Being a buy to let landlord wasn't for me, I am pretty sure it won't be for you either

Despite what this post puts out, I am still working on putting out an awesome property platform. The market is there, just not for everybody.

See my page on my findigl property plaform

None of this is financial advice - just opinion on my experience.

The timeframes will be a little hazy. Around two and a half years ago, our house was due a renovation. Expecting a child a while later, we thought it would be a good idea to buy a flat, live in it whilst our house was being renovated, and then rent it out. I knew the property markets had topped, but long term, it should still net a profit and some potential capital gain. I knew the government had made it harder for buy to let landlords make any money, but still I did it. Being contrarian doesn't always work.

As a former tenant, I am all up for protecting people, but doing so often really harms landlords. Many friends who have been buy to let landlords, can each tell me horror stories about how their houses had been destroyed. As a tenant, I have seen landlords try to scam way more out of the deposit too. Eventually, you have to hope that you are okay and whichever side you pick it works out well. 

So, I bought a flat in an Essex town, I got the price reduced from £164k to £148,950. We paid £8,500 to renovate it. One thing I did was to get advice on rental potential from estate agents to make sure the yield was sufficient. Then, the upstairs flat leaked, destroying all the work. There were all kinds of tricks by the management company and loss adjustor. Eventually, the flat was renovated again.

The letting agency had assured us they could get the best price of £850 pcm - they couldn't, in the end it was £750. They tried to persuade us to accept £725 pcm one point. Finally, our tenants moved in. We had been paying out on a buy to let interest only mortgage for ages.

The tenants asked some pretty stupid questions, which we always had to answer despite the property being managed. I must have spent weeks doing admin on behalf of the people taking a cut for being the guys to do the hard grunt.

Quickly, I decided to sell it. We sold it at £162,500, had to pay all kinds of fees and on reflection, won't have made a profit.

I consider this a lucky escape.

Some observations on being a buy to let landlord

Never own just one property - HMO's may be better

By having multiple properties, any unoccupied properties costs should get covered by the other properties.

Too much risk is attached to the landlord/owner of a buy to let

Banks create mortgages based upon fractional reserve banking. If 198 in 200 mortgages failed, the banks should still be in profit. If your home gets screwed up by tenants - you are in debt to the lender. Paper money to the lender, real debt to you.

It is no longer profitable for private landlords

The government has run a tax grab on private landlords. When you start to run through all of the costs, that it gets added to your income tax bill it is not worth doing. At all.

You have a high duty of accountability

If a tenant died by some negligence - whether you are professionally qualified or not, you could be liable.

A property is not an asset unless you are in the black

I am reaching the conclusion - the less you own, the better. Indeed, many things we as an individual class as assets are actually liabilities. A mortgage is an asset to a lender. The only time a property is an asset is if you own equity and when selling the property you will recover equity.

It is a bottom feeding industry

This is no disrespect to people working in the industry or many of the tenants. Unfortunately, these industries are low margin, and everybody is out for themselves. The tenants would never dream of reading an instruction manual, because it isn't their responsibility - they are paying too much rent already. The letting agents want to make sure any agreement you signed removes all accountability from them, becoming the responsibility of the landlord. Any repairs undertaken, often require you to do a lot of research because the workmen don't know what they are doing etc.

Property is often, a highly leveraged asset

Our deposit was 25% - high. If the prices dropped, then we are faced with paying interest on a property which we couldn't sell to get our money back. Indeed, even selling a property for more than we paid for it didn't make a profit.

Property should be run through a company using debt and cash flow

This will sound contradictory. Property should be purchased with debt, rent taken as cash flows, dividends taken as income to the directors. If the principal gets called by the lender, because the value drops - simply liquidate the company. You at least have earned some income for however long it lasts for.

Alternative ways of making money out of buy to let

That's the thing. Without completely new ways of innovating the industry, or charging a lot more money - I don't see there to be any ways for private buy to let landlords to do well any longer.

It may change - but governments seem to love manipulating people and their emotions through property. 

 

 

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