landlord and that means the renter is always going to lose out, perpetuating the current system

Brian: I’ve never missed a mortgage payment…EVER. so the govt should do the same on car finance….etc

Darren: What do you mean?

Brian: Are you saying that landlords shouldn’t borrow?

Darren: No. I’m saying that if you need to borrow, you shouldn’t be a landlord as YOU are the problem for young people and renters in general.

Darren: So yes, I’m saying that 🙂

Brian: You’re delusional 🙂

Darren: If you have 6 houses, all with BTL mortgages, your rent is going to be high because you have to pay the mortgages on each house.

Darren: If you sold all 6 and bought one house outright, you could then rent it out for 30% less than the next BTL landlord and always guarantee you have a tenant

Darren: This reduces the pressure on the renters and the economy

Brian: No. the rents are high because there are costs/taxes/letting licences to pay. That’s why typically 5 % returns are achieved

Brian: Supply and demand.

Darren: No, the costs you have are ON TOP OF the mortgage costs of the house

Darren: If you remove the BTL cost, your return would be higher proportionally

Darren: Imagine owning your houses, and having NO mortgage on any of them… then do your stats for ROI

Brian: Of course. None of my houses fell in my lap. It’s more work than you can imagine.

Darren: So, going back to my point: anyone with a spare 50 grand can become a BTL landlord and perpetuate the current system of high rents, which forces people into poverty

Brian: And you wouldn’t be saying this if you had a portfolio;)

Darren: All because the renter is paying the mortgage of the BTL landlord

Darren: I would be saying it. I had a house or two and we sold them and made a decent profit. But the principle remains true regardless of whether I have one or ten houses

Brian: The govt has done that all be themselves

Darren: Principles Brian, not actions

Brian: I’m speechless… for a change.

Darren: We can talk about it over a beer next month. I’m at conferences all this month giving presentations on the principles of my new theoretical framework 😜

Brian: But why should homeowners make profit? Same principle:)

Darren: It’s not the same principle at all

Darren: A home owner is living in the house they are buying

Brian: Yes it is.

Darren: They’re not making a profit because the bigger picture is, when they sell and have made 20% profit, so has every other house they want to buy

Darren: No it’s not

Brian: The value is going up. Why should they profit?

Darren: The profit on a house they own is negated when they buy the next house

Darren: A renter does not own anything and will not profit from his renting. A home owner only thinks they own their house, but the bank does. They don’t benefit from owning it really until it’s all paid up.

Darren: And then when they move, their profit is eaten up in the next purchase unless they down-size

Brian: Exactly the same when I buy my next BTL.

Darren: No it’s not

Brian: We could ping pong this all day.

Darren: Only until you get it

Darren: YOU are perpetuating the current economic crisis because you can’t actually afford to be a landlord

Darren: You are forcing your tenants to pay for mortgages you can’t afford yourself…for houses you can’t afford…

Darren: Think about it

Brian: I get it. Accept that people don’t agree with you. Which you clearly don’t. I’ll have 71 k on the 24th April. Try and stop me from buying another one 🤣

Darren: If you got it, you’d agree with me

Darren: You don’t get the principle

Brian: There you go again

Darren: And we’re talking about principles and ideas

Darren: Where’s Dave?

Darren: I need backup

Brian: 🙂 The principle of free market forces WILL NOT CHANGE

Darren: That’s not the point.

Brian: But it’s MY point

Darren: The point is: renters are being disproportionally fucked by the system because people who can’t actually afford a house have houses

Darren: Factor in the things you say above about boilers and whatnot, and you REALLY can’t afford to be a landlord

Darren: as you’re systematically fucking all your tenants

Darren: The only way forward is MORE council houses….

Darren: 😉

Brian: I’m profiting…yes. I no. I don’t feel guilty

Darren: Of course you don’t

Brian: More supply is the only answer

Brian: I agree with you on that 🙂

Darren: Yes but not more supply for BTL landlords who can’t afford to be landlords

Darren: Otherwise why wouldn’t the banks just lend to the people who are renting and covering the BTL mortgage cots?

Darren: costs

Darren: For example: If a renter can prove they’ve never missed a rent payment in 5 years, then that should automatically act as a “deposit substitute” for the purchase of a house

Brian: without gearing the economy would simply collapse…. in ANY industry. Not just housing.

Darren: A guarantee, if you will

Darren: Explain your gearing comment

Brian: Gearing…..virtually ALL businesses use loans to run their business….to buy and expand using borrowing …. Gearing loan to capital ratios are the basis that make this economic model work.

Darren: How many of your houses are owned by a business?

Brian: All future purchases will be owned via a limited company.

Darren: And current properties moved into the business?

Brian: None.  I would have to pay capital gains tax at the older high rate and the Ltd company would have to be paid at the higher rate stamp duty. Simply not worth it.

Darren: So you can’t afford to be a landlord even via a business…

Brian: You get it

Darren: Peculiar…

Darren: 😉

Darren: Basically, the MODEL you’re using doesn’t work

Darren: So the PRINCIPLE doesn’t work

Darren: And yes, you can blame the government here

Brian: Same principal as to why you can’t afford to buy your house outright

Darren: Not when it’s about renting

Darren: And perpetuating the current economic renting crisis

Brian: I thought it was the principle 😉

Darren: Where else are all these illegal economic migrants going to live?

Darren: The principle isn’t the same