Updating post from Reddit.
Following on from a comment in another thread, it was noted that;
"Most landlords I know just break even from the rent. It is the changes in house price where the money is made."
Is this the case for most landlords? that its the long term investment where they are aiming to make the money rather than partially from rental income?
I make 300 each month before tax. Then tax, genral repairs throughout the year.. yeah i make little or no profit.
It is the property im hoping increases in value but who knows what it will be worth in 30 years.. its a gamble and at the moment doesnt seem worth it.. but maybe in 30 years ill think differently.
We all know, will be over double.
Less CGT at whatever rate that will be then.
Probably, either way, there’s no better investment. Easy money.
S&P 500 was a much better investment but things are somewhat chaotic right now.
Short term maybe. Just off to see my parents, they bought their old house for 290 k in 97 and just sold it for 1.3 million in North London. That’s been through many world financial crisis eras. This will be no different. Will be many dips along the way.
Yeah and putting that money in s&p 500, would net them 1.4 mill.
So basically the same, not much better then. Something I’ve never heard of would’ve made a slight difference. Either way, both very easy money, for very little effort. Just insane people complaining they’re only making a lot of money for little effort and not using any skill. The only requirement is to have a lot of money and follow some easy rules. And mortgages cover the first requirement.
But where would they have lived 😂?
This is where the comparisons get interesting. Is that reinvesting dividends? If not how much dividend compared theatres received or displaced cost of livin go somewhere Then repairs etc It’s complex
I'd have made more investing in a global tracker and doing no work at all. I'm not in landlording to maximise profits otherwise I'd sell up.
Is the mortgage capital repayment included in that, or is that separate?
Noo interest only, repayment id be at a loss every month. Im fixed at 5.2% at the moment and it hurts.
Times must be tough. Have you considered full time employment?
Right? 😅
Yea when you take into account agents fees, high interest rate mortgages (interest only mortgage), repair and maintenance costs etc., a lot of landlords have been breaking even/loss making since COVID (when interest rates shot up)
The value of the property will have gone up 100k plus since then for bigger houses. Mine has. Nothing, is a very small price to pay for that. How else can you make that guaranteed money so quickly legally?
Nice profit for you! Depends where again though.. many leasehold flats would not be in profit, and many purchases in London over the past 5-10 years would not be in profit either
London prices have shot up in my area. Got to get really unlucky it seems.
Hmm well depends where you live and what kind of property Leasehold flats have done poorly, and you would've done especially poorly if you bought new from the developer.
From 2004-2014 prime / expensive areas in London really shot up, and since 2014 they've been down/flat.
Looks like I’ve been lucky then, and I don’t know my general stuff.
And tax
No it’s not the case for everyone. Nobody would still be doing it if we all just broke even.
Plenty of people operate businesses at no/negative net margin when they know they are growing the overall value of the business itself.
Sure, the ideal is to have positive month on month cashflow as well as an appreciating underlying asset, but as long as the appreciation is enough to offset short-term losses, and as long as you have enough cash to support the long-term negative cashflow, there is nothing wrong with making a loss each month.
With the amount of tax I pay, I make little profit on rent. I'm basically parking my money in houses on the assumption that housing inflation has historically outpaced general inflation. One of my houses has increased in value by 40% in 4 years.
No. I would consider that a poor investment. Property can cashflow nicely if you find be right deals.
Yes.
The drive towards a rental sector dominated by BTR companies means baking in CPI+1% annual rental inflation as a minimum.
We’ve moved from a rental sector dominated by individual pension investors holding for long term capital growth & generally not raising rents, to a private equity model that needs guaranteed income returns that beat both the bond market & CPI.
The Renters Rights Bill is the final step in this “professionalisation”. And it’s tenants who are gonna pay for it 🥺
They are gaining equity and the repair excuse is pathetic because repairs don't happen every month. Maybe if they do you need to hire someone better to fix them
I lost money last year, lost about 2k due to a new roof.
Usually after taxes I make about 1k on 2 houses.
Just diversifying my investments and hoping the value goes up, which it has been
That a pretty poor business model it the case and means they can’t stress test the rental business model of only breaking even. Very risky and often terms as an investment like this is an ‘equity trap’ dependent on property price speculation.
I made a small loss last year. A new boiler and a month's void due to repairs did it.
Depends on the year, this year I've lost loads because I needed to fix something in the bathroom and just decided to re do the entire thing, tenants ecstatic. Fridge also died so need to replace that.
Some years I'll make a grand or two.
I really see it as getting a free house, but I'm an accidental landlord so I guess if I was a proper businessperson I'd not be particularly happy.
It's probably true in a lot of cases, hard to make money directly from the income from tenants once the morgage and tax is in play. That said I'm sure a handful of those saying this 'forget' that they are on a repayment mortgage that the tenants are paying off, which is the same as profit.
My LL breaks even but he's been quite up front that it's an investment property that he wants to make money on through the eventual sale of it rather than the monthly rent payments.
I make a very small profit/break even (repayment mortgage). Until I have to pay tax. It costs a few hundred per month because of that. But…the principal is being paid and asset appreciation means it should be profitable still (it seemed that’s the case based on purported valuation increase)
I don’t believe it’s most. Most use leverage and interest only mortgages. Even at higher interest rates you’re still paying £500-600 a month on an interest only mortgage (obviously highly dependant on price, term etc) for a property renting for +£1000.
Buy to rent is the biggest business in the country so I think they’re making plenty of money
Mine is solely as I work away from where I bought the property, after I pay mortgage, agents 12% and the factor along with greenbelt charge I’m about £150 worse off per month, then I’m usually another £800-£1000 extra to HMRC a year, don’t get me wrong I’m still better off than if I had kept it empty solely for personal use once a month when home. O have a normal repayment mortgage on the SVR at moment, 5 years left on mortgage with about £30 left to pay. I’m overpaying £50 a month as well. Once it gets to £10k I will have enough saved to pay it off hopefully then see what happens as I want to Live in it at some point. But it’s not easy these days I don’t think to make a great profit, I’m sure more experienced people will correct me.
Just to add mine has went up £18k in value since purchased in 2008
This is the state it am in. Have two and I keep using my personal money to fix the house as the rent is not covering it. I feel you have to be a slum landlord to make a profit now.
Not always.If you don't have a mortgage on your rental property, it's fine. You can afford to make it nice for your tenants and charge a reasonable rent as an income for yourself as well as the capital appreciation of the property.
The breaking even part is probably related to matching rental income to the mortgage payments which isn't how profit should be calculated and is more of a cashflow issue.
I would not expect many landlords to be purchasing solely for appreciation in house prices and is more of a secondary factor
I'm an accidental landlord (twice) and have held onto the properties for ages basically making little profit. Now suddenly rents have gone crazy and agents have been telling me to raise rents to crazy amounts (which I haven't as they are not really profit making schemes for me), but it's getting to the point I could quite happily live off the rent and I'm pretty much done paying off the mortgage.
I guess if I'd sold and invested in the stock market I would have been better off, but suddenly sitting it out basically out of low motivation to sell and now the income is getting pretty real.
Both properties are in good locations so I've been very lucky, but I think the key is longevity. Feels similar to compounding an investment.
Rental income is approx the same as a good saving account. Plus any capital growth. Compared to equity investment it is losing money.
But when combined with my other investments it’s stable income and other investments are 100% equity.
Yep, I use the rental income so I can work part time, I started investing 25 years ago now all my houses are paid off , now it’s time to enjoy
Breaking even on rent against what?
Against a mortgage? It can't be taxes l, ect, right?
So they're barely making additional money on top of a stranger buying them a house?
And that's supposed to be sympathetic?
Most landlords will be on interest only and breaking even so it's not even paying down the mortgage.
Why would a person make such a poor financial decision?
I'm a landlord in this situation, but likely in the vast minority. Only renting out my place because we ran out of room when we had a baby.
I just about break even after moving to an interest only mortgage. But I'm looking to sell the place soon anyway, I have no appetite for being a landlord. It's a real stress IMO.
Well, they'll own any increase in value of the house.
But this is not the whole story because capital gains tax is owed on notional increase in value, even if inflation means the value has stayed the same in real terms. I.e. in a high interest rate environment it is easy to lose money after tax.