{ in·deed·a·bly }

adverb: to competently express interest, surprise, disbelief, or contempt


Total rent from tenancy: £150,000. Agency costs and services: £8,500. Net revenue: £141,500.

At first glance, not a bad little earner. Income I would not have received had I not been invested.

For context, that revenue stream equates to nearly 4.5 median household disposable incomes. The residual cash that a family feeds, clothes, and houses itself on after the taxman has extracted his cut.

Sounds impressive, no? A not so humble brag. With profits like those I should be comfortably retired on the French Riviera. Ageing disgracefully. Performing medical alchemy by transforming sun tan into skin cancer.

But hold on a second. Revenue isn’t profit. Revenue is cash you receive. Profit is cash you keep.

That “net revenue” number was net of agency costs.

Not net of financing.

Not net of insurance.

Not net of maintenance.

Not net of service charges.

The actual profit figure would be smaller. Much smaller. Possibly negative, as in operating at a loss.

£150,000 sounds great if earned over a single year. Less great, were it spread over a decade.

The lesson here is that much of what you read on the internet, particularly in the personal finance niche, is bullshit. At best a self-flattering partial picture. At worst setting up the audience to sell into.

I’ve seen bloggers goose their investment performance figures with capital contributions. Conflate paper capital gains with passive income actually earned. Overlooking taxes. Ignoring inflation. The list is long and disheartening. You don’t need expertise to write a blog, just opinion.

To be fair, the root cause of the bullshit is often ignorance rather than malice. Yet bullshit it remains.

I took a final look around the investment property, before locking up for the last time. Empty of furniture, it felt much larger. Sound echoing from bare walls. Light streaming through naked windows.

Faded water stains marked one wall, previously hidden behind a mirror. A lasting reminder of the time the upstairs neighbour jumped on the DIY bandwagon. Self-installing a tiny “wet room” ensuite where a wardrobe had once stood. Unaware of the sealing powers of silicone. Ignorant of escaping water’s propensity to flow to the lowest point… in this case, the light fitting in my flat’s ceiling immediately below.

The upstairs owner celebrated the warm fuzzy feeling of creating investment value by jetting abroad for three months, while their handiwork dripped. And dripped. And dripped.

Leaving my displeased tenant with an undesired indoor water feature and no lighting.

Phrases like “breaking and entering”, “criminal damage”, and “criminal trespass” get bandied about from time to time. Strong words, particularly when CCTV cameras mysteriously glitch and fail. I had been slightly amazed at how creative a motivated plumber with a job to do can be. I was a tad disheartened at how little challenge a dead-bolted door posed to a tradesperson with a screwdriver.

My tenant moved out this week.





Evicted through no fault of their own.

For no other reason than their private landlord’s numbers no longer worked. Soaring costs. Capital growth trend line flat-lining, performing what economists call a “dead cat bounce”. Prospects for a turnaround nonexistent over the medium term.

Market rents had risen markedly since the tenant had last sought housing. Not nearly as fast as interest rates had risen, but far exceeding wages growth.

Adjusting for inflation, the tenant now worked harder but earned less than they had a decade ago. A common refrain across the United Kingdom. One of the reasons service providers all seem to be on strike half the time.

The tenant’s new home was a retrograde step.

A room in a group house, no longer able to afford sole occupancy.

Located an extra 30-minute commute away from work.

Yet costing more than they had been paying me in rent.

The market was flooded with prospective tenants but few available properties, as private landlords throughout the city ran their numbers and reached similar conclusions: it no longer made sense.

Cyclically, as borrowed money was no longer free.

But also structurally, as the government flexes tax and regulatory powers to enact social policy targeted at thinning the herd of private landlords. Cue the tiny violins for their plight, but the tenants still need somewhere to live.

My tenant had been competing against my cleaner when searching for housing. Evicted from her modest flat when her landlord listed the property for sale. No longer able to afford housing within the catchment areas of the schools where her daughters’ friends would be attending high school and college respectively. Talking about packing up and returning to Poland. There were jobs and opportunities there. It was just too expensive to remain.

Another competitor was my after-school nanny. Healthcare worker by day, moonlighting as a nanny by night. The only way to make menial NHS wages stretch to meet the demands of the nation’s capital. The unlicensed group house she had formerly occupied had been shut down by the council. Her landlord prosecuted for illegally converting the house into tiny, yet barely affordable, bedsits. Her new home costs more, with a roundtrip commute 90 minutes longer. Who needs sleep?

I had faced a similar prospect myself, before recently joining the ranks of the owner occupier. My landlord suffered from delusions of grandeur about what represented fair market rent. Trading a single family tenancy for a group house of eight adults. Lounge and family rooms converted into bedrooms. Loft sub-divided by wardrobes, each side separately let. Our former neighbour lamented that the parties were wild, the arguments heated, and the maintenance bills eye-watering.

It hadn’t always been this way.

My original tenant in this flat had been a weekly commuting investment banker on a lush ex-pat package. Inner city bachelor pad Mondays through Thursdays, with all the drink, drugs, and debauchery that makes the road warrior existence attractive to some. Weekends spent playing at being dutiful husband and doting father out in a Surrey countryside village where his family resided.

Yields were high. Growth was strong. Interest payments were low and tax deductible.

That tenant departed when the ex-pat packages dried up. His wife had long since tired of turning a blind eye to his mid-week shenanigans. Retreating abroad with her children and without her husband.

My tenant-seeking radar had switched to highly skilled financial services professionals. One from Northern Europe. Another on a sponsored work visa. Attracted by the bright lights and opportunities once on offer in the City. Hoping to accelerate their careers. Expand their influence network. Get rich along the way.

Redundancies took both tenants out in quick succession. Fallout from one financial crisis or another.

An unsympathetic Home Office issued the no longer sponsored visa holder with 60 days’ notice to depart or be deported. Sell their soul to an alternative employer, or return from whence they came. Faced with a dire job market, they packed their bags and headed for Heathrow.

The European bent the knee to a large management consultancy. Pimped out for a small fortune, while receiving a mere fraction of their former pay packet. Their tri-lingual communication skills saw them allocated to a client site in their country of origin. After a month of relentless international commuting, they too packed up and moved home.

Yields were weakening. Growth was non-existent. Interest payments were negligible, and still tax deductible.

With the bottom falling out of the City job market, it was time to look elsewhere for tenants. A pair of university student siblings. Funded via an advance on their inheritance. Drawn against the bank of Mum and Dad.

After a year or two, one of the siblings concluded that trading on looks and becoming arm candy to a rich older man was easier than grinding out a thankless liberal arts degree. She didn’t fancy joining the beauty pageant that is graduate recruitment, especially when she lacked the strong family network or a degree awarded by an institution specialising in conferred status.

Not a path recommended by career advisors. Nor pleasing to parents. She figured if she played her cards right, she could trade a few years’ worth of painted-on smiles and fake orgasms for a divorce settlement win or fat inheritance.

Prostituting herself little differently from her classmates joining graduate programs in consulting or financial services. All getting screwed by old white men in suits. She was just more honest about it.

Internships and graduate programmes had become self-selecting. Paying too little to afford market rents in the capital. Rendering them increasingly the exclusive domain of those with access to the Bank of Mum and Dad. No subsidised housing? No chance!

The other sibling persisted alone. Professional student graduating to faculty member.

Temporary contract after temporary contract.

Hoping for permanency.

Praying for tenure.

Begrudgingly learning that hope is not a financial plan.

By the time I decided to sell, yields were in the toilet. Capital growth was negative. Interest payments were on the rise, and no longer meaningfully tax deductible. Rental income was now taxed based upon revenue rather than profits.

Casting an eye around the market, I wondered where the next generation of tenants would come from? Or for that matter, the next generation of buyers? Who was going to fuel the demand required to drive up prices? To deliver those much sought-after property capital gains?

The ex-pats were gone.

Skilled migrants were gone.

Overseas students were gone.

Wages were stagnant. Had been for some time. Going backwards when adjusted for inflation.

Living costs were climbing in what was already a very expensive corner of the world.

Locals shouldn’t afford the rents required to sustain a landlord’s mortgage. Most couldn’t even if they wanted to.

Americans talk about capitalisation rates when evaluating residential property investments.

Net operating income / Current asset value.

The result is expressed as a percentage rate of return.

An investment returning between 5% and 10% was said to be good.

Less than that, questionable.

Negative cap rates raised some serious questions about the sanity and sustainability of retaining the investment. Burning cash on holding costs. Hoping to be rescued by capital growth.

Potentially viable if that value is being actively created, a subdivision or extension for example.

Less so if it depends solely on a rising market to save the day.

When I bought the property, the capitalisation rate was comfortably in that good range.

By the time the siblings took up residence, it was in questionable territory.

Once the fixed-term honeymoon mortgage rate expired a couple of weeks before the sale completed, my property’s cap rate was negative.

Rental income no longer covered the mortgage interest, which had increased to accrue at an eye-watering 9%, the bank’s standard variable mortgage interest rate. Only briefly in my case, I was one of the fortunate ones.

But here is the thing: talking to the estate agents who handled the sale, they had hundreds of similar buy-to-let properties on their books. With nary a buyer to be found.

The owners all experiencing the same cashflow pressures as their two-year fixed rate mortgage deals expired. Unable to refinance on anything like the previous terms. Often unable to borrow at previous valuations.

Those buyers who do make cheeky offers have trouble securing finance. When everyone is selling and nobody buying, what is the market price? The banks don’t know, so err on the side of caution. Requiring a large deposit or an accepted offer 5-10% below asking price to establish a buffer against negative equity.

A week before the deal completed, my selling agent lost his job. One of many redundancies rolling through a dysfunctional property market. His office closed down. The few surviving staff combined with those from two other regional offices. Set impossible targets. Told to sell or perish.

After locking up the flat, I set off for the trek across town in search of the new estate agent office. Dropping off the keys for the buyer to collect. Marking the end of my journey as a Buy-To-Let landlord in England, for this property cycle at least.

Glancing at the address, it seemed vaguely familiar. I’m pretty sure the building housed a WeWork. A sign of the times perhaps? Temporary office space to go with a temporarily bleak market outlook?

Everything is cyclical. Occasionally it is structural. Obvious in hindsight. Hard to call in the moment.

Contrarians will find opportunity in trading against the herd.

Gamble that London will rediscover relevance on the world stage.

Punt that England flips the switch from actively repelling business, opportunity, and great minds to attracting them once more.

It could happen. But within my timescales? I chose not to bet my house on it.

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  1. Bernie 26 July 2023

    I’ll never forget the discomfort of being an accidental landlord with a flat that was in negative equity from the GFC. 10 years later, I finally exited that property as soon as capital value broke even. No desire to be a landlord again tbh!

    • {in·deed·a·bly} 26 July 2023 — Post author

      Thanks Bernie. That sounds like an uncomfortable journey indeed. Glad you managed to land an exit.

      Our fragile investor prides are funny things. I’ve caught myself falling into the same trap at times, wanting investments to recover so I didn’t book a paper loss. My faulty mental accounting ignoring both the time value of money (the same absolute value then purchased far more than it does not) and the foregone opportunity costs associated with parking the money in more lucrative alternatives.

      Sometimes peace of mind is worth more than financial returns. As long as you’re content with the ultimate outcome, that feels like winning to me.

  2. AoI 26 July 2023

    The London rental market is brutal at the moment, one really feels for the people you describe and the many like them. Personally I profoundly regret my naive foray into buy to let with a 1 bed flat in east London a decade ago before adding a second rental flat via accidental landlordship when work took me overseas. Cue Brexit, Covid, years of combustible cladding work driving service charges through the roof and rendering both blocks unmortgage-able then finally an inflation / interest rate surge leaving me floundering around between unsuccessfully trying to sell them at various points before taking another tenancy in hopes of better times ahead only to be hit by the next disaster. An index fund would have produced better returns, less stress and my online broker would have been infinitely more enjoyable to deal with than London agents. Appreciate this is very much a first world problem and I’m not labouring under the illusion I am due any sympathy. I’m slightly at a loss as to what to do now though, a positive cap rate given low levels of debt and a tight rental market and dire sales market points to being patient but that approach has failed consistently for 7 years now, waiting for a better market starts to feel like a triumph of hope over experience. A painful lesson in the value of liquidity. Congrats on managing to sell your rental property, a smart move and hedged against missing a market recovery given the move to owner occupier status.

    • {in·deed·a·bly} 26 July 2023 — Post author

      Wow, that is a tough journey you describe Aol. Having one property caught by the flammable cladding is unlucky. Catching it on both is tragic.

      It sounds like you’ve got a decision to make about price. There is always a market value, it just may not be what you would like. Providing the price obtained clears your debts, and you have something else figured out to do with the accumulated equity (after paying capital gains taxes), then some flexibility in aspirations might be called for. This may involve an injured pride, licking of wounds, and dusting yourself off for the next game. Not much fun, but is definitive.

      The good news is, under the current approach, once your mortgages are cleared the cash flow position for each property markedly improves. Then you can start boasting of owning some of those passive income gravy trains that personal finance bloggers love to evangelise about!

      With this flat I’ve experienced a similar oscillation between unsuccessfully attempting to sell at each break in tenancy, before giving up and reletting.

      Which is a shame, because size and location wise it was perfect for my target tenancy markets. Unfortunately those markets simply no longer exist in a meaningful form. Why migrate to the UK, and live in an expensive inner London, when the high income earning jobs are (for now) mostly hybrid/work from home? The brutal answer is: these days, you don’t. Those who do simply can’t afford to occupy such a property alone, and it remains a stretch on two decent wages.

  3. AJP 26 July 2023

    Really interesting! Helps me regret less missing out on the whole buy-to-let bandwagon and all those huge capital growth numbers you read about from the past 10+ years in London. Although seen friends homes go up from 400k to 800k in that time whilst i was off around the world stings a little but not enough to want to miss out on time abroad.

    • {in·deed·a·bly} 26 July 2023 — Post author

      Thanks AJP. Fantastic that you’re content with your life choices, happiness resides down that road.

      For what it is worth, big decisions like that seldom have to be either/or, often times we’re able to attain a bit of both options (but rarely all of either). Purchasing a much lower cost property somewhere abroad during your travels for example, though doing so can introduce currency fluctuations and taxation risks.

      The London market, on reflection just about all the markets I’ve invested in, tends to be very stop/start. 5-10 years of stagnant growth, followed by a spectacular (albeit brief) run where prices surge and wealth is created seemingly overnight. The flat in this story increased in value by about 50% over the first 18 months I owned it. It also experienced no growth at all for the subsequent half dozen years, before starting to go backwards.

      I sold at a profit (in both nominal and real terms), but history tells us from an opportunity cost perspective I should have cashed in around the time the investment banker tenants’s wife left him back in the early days. Live and learn, I’d be lying if I claimed the outcome had more to do with good management than good fortune!

      • Al Cam 2 August 2023

        Your comment hereabout that starts “I should have cashed in around …” and your earlier note that begins “Providing the price obtained clears your debts, and you have something else figured out to do with the accumulated equity (after paying capital gains taxes), …” intrigued me as I suspect a number of years have passed since you should have sold. My key question – which is possibly a bit nosey, for which I apologise in advance, – is has your “something else” evolved over the intervening period [of I assume several years] or was the sale ultimately about clearing a BTL mortgage?

        • {in·deed·a·bly} 2 August 2023 — Post author

          Thanks Al Cam, glad to have piqued your interest.

          has your “something else” evolved over the intervening period [of I assume several years] or was the sale ultimately about clearing a BTL mortgage?

          Yes it has.

          I first thought about selling the property after the market value increased by 70% over four years. That would have been a opportunistic exit, the easy money made as the market imbalance I identified as an investment opportunity had been addressed.

          Had I sold then, I would have reallocated the accumulated equity into shares, mostly a couple of global trackers with the remainder used to top up some existing active investments. This would have served two purposes, rebalancing my asset allocation to reduce exposure to residential property (as an asset class in general, in the United Kingdom in particular) , and also reduce debt levels as I figured interest rates would sooner or later revert to the long term historical mean.

          My motivations for listing it when I actually did were somewhat different. Matrimonial disharmony had escalated my annual “housing wars” to unsustainable levels. I purchased daily access to my children by trading my soul, financial independence, and semi-retired lifestyle for an overpriced owner-occupied money pit in central London.

          Now some of the released accumulated equity will buy my younger son a place at a good state high school. The rest will be invested in low cost global index trackers, hopefully growing and compounding away until they are potentially needed to clear the money pit’s sub 2% fixed rate interest only mortgage when it eventually expires.

          Ironically, with interest rates now having reverted to the mean, it no longer makes financial sense to reduce the mortgage. If historic real total stock market returns run at about 6.5% to 7%, while cost of funds is < 2%, then while there is no immediate need to access the funds they are better off invested.

          • Al Cam 3 August 2023

            Thanks for the detailed reply.
            Plans do change, and often in ways not foreseen at the outset.
            Thus, IMO flexibility – which can be easily overlooked – is important.

  4. David Andrews 28 July 2023

    Finance costs increased, maintenance costs increased, applicable taxes and legislation increased and all before EPC C and the long delayed Renter Reform Bill.

    Tenants complain rents are too high and landlords complain they are still losing money.

    I only let my “spare” property for 2 years under an agreed consent to let.

    The tenant was relatively benign and the rent was at “mates rates” to cover the costs that I’d otherwise personally have to cover if I kept the property empty. When I approached the subject of a rent increase after 2 years things got a little “interesting” and I took back possession.

    Logically I should sell it and put the equity to work but I’m holding it empty. I need to produce a CGT efficient exit plan.

    • {in·deed·a·bly} 28 July 2023 — Post author

      Thanks David, private landlording can certainly be a minefield.

      I need to produce a CGT efficient exit plan.

      Challenge there is the CGT efficiency is determined on the way in (via ownership vehicle etc), rather than the way out. Offsetting it capital losses is an option, the no longer vocal crypto kiddies and meme stock traders are all sitting on large ones for example.

  5. Steveark 31 July 2023

    One big problem with real estate investing to me is the fact that it doesn’t reward talent the way something like an engineering job does. The things that set your profit potential are largely out of your control, but if you are an extremely talented employee you will never be at the mercy of any particular company or even economic cycles. You can recession proof your income if you have enough talent and have built a big enough brand to always be in demand. The whole history of your investing reads like a very competent landlord facing an unending stream of intractable situations. I admire your patience and your insight into lives of your tenants.

    • {in·deed·a·bly} 31 July 2023 — Post author

      Thanks Steveark.

      That’s a sweeping statement about real estate not rewarding talent. I think successful property developers who create value using real estate can be very talented; understanding their market, costs, timing, and demand for their product. On a large scale that might be redeveloping a neighbourhood, establishing shopping precincts or tourism destinations for example. At the smaller end, it could be replacing a single family home with a small mixed use commercial premises below with a handful of residential apartments above.

      That said, I suspect the majority of real estate investors are not successful property developers, but rather passive investors in the sense they create/add absolutely no value to the properties they purchase.

      Instead, they hope for cash flow and to be buoyed by a rising market, in the same way passive stock market investors do. In the general case the passive approach has a lot going for it, slower more predictable market cycles and the ability to use leverage without the risk of margin calls.

      In both passive cases however, the timing and outcome is largely determined by fortune and externalities. Interest rates. Demographic patterns. Employment prospects. Infrastructure improvements. Government policy. Great when others make decisions which happen to improve the prospects of their target market. Less great when employers depart, crime rises, or infrastructure investments are diverted elsewhere.

      I agree with your sentiment about an employee (or freelancer or consultant or business owner) viewing their skills into a marketable product. Selling what employers or clients are demanding. Creating value.

      To complete that thought, employees also need to be willing to move where the work is in order to capitalise on demand for their product. A small thing in a major metropolitan centre with plenty of employers, London or Silicon Valley for example. A much larger hurdle for someone residing in a more remote location with few options.

      As for my journey on this particular property, the prospects appeared promising and the numbers made sense in the early years. I hadn’t counted on externalities, such English society collectively choosing to raise the drawbridge and actively chase away the traditional short and long term migrants who sustained this segment of the property market.

      My decision to exit was made once I recognised these were structural changes rather than temporary anomalies. Unfortunately it took nearly two years for a deal to go the distance, as a succession of buyers pulled out, couldn’t sell their own properties, or struggled to obtain financing at valuations anywhere near “fair market” prices.

  6. Sam 5 August 2023

    Contrarian point of view – if you’re cashed up at the moment, maybe in the next year this will be fantastic time to enter the property market?

    • {in·deed·a·bly} 5 August 2023 — Post author

      Thanks Sam.

      You make a valid point, if everyone is selling and nobody is buying, then there is the opportunity for treasures amongst the trash.

      As is the case with any investment, it becomes an assessment of the cost of funds versus the anticipated future total returns.

      For mine, the medium to long term outlook for London residential property is suboptimal as the asset prices are too high and the yields are too low. That doesn’t mean property as an asset class is bleak, nor locations further afield. I still hold residential property investments abroad, and would consider adding to my holdings if the right opportunity arose.

      That said, from our mid-40s onwards, lenders start offering less favourable lending terms in terms of mortgage durations, and ask inconvenient questions about how interest only loans will eventually be repaid.

What say you?

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