How to make money in buy to let

Genuinely don't want to flog a dead horse on this thread so to sum up:

What might be described as the Kipper/ddarag view is predicated on continuing house price rises. Mine/HPCer's emphasis on yield is more important in the event of any stagnation or reverse in the market.

We'll all have to agree to differ. Mind you, I'd be very worried being hightly geared in an investment which looks suspiciously like being at the top end of a very prolonged wave....
 
can't wait for this pyramid scheme to unravel. The unravelling is accelerating in the UK and the cheques in the mail for us. It's gonna be absolute carnage in Dublin. The number of heavily geared people who are going to be sitting on enormous neg equity in the future, assuming they can sell at all, will cause not just economic turmoil, but social turmoil. €475,000 for an apt in Terenure that returns €1400/mth GROSS when it's rented out (€0/mth when it's not). COme again?

Sorry Im not going to provide "analysis" of my view. Already been there and banged head against that wall. It's clear that we're all beyond analysis in this country. €475,000 for an apartment in Terenure. What? How much?

Boys and girls, heres my advice: make sure you can afford the roof immediately over your head, go to zero exposure to property beyond that your ppr, pay down mortgage and build up a nice rainy day fund. Batton down the hatches lads!
 
Unregistered said:
€475,000 for an apartment in Terenure. What? How much?

Boys and girls, heres my advice: make sure you can afford the roof immediately over your head, go to zero exposure to property beyond that your ppr, pay down mortgage and build up a nice rainy day fund. Batton down the hatches lads!
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Here's a little 2-bed apartment in Terenure for a cool €500,000
[broken link removed]
 
Unregistered said:
can't wait for this pyramid scheme to unravel. The unravelling is accelerating in the UK and the cheques in the mail for us. It's gonna be absolute carnage in Dublin. The number of heavily geared people who are going to be sitting on enormous neg equity in the future, assuming they can sell at all, will cause not just economic turmoil, but social turmoil. €475,000 for an apt in Terenure that returns €1400/mth GROSS when it's rented out (€0/mth when it's not). COme again?

Sorry Im not going to provide "analysis" of my view. Already been there and banged head against that wall. It's clear that we're all beyond analysis in this country. €475,000 for an apartment in Terenure. What? How much?

Boys and girls, heres my advice: make sure you can afford the roof immediately over your head, go to zero exposure to property beyond that your ppr, pay down mortgage and build up a nice rainy day fund. Batton down the hatches lads!
Click to expand...

any sense of proportion and sense of reality has slipped away....
remember irrational exuberance ?
 
Yes, the dividend/yield analogy is not precise but it does express the attitude of property investors to yield.

My point is that it is does not make sense to look at yield as the bottom line. It is not realistic to assume that over the long term that there will be no capital appreciation in the value of a property. Historically, property has always appreciated in value; it has outpaced inflation - outperforming bonds but underperformed shares.

We may well be on the cusp of a property bubble right now. We were on the cusp of a share price bubble a few years ago but that hasn't altered the established consensus that over the long term, shares will deliver a return above the rate of inflation. It is not unreasonable to have the same view of property.

The calculations I did showed that even with zero yield and with falling REAL property prices (i.e. growing at less than the rate of general inflation) that a reasonable return can be expected from property if you're prepared to put in the time and effort of being a landlord. Of course there are lots of things that could go wrong (a big jump in interest rates or a collapse of rental rates) but that's the case with any investment.

People sometimes can be right (to invest in property for example) for the wrong reasons.
 
darag, do you know the punch line to the old wall street joke "what's the definition of a long-term investment?..."

As for valuing property, yield is the bottom line. yes it is. But if you're talking about highly geared debtors who are speculating on there being no upsets in the property market here, ever, well then use whatever makes you feel good.
 
I don't need to feel good; I'm not a property investor. If anything I'd rather feel smug about not being an investor. I'm not convinced by the argument "yes it is". I've done the calculations. If you are able to present a convincing argument that it is reasonable to expect property to fall in value in REAL terms, I'd be interested to hear it. Historically it hasn't been the case (over hundreds of years). Otherwise it is reasonable to assume that property will nominally rise in value. The rest is just basic financial sums.
 
Darag, you seem to suffer from the same delusion of just about everyone I talk to in this country. I.e. that property values cannot fall, that theres some miraculous floor under which prices cannot move. As if prices only ratchet upwards and cannot ever go down. As if someone, somewhere is going to insist that everyone will always have to pay a certain price and no lower. I dont't know where to begin when I hear otherwise intelligent people holding these views. Property prices fell in Ireland in real terms by 26.2% over the period 1979-86. But Ireland is a bad example of cyclical property values cos we've only just become a rich country. Countries that have been rich for much longer, all exhibit multiple boom/bust cycles in property values. I refer you a study by Goldman Sachs, Global Economics Weekly, April 30, 2003 (p7) which lists 29 busts in the last 30 yrs in 15 developed countries. The average peak-to-trough bust lasts 18 quarters and average real price falls 27.2%.



The evidence is overwhemingly pointing to the existence of a speculative bubble in property prices in this country. Darag, I can and would present convincing arguments but I'm blue in the face. Fact is people are beyond listening in this country. It's speculative fever wrought on a massive scale, and I believe we'll reap some nasty results for it. I've already outlined my views of why and what's in store. I refer you to post No. 48 in the topic Bought apartment 12 months ago - value is still the same
 
walk2dewater said:
Darag, you seem to suffer from the same delusion of just about everyone I talk to in this country. I.e. that property values cannot fall, that theres some miraculous floor under which prices cannot move.
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A SUREFIRE indicator of a bubble of course :) . /me is with walk2dewater 100% on this .

The Last punters in the pyramid are typically more delusional as they have most to lose with their 90% interest only investments and only 10% equity . It is they who tank markets when they cut n run ....as they must .

Post 48 sums it all up so well
 
Darag, you seem to suffer from the same delusion of just about everyone I talk to in this country. I.e. that property values cannot fall
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walk2dewater, I probably haven't been very clear but that's not my position at all. When I talk about expectation, I mean in statistical sense. For example, just because I'd "expect" to lose money playing roulette (about 2.5% playing red or black), doesn't mean I believe it's impossible to win. Of course I believe property can drop in value. We've seen it happen here and elsewhere. And I have plenty of time for the opinion that we're currently hitting the cusp of a bubble. People have been saying we're at a cusp for the last five years now; this time they may well be right.

However if you're trying to apply your intelligence to the decision on whether to invest in property, shares, gold or anything else, trying to time the market has been proven to be a waste of time. The only smart thing you can do is to make sure you're in for long enough so that you don't get screwed by a cycle. Shares have a number of advantages: you can use cost averaging to lessen the effect and they're more liquid and incur less trading costs which seem to be factors in damping cycles.

But fundamentally the investor in shares is facing the same dilemma; a bunch of people will state that the stock market is overpriced and another bunch will say it's cheap. You could spend your life listening and evaluating both sets of arguments or you can join the fray yourself and talk up/down the market. You might end up on the right or wrong side but it's all pretty pointless as far as I can see. If I'd been putting money regularly into the stock market over the last 10 years, despite there being a major boom and bust with a couple of smaller ones, I'd be far wealthier than I am now. Instead I've spent the last 10 years reading about the the overall state of thte market and giving out in the pub about the market cap of such or such company and discussing why one companies business strategy was far superior to that of its rivals. It hasn't made me any wealthier. My strategy now is to have a long term investment window and use cost averaging if possible and let averaging do its magic.
 
Darag, you want to cost-average into property in Ireland at this stage of the game? Fair enough, be my guest. Good Luck and let me know what you find and how you end up doing it. As for market timing, well with equities you’re probably right, but with property, my god, a blind man can see that this is a horrible time to bring new money to the table.



Look- here’s my big picture view for what its worth. There are 6 things to invest in;



1) your earning ability

2) cash

3) property

4) debt (e.g. bonds)

5) equity (e.g. shares)

6) precious metals (e.g. gold)

7) art/collectables/wine/john lennons guitars etc.



The ranking is not random, its based on my normal preferences.



Today, I am 20% in cold hard cash, 40% intl government bonds (ex-US), 2.5% gold (cost-averaging up to 10% max), and the remainder divided b/n two equity purchases, a canadian gas pipeline co. and a US nuclear/wind electricity utility co. Both of which pay me dividends > inflation. I consider property, virtually anywhere in the developed world to be a very poor bet at the moment.



I’ve made 4.5% on my capital in the last six months. Yeah not great, but better than –ve and importantly with a VERY low risk profile. I’ve owned, sold and made money on property in the past. However, IMHO property in the Anglo-Saxon world a lousy bet right now.



Let me conclude by saying that the property party may still have some legs left in this country- the psychotic fixation is mind-boggling here- we may end up having the most expensive property prices the world has ever seen. God only knows what the hangover will be like though. In fact I'd rather not be around to witness it.
 
Another 10% off in Oz, and so say JP Morgan no less. This is not even a slump , more a correction.

From http://finance.news.com.au/story/0,10166,15235652-14302,00.html

10 May

Economists at investment bank JP Morgan said prices would fall 10per cent in nominal terms, assuming no rate rise and without taking inflation into account.

Even those who believe prices nationwide will remain flat or rise slightly in nominal terms predict house prices in overstretched Sydney will fall. But weakness in Sydney and Melbourne will be tempered by healthier markets in cities such as Perth and Brisbane.

JP Morgan said the demand for new housing was running at about 155,000 dwellings a year, while the supply had averaged 170,000 a year over the past three years.

"Australian house prices are falling as there will be a shortfall of home buyers willing to soak up the excess supply of housing at the prevailing price," the bank's economists said.

They also pointed to the strong relationship between house prices and auction clearance rates, which have fallen to 40per cent in Sydney, as evidence that house prices are falling. "As a rule of thumb, when auction clearance rates are below 50per cent, house supply probably exceeds demand and house prices will fall."

Private surveys of house prices in the March quarter also suggest that prices are falling. "Prices have already come down," JP Morgan chief economist Stephen Walters said. "I suspect at least half of that (10per cent) has already been achieved."

The bank's economists said that because of high prices, buyers had returned to the rental market, causing rents to rise, and there were even signs of a looming undersupply of rental properties in Sydney.

However, the huge amount of residential building work still to be completed - $13.7billion nationwide - would tip the balance.

"Rents are likely to come under (downward) pressure as more high density floods the market," they said.
 
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