BTL as a pension fund - why not?
Discussion
Rovinghawk said:
BL Fanboy said:
I might have got in to BTL if I could get my head around the social aspects to it. Yes I know we have to look after ourselves but I'd like to try and do it ethically if I can.
Surprisingly easy: rent out a decent place at a sensible price to a quality tenant. Have a legal tenancy contract but have a gentleman's agreement on the side that any problems will be sorted quickly & quietly. Both sides understand give & take.It's worked very well for me for many years.
I've worked hard yes, but I'm also grateful. If I went into BTL I'd be helping to bid up prices, cornering a finite resource. I just feel I'd be adding more petrol to the fire and basically kicking the face of people scrabbling to get "in" as the door closed.
Don't feel comfortable about that.
Paying CGT every time you move house?
Unless house prices remain static or rise very slowly (not a bad thing at the moment as prices are too high against wages) then that sounds like a race to the bottom.
Surely if you paid 150 ten years ago for a house now worth 300, if you had to move to a new area for work for example, a 28% tax bill on 150k on top of a 3% SD bill on £300k, if moving to an equivalent house, plus all other costs means you aren't going to move. You'd be paying the taxman over £50k (just to squander on something).
What do you do, take out more debt or do all prices have to crash to reduce the CGT bill? Repossession, family breakdowns will all ensue not doubt. Property would be cheaper for FTB's though. It does seem an extreme way to correct price levels rather than letting the market do it over time.
Unless house prices remain static or rise very slowly (not a bad thing at the moment as prices are too high against wages) then that sounds like a race to the bottom.
Surely if you paid 150 ten years ago for a house now worth 300, if you had to move to a new area for work for example, a 28% tax bill on 150k on top of a 3% SD bill on £300k, if moving to an equivalent house, plus all other costs means you aren't going to move. You'd be paying the taxman over £50k (just to squander on something).
What do you do, take out more debt or do all prices have to crash to reduce the CGT bill? Repossession, family breakdowns will all ensue not doubt. Property would be cheaper for FTB's though. It does seem an extreme way to correct price levels rather than letting the market do it over time.
ITP said:
Paying CGT every time you move house?
Most people proposing it are ignorant of history or simply hoping to force a market crash to redistribute other peoples wealth to themselves.If CGT were chargeable in the last dip or the preceding crash, everyone facing loses would have moved house, crystalising massive CGT losses effectively abolishing CGT.
People would move on the dips and sit tight on the peaks, in essence magnifying both and making the market far more volatile. Volatility increases risk. Risk is charged at a premium, so lenders would demand higher rates.
Bed and spousing houses would be a nice money-spinner for me over the next couple of decades as I expect to begin hitting the CGT threshold every few years. That doesn't mean it'd be a good idea for society though.
Eric Mc said:
You could argue that perhaps economies with far more renters behave better - as they allow a much better flexibility of movement of the workforce.
It would be useful to look at the ratio of home ownership to state of economy and see which countries come out best.
And who should provide these rented homes?It would be useful to look at the ratio of home ownership to state of economy and see which countries come out best.
I have to confess, I have skin in this game, I have a buy to let property as well as my main residence, both in central london. I have it partly through pension provision reasons, partly through a view long term land and property prices in the uk, and partly because I suspect at some point I may well want to sell my primary residence and live either in the country and use my London flat as a bolt hold, or even live abroad and do the same. So it suits me to keep it considering the costs of stamp duty et al. Plus currently, im not sure where I would put the cash should I liquidate it.
In the time that I hold it and don't use it I have decided to rent it out and be as good a landlord as I can. Yes it makes money, but I also provide a lovely home and try to be a good landlord for a couple who have as yet decided not to or cannot afford to buy their own similar place.
What is wrong with that?
Edited by gibbon on Thursday 27th November 12:20
LucreLout said:
Eric Mc said:
What type of downward expectation should those seeking a place to live make?
They should be looking at what they can afford, not what their baby boomer parents could afford. Those days are gone and they aren't coming back.If you can afford a one bed flat needing work, buy that and do the work. In a few years you'll have enough equity to buy something bigger.
The trouble with most of those howling about property is that due to their age, they're gen y or gen me me me, and they really do think they're worth it.
Unable to afford a 4 bed detached like mammy and daddy bought does not equate to a lack of access. It equates to unrealistic ambitions.
My dad was a factory worker. I work in the City. I managed to buy the same sort of house I grew up in because I studied hard, worked hard, and saved hard for a decade, and have a significantly higher income than my parents. I was lucky. If, however, you had middle class parents and you're middle class yourself, well, you'll have to aspire to the sort of property factory workers bought in your folks generation. That's life.
Are you suggesting the balance will continue to tilt, or will it now stabilise.
I can sort of understand your thinking if you believe the balance will stabilise, but if you think houses will continue to outpace income for the medium/long term then how do you expect this to be sustained?
LucreLout said:
Then I'd respectfully suggest you know little about taxation. There are far more lucrative tax breaks than PPR exemption from CGT.
I was talking about its impact on the nation - not how valuable it is to individuals.Of course there are certain tax breaks that might yield a greater benefit to an individual. An awful lot of these breaks are not accessable to many people as the greatest tax breaks tend to be used by high earners or high net worth individuals.
The tax break relating to your main residence affects a vast number of people - and therefore has a massive impact on the economy.
oyster said:
You're speaking across a very narrow timeframe of 20 to 25 years.
Are you suggesting the balance will continue to tilt, or will it now stabilise.
I can sort of understand your thinking if you believe the balance will stabilise, but if you think houses will continue to outpace income for the medium/long term then how do you expect this to be sustained?
A change in paradigm. Property passed through generations, multi generational financed property, either through accrued wealth or shared debt.Are you suggesting the balance will continue to tilt, or will it now stabilise.
I can sort of understand your thinking if you believe the balance will stabilise, but if you think houses will continue to outpace income for the medium/long term then how do you expect this to be sustained?
The thing is, the accrued wealth has never been split in the way it has before or seen at the levels it currently is before, we are only now realising how the market will change as generations of home owners pass away and pass on either the property or the accrued wealth from it. This didn't used to be the norm, it could now be argued that it is.
What will happen? My bet is prices slowly continue to outpace inflation, mortgage terms get longer, rates stay low, generations share and pass on property.
Its a very difficult situation to reverse, and we have never seen these conditions before, this situation has been building for three generations now and we are only really seeing the effects of housing commoditisation and privatisation now.
rotarymazda said:
If the BTL'rs were adding to the housing stock, that would be OK. They aren't, they are just hoarding. House prices go up, renters get stuffed, mortgagees end up paying more for their massive debts.
Plenty of houses are built with the explicit intention of appealing to those buying to operate a BTL.oyster said:
You're speaking across a very narrow timeframe of 20 to 25 years.
Are you suggesting the balance will continue to tilt, or will it now stabilise.
I can sort of understand your thinking if you believe the balance will stabilise, but if you think houses will continue to outpace income for the medium/long term then how do you expect this to be sustained?
I don't because logically there has to be a limit.... I expect it to go higher than it is then level out increasing about 3.5 times income increases. It might level out a bit higher than that as most people buy as part of a couple. Booms and busts will, however, continue within a range.Are you suggesting the balance will continue to tilt, or will it now stabilise.
I can sort of understand your thinking if you believe the balance will stabilise, but if you think houses will continue to outpace income for the medium/long term then how do you expect this to be sustained?
25 years is a narrow band in terms of nations, but in terms of people its about a third of your life, or half your property owning period. Not that narrow.
I think long term BTL makes an excellent investment, and annoyingly its one of three decent classes I have no exposure to (yet)!
Eric Mc said:
I was talking about its impact on the nation - not how valuable it is to individuals.
Then I'm afraid you're even more mistaken. Corporate level tax arbitrage is an area I have some commercial experience with, and all the ppr gains in the country don't come close.My writing style is a lot more abrasive than I intend it to be, so please don't mistake the above as a lack of respect or me having a dig. That's not my intent.
BL Fanboy said:
If I went into BTL I'd be helping to bid up prices, cornering a finite resource. I just feel I'd be adding more petrol to the fire and basically kicking the face of people scrabbling to get "in" as the door closed.
Don't feel comfortable about that.
Smoking is bad & I don' approve.Don't feel comfortable about that.
I look at the shopkeeper selling cigarettes & think no less of him- if he didn't stock them then the next guy would.
gibbon said:
The thing is, the accrued wealth has never been split in the way it has before or seen at the levels it currently is before...
Please accept Rockefeller and Morgan as my rebuttal to that.The least wealthy in the UK have never had it so good, generationally speaking. In terms of basic provision of necessity you could credibly argue we've never been so equal.
The pretty will always get laid. The clever will always win pub quizzes. And the lucky are destined to remain so. The rich will get richer. Quite why people get so worked up about one of those imbalances and are perfectly accepting of the others I'll never understand.
LucreLout said:
Then I'm afraid you're even more mistaken. Corporate level tax arbitrage is an area I have some commercial experience with, and all the ppr gains in the country don't come close.
My writing style is a lot more abrasive than I intend it to be, so please don't mistake the above as a lack of respect or me having a dig. That's not my intent.
Yes, it does indeed come across as abrasive. I hope you deal with your clients a little less brusquely.My writing style is a lot more abrasive than I intend it to be, so please don't mistake the above as a lack of respect or me having a dig. That's not my intent.
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