Home » Business news » What’s the point of… Buy-to-let?

What’s the point of… Buy-to-let?

When I was still hoping to be allowed to go and pursue my vocation for looking after other people’s homes and gardens abroad, I thought about letting my house in Wales to boost my income.

‘Other people’ weren’t offering very much by way of a salary, some none at all, and in the end they stiffed me over the job, but with their roof over my head I would have had no use for my house.

It could have benefited someone who needed to be in the area temporarily, and it would benefit me to let my house out for a while and have the income to live more comfortably on.

But I already own the house. I live here, and at some stage I might want to return to it. What of the thousands of chancers who are rushing to take out cheap mortgages in order to buy more houses than they can possibly live in, so they can make money from letting them out to desperate wannabuys – young homemakers who can’t afford the crazy house prices being pushed up by the insatiable buy-to-letters?

It’s the stupidest business plan I’ve ever heard of! I wish someone would explain it to me.

So, you are going to spend £250,000 buying a house that you can let for £1,000 a month. You’ll have taxes, agents’ fees, repairs and maintenance costs… legal fees. Say you manage to clear £700 a month, it’ll take 30 years to break even on your invested capital!

Ah, but I have all these lovely rents coming in, the building society is paying for the house (and you’re paying for the building society) and at the end I have an appreciating asset so you have to factor-in the rising house prices as income too!

Sure. You’ll pay capital gains tax on any increase when you sell. Besides, look at the ‘increase’ in house prices over the past five years… they actually dropped in value. It could so happen again.

Then, when the government and the National Housebuilders Federation get their act together to start hitting their target of 250,000 newbuilds a year, supply will start to match demand and real house prices will fall – followed by rents. In the meantime, inflation is eating at fixed asset values, the currency is depreciating, food, fuel, transportation and energy all becoming more unaffordable by the day… but you’re all tied-up in nutritious, combustible, rapid-transit bricks-and-mortar, on a fixed income…

And in the meantime you’ve either laid-out a quarter of a million quid in cash, or you’ve had to take out a huge mortgage whose rate will eventually go up and you’ll have to sell the house.

So, great, you’ve got an income of £700 a month. Enjoy, Mr or Mrs Big Businessman or woman. You’ve earned it, bloodsuckers.

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