Rent controls - good or bad?

[psynuk]

So where's all this undercutting the competition then?

[Hippogriff]

I think to compete with someone, truly, you need to realise you're in a competition. I don't consciously compete with other Landlords and their properties. I do not even do much research when setting prices... I go on my experience and the input from Letting Agents who I employ to get properties on the main portals (tried uPad, didn't work well for me). I do not undercut, but I price reasonably (I think).

[I1L2T3]

Don't be ridiculous.

 

---------- Post added 30-04-2015 at 15:38 ----------

 

It is like that, but supply is limited and demand ever increasing. That's why it appears to be always upwards.

 

Re:blithering on, it's a comparison, an entirely valid one.

 

---------- Post added 30-04-2015 at 15:40 ----------

 

 

What's your point? Inflation on house prices has been higher than on groceries, yes. Both are affected by market forces, supply and demand. Unfortunately the supply of houses is limited.

 

The strength of the supply and demand argument as a standalone argument is diluted by the level of interference in the housing market. When certain categories of buyers achieve certain advantages over others, and those advantages are deliberately introduced by legislation, then it is no longer a simple case of supply and demand. Even more so when government legislation deliberately influences the supply. All true in the housing market.

 

So please don't use that argument. It's disingenuous.

[ubermaus]

Don't be ridiculous.

 

---------- Post added 30-04-2015 at 15:38 ----------

 

It is like that, but supply is limited and demand ever increasing. That's why it appears to be always upwards.

 

Re:blithering on, it's a comparison, an entirely valid one.

 

---------- Post added 30-04-2015 at 15:40 ----------

 

 

What's your point? Inflation on house prices has been higher than on groceries, yes. Both are affected by market forces, supply and demand. Unfortunately the supply of houses is limited.

 

Just admit you were wrong.

 

---------- Post added 30-04-2015 at 23:28 ----------

 

The strength of the supply and demand argument as a standalone argument is diluted by the level of interference in the housing market. When certain categories of buyers achieve certain advantages over others, and those advantages are deliberately introduced by legislation, then it is no longer a simple case of supply and demand. Even more so when government legislation deliberately influences the supply. All true in the housing market.

 

So please don't use that argument. It's disingenuous.

 

Yes i agree. A very sensible post.

 

---------- Post added 30-04-2015 at 23:29 ----------

 

I think to compete with someone, truly, you need to realise you're in a competition. I don't consciously compete with other Landlords and their properties. I do not even do much research when setting prices... I go on my experience and the input from Letting Agents who I employ to get properties on the main portals (tried uPad, didn't work well for me). I do not undercut, but I price reasonably (I think).

 

Exactly right. Where is the competition between landlords.

 

---------- Post added 30-04-2015 at 23:29 ----------

 

So where's all this undercutting the competition then?

 

There isnt any.

[Cyclone]

Just admit you were wrong

It's quite clear that I wasn't though, despite you not understanding still.

 

---------- Post added 01-05-2015 at 06:53 ----------

 

So where's all this undercutting the competition then?

 

There isn't actually a huge profit to be made, so people aren't rushing to enter the market. Which suggests that the prices are probably about right.

 

---------- Post added 01-05-2015 at 06:54 ----------

 

I think to compete with someone, truly, you need to realise you're in a competition. I don't consciously compete with other Landlords and their properties. I do not even do much research when setting prices... I go on my experience and the input from Letting Agents who I employ to get properties on the main portals (tried uPad, didn't work well for me). I do not undercut, but I price reasonably (I think).

 

The agents of course DO research the opposition, and in fact are agents for many of your opposition, they know what price will get you a tenant and advise you appropriately. You don't need to undercut, you do need to not over price.

 

---------- Post added 01-05-2015 at 06:56 ----------

 

The strength of the supply and demand argument as a standalone argument is diluted by the level of interference in the housing market. When certain categories of buyers achieve certain advantages over others, and those advantages are deliberately introduced by legislation, then it is no longer a simple case of supply and demand. Even more so when government legislation deliberately influences the supply. All true in the housing market.

 

So please don't use that argument. It's disingenuous.

 

Have you entirely missed the point that was being made? It would seem so.

 

Supply and demand is what has driven up and what controls rental prices. There is no advantage any individual landlord has over a tenant, indeed it's the other way around really. That's why I can tell you that renting a 3 bed house in Walkley is possible for £600/month or maybe less. Because I know that that's the market price and a landlord trying to charge more (without good justification) will simply not find a tenant.

[Hippogriff]

The agents of course DO research the opposition, and in fact are agents for many of your opposition, they know what price will get you a tenant and advise you appropriately. You don't need to undercut, you do need to not over price.

 

The subtle aspect of this is that, in the last 3 lettings I've done, I've not gone with the Agent's recommendation, but asked them to put it on at a higher price (once £175 per month more, which the Agent appeared shocked at, but it let). The rationale behind this is that the Agent, who I'm employing for Tenant Find only, is only interested in getting the property on and off their books, as quick as that can possibly be done, so they will advise a price that is overly appealing, so I'd claim I base my rent prices on my own experience more... this is knowing the property, the area, what's included, what's not and the time (that being how good people feel - national economy - and also the time of year which has an impact). I always do enjoy a good haggle, though.

[loraward]

 

Have you entirely missed the point that was being made? It would seem so.

 

Supply and demand is what has driven up and what controls rental prices. There is no advantage any individual landlord has over a tenant, indeed it's the other way around really. That's why I can tell you that renting a 3 bed house in Walkley is possible for £600/month or maybe less. Because I know that that's the market price and a landlord trying to charge more (without good justification) will simply not find a tenant.

 

Supply and demand is controlled by national and local governments, they control supply, and they caused an increase in demand by increasing the population, as well as paying out large sums of money to people that couldn't otherwise afford to rent the house they live in.

 

If government controlled the number of cars that are made, and then gave large sums of money to anyone wanting a car, car prices would go through the roof.

[sgtkate]

There isn't actually a huge profit to be made, so people aren't rushing to enter the market. Which suggests that the prices are probably about right.

 

 

You are right, there isn't much money to be made purely of the rental income, but as you are effectively having someone else pay your mortgage for you then there is considerable profit to be made in capital.

Edited May 1, 2015 by sgtkate
Tidying up quote

[Cyclone]

There isn't much money to be made even on an interest only mortgage.

If you have a repayment mortgage then there is probably only a loss to be made every month.

 

For example, houses in Lower Walkely are let for £600/month at the moment and to buy cost £125k (real example from the house I just sold).

 

Repayment mortgage of 125k over 25 years at current interest rates means a monthly cost of between £650 and £750. Given the other costs involved on top of the mortgage you'll make a monthly loss. So the only profit to be made is on the sale of the property.

 

If nothing changed for 25 years (assume no inflation for ease of calculation), say you lose £50 a month on the mortgage, and other annual costs including maintenance and finding tenants come to £800 (based on insurance, gas certificate, credit checks and a moderate amount of maintenance and upkeep) AND that you never go without tenants, that means you spend £1400 a year. But after 25 years you can sell for 125k.

 

To be fair, that is a better return than putting the money into a savings account at 3% for 25 years, which would only result in a total of £51000.

 

Of course that was on the £650 mortgage (which actually requires a high LTV), if you had the £750 mortgage the loss would be £1200 a year worse. And if the property were empty for 1 month/year (a reasonable way to plan) then the savings account by comparison would have resulted in... £118000

 

So not much to be made in Lower Walkley anyway. You might do considerably better than a savings account, but on the other hand you might spend 25 years acting as a landlord and be no better off than just putting the money into a savings account!

 

---------- Post added 01-05-2015 at 10:09 ----------

 

Thats why I sold up, the amount of profit to be made didn't justify even the small amount of time and effort I had to put into finding tenants, inspections, fixing problems, etc...

 

---------- Post added 01-05-2015 at 10:11 ----------

 

Supply and demand is controlled by national and local governments, they control supply, and they caused an increase in demand by increasing the population, as well as paying out large sums of money to people that couldn't otherwise afford to rent the house they live in.

 

If government controlled the number of cars that are made, and then gave large sums of money to anyone wanting a car, car prices would go through the roof.

 

Government certainly have something to answer for with restraining the supply, I totally agree. I don't really agree that they control the population growth. They can affect it through immigration controls, but they can't stop or start people having children.

 

Given that the problem is one of supply and demand, the appropriate government response would be to look at how they restrain the supply side and change that, reduce their interference, rather than try to fix the problem by making more interventions!

 

---------- Post added 01-05-2015 at 10:14 ----------

 

The subtle aspect of this is that, in the last 3 lettings I've done, I've not gone with the Agent's recommendation, but asked them to put it on at a higher price (once £175 per month more, which the Agent appeared shocked at, but it let). The rationale behind this is that the Agent, who I'm employing for Tenant Find only, is only interested in getting the property on and off their books, as quick as that can possibly be done, so they will advise a price that is overly appealing, so I'd claim I base my rent prices on my own experience more... this is knowing the property, the area, what's included, what's not and the time (that being how good people feel - national economy - and also the time of year which has an impact). I always do enjoy a good haggle, though.

 

You don't do research, but you apparently DO know how much you can let the property for. You don't get to just choose a number as large as you'd like though, if you advertised the property for too much it wouldn't let (I hope you agree with that), so you are constrained by market forces and not (as ubermaus claimed) able to just keep putting up the rent and tenants have to suck it up.

[Hippogriff]

You don't do research, but you apparently DO know how much you can let the property for. You don't get to just choose a number as large as you'd like though, if you advertised the property for too much it wouldn't let (I hope you agree with that), so you are constrained by market forces and not (as ubermaus claimed) able to just keep putting up the rent and tenants have to suck it up.

 

I suppose it's knowledge / experience and intent... I've never gone on Zoopla and filtered down to postcode and number of bedrooms to get a sample of the market. That would be proper research.

 

A real example was a property I was letting for £925 through 2014, in 2015 I very consciously decided to put it on the market at £1,100. I expected haggling. I would have been happy to haggle. Less than a month later it went for £1,100. I actually admit to that surprising me, somewhat, but it's a seller's market today.

 

Of course, I don't just win out to the tune of £175 per month. The property has a service charge that went up in the last year. My insurance went up in the last year. George Osborne will want £70 of it.

 

---------- Post added 01-05-2015 at 10:28 ----------

 

If you have a repayment mortgage then there is probably only a loss to be made every month.

 

I've got to be honest, this doesn't jive with my experience. Any mortgage I ever get is repayment (I don't agree with the interest-only approach, full-stop).

 

So... real figures, all repayment... mortgage payment of £371, rent of £570. Mortgage payment of £568, rent of £1,100 (other outgoings for this property, including a hefty service charge amounting to around £200 per month!), mortgage payment of £750, rent of £850 (newly acquired property, advertised at a sensationally low price as I thought it would only appeal to a niche, mistake there from me!)... if the figures aren't working monthly and you're only banking on capital appreciation then I don't see how you can build up a contingency fund for repairs when they're needed, it's just a money-pit for you with a pay-off in, say, 25 years... and that's when Landlords start to let their properties go to wrack and ruin... if your properties are profitable then you will love them, if they are only trouble for you, then you will hate them.