Friday 12 October 2007

The generousity of buy-to-let landlords

Check this story out from the BBC. Half-way down the page, you will find the following story:

Derek Stobbs, who owns 13 properties in the Derby area, says he is losing about £6,000 a year on his portfolio. He is relying on the profits from his other business to balance his books. "It looks like I am going to have to subsidise them for a few years to come," he says.

It is difficult to conceive of a more stupid investment strategy than the one from Derek from Derby. Here is someone who has bought 13 over-valued houses, almost certainly on loans. The rental yield is negative, and he is actually subsidizing his tenants. Now house prices are falling, and this buy-to-let investor is on the express highway to financial ruin.

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