| Building a buy to let portfolio [message #375736] |
Di, 28 März 2006 18:30 |
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Hi everyone
A simple question: how can I develop my single buy-to-let property
(with approx 40k of equity) into a portfolio of BTL properties?
Is there a common formula that investors follow? I'm not in it to make
a quick profit - it's more about planning my kids future and maybe
retiring a few years early (hence I don't want to expose myself to a
high level of risk).
I'd be grateful for any suggestions
Simon R
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| Re: Building a buy to let portfolio [message #375768 ] |
Di, 28 März 2006 23:08 |
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"Simon R" <simon.ransley [at] digforfire.co.uk> wrote:
>A simple question: how can I develop my single buy-to-let property
>(with approx 40k of equity) into a portfolio of BTL properties?
I'd say you're exposed to a high level of risk at current levels
whether you like it or not.
Property Investor - Malcolm Walton is the best book on the subject. No
longer in print, but available for £4 secondhand
< URL:http://www.amazon.co.uk/exec/obidos/ASIN/0953105709/026- 0174889-7231604>
How much can you re-mortage for ? LTVs are generally limited below
80%.
40k - 4k for expenses = a deposit of 36k at 80% LTV = 180k spending
power assuming you can obtain rents that are 125-130% of mortgage
interest.
The boss of this website <URL:http://www.buy-to-let.com/index.asp>
used to post on TMF and he new his stuff. They're the only BTL
Investment company I'd consider.
I've answered many similar questions so browse -
< URL:http://groups.google.co.uk/group/uk.finance/search?q=Day tona+BTL&start=0&scoring=d&>.
These are the experts - The Motley Fool - Property Investing -
Practical - <URL:http://boards.fool.co.uk/Messages.asp?bid=50096>
Confidant you can do better than this ? iShares UK
Dividend Plus ETF -
< URL:http://www.ishares.co.uk/content/stream.jsp?url=/publish /repository/documents/en/downloads/factsheet_ftse_uk_dividen d_plus.pdf>
It's the benchmark investment AFAIC.
hth
Daytona
(Landlord & tenant)
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| Re: Building a buy to let portfolio [message #375816 ] |
Mi, 29 März 2006 13:33 |
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Simon,
There is a difference between how the model works and if the timing is
good to implement the model.
First, I do not believe in market timing when it comes to property.
Better is to focus on the cash flow and buying a bargain. In up or down
markets there are bargains and there can be property that will safely
cash flow even if there is no appreciation.
Back to the question.
You would refinance the property to pull out equity to purchase the
next property. Or you could choose to use other capital to make the
purchase. Or you could look to obtain 100% financing (ignore the
mechanics for a minute). If you find that the new property will not
cash flow but you run a significant surplus on the prior property then
the portfolio may cash flow.
Figure you need between 1.25 and 1.50 for a debt service multiple. The
income projected needs to be 1.25 times the monthly mortgage payment at
a minimum is how you apply the ratio. If you really want to speculate
that prices will rise long term yet the cash flow is not there to cover
everything and a buffer then 'buy' a larger buffer. This means taking a
lump sum of cash and setting it aside to fund the gaps. The gaps are
real and they do happen. Note that 'buying' the buffer is really a
conservative way to speculate on appreciation rather than have the
tenant pay for your speculation.
I have been investing for over 20 years in the property sector.
Multiple countries no less. Rather than focus on the doom and gloom a
long term investor looks at the fundamentals (mostly the cash flow). If
there is cash flow then there is someone else paying to keep you in the
game. If they really are paying enough to cover all costs and all
reserves you just sit back and let the market come to you if and when
it does. If the market was never to appreciate (no doom and gloomer
will argue this point) you likely will still see rents rise. The logic
is people who have jobs expect that over 10 or 20 years their pay will
rise. Rents tend to move at the same time broadly speaking. People
figure that paying up to 1/3 of their income for housing is reasonable
(3.5 times 1 person's income). Hence long term rises in employment and
income levels translate into long term rent and housing price rises.
BTW - If you buy in an area that has a lack or jobs and no future
prospects the logic still applies. I am saying there is a connection
between income levels and rising employment that over long periods is
even more important than short term interest rates.
John Corey
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| Re: Building a buy to let portfolio [message #375842 ] |
Mi, 29 März 2006 17:15 |
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"i don't want to expose myself to a high level of risk"
Indebtedness at record levels, unemployment rising for 12 months
straight, recession on the high street, economy slowing down, interest
rates likely to start rising again, house prices likely to fall over
the next 5 years.
Investing in property at the moment is high risk, no matter your view
on the subject. A lower risk approach woulf be to MEW all your equity
and place it all on red or black.
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| Re: Building a buy to let portfolio [message #375851 ] |
Mi, 29 März 2006 18:09 |
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"Simon R" <simon.ransley [at] digforfire.co.uk> wrote in message
news:1143563432.611735.8130 [at] u72g2000cwu.googlegroups.com...
>
> Hi everyone
>
> A simple question: how can I develop my single buy-to-let property
> (with approx 40k of equity) into a portfolio of BTL properties?
>
> Is there a common formula that investors follow? I'm not in it to make
> a quick profit - it's more about planning my kids future and maybe
> retiring a few years early (hence I don't want to expose myself to a
> high level of risk).
Be ready to subsidize the mortgage shortfall each money as BTL yields are
now often below the mortgage rate (excluding, insurance, voids, fees, etc).
I doubt there are many places left in the UK with >7% yields
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| Re: Building a buy to let portfolio [message #375859 ] |
Mi, 29 März 2006 18:27 |
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"John" <john.corey [at] gmail.com> wrote in message
news:1143632005.709163.189180 [at] v46g2000cwv.googlegroups.com...
<
> I have been investing for over 20 years in the property sector.
> Multiple countries no less. Rather than focus on the doom and gloom a
> long term investor looks at the fundamentals (mostly the cash flow). If
> there is cash flow then there is someone else paying to keep you in the
> game.
That's true, but you also have to look at the "opportunity cost". On a cash
flow basis you could ride out a 15% tumble in the housing market,
alternatively you could realise your gains and sell your portfolio at the
peak of the market (yeah, when?) and drop them into some other asset class,
say the stock market, that might gain an additional 15%. Your 30% aggravate
return could then be leveraged up for a return to the property market at
more reasonable values.
Obviously the above has to be viable enough to offset the incurred costs,
time, fees or sentiment. There may also be an 'opportunity cost' for not
being in the property market.
As you say, all models are effective depending upon timing, in hindsight
people should have dropped their property investments 18 months ago and
invested in gold or commodities as they've shown a much better return. Some
'investors' are MEW'ing their BTL portfolios in order to invest in the stock
market believing they're getting the best of both worlds... or quite
possibly the worst if they're timing is wrong!
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| Re: Building a buy to let portfolio [message #375860 ] |
Mi, 29 März 2006 18:27 |
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"Daytona" <me [at] privacy.net> wrote in message
news:1e8j22htjmume8p5gc7d1ekhfjimkkk7r1 [at] 4ax.com...
> "Simon R" <simon.ransley [at] digforfire.co.uk> wrote:
>
>>A simple question: how can I develop my single buy-to-let property
>>(with approx 40k of equity) into a portfolio of BTL properties?
>
> I'd say you're exposed to a high level of risk at current levels
> whether you like it or not.
>
> Property Investor - Malcolm Walton is the best book on the subject. No
> longer in print, but available for £4 secondhand
That says a lot!
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| Re: Building a buy to let portfolio [message #376035 ] |
Fr, 31 März 2006 18:40 |
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Thanks very much for the detailed reply and the links. Not had chance
to digest it all - but much appreciated.
Simon R
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