So are Landlords finished?

[98elise]

Oakey said:

98elise said:

Would you say that was typical for let's on your area? I'm not suggesting every rental property is perfect, but it's nothing like it's being made out to be. As I've said it's easy to check what's available on rightmove.

Not sure what you mean by the last line?

I refurbish my properties before they're let. As a minimum that's full redecoration and new carpets. If it needs it I do the bathroom and kitchen.
Of the 4 I have left (I've sold 2) 3 had new kitchens, 2 had new bathrooms. 1 had new kitchen doors and worktops as the cupboards were sound, and the layout was fine.

Before....



After...



When a tenant leaves I will refurbish them again before being re-let (or sold).

Edited by 98elise on Thursday 25th April 16:07

This is satire, right?

Which bit?

If you prefer a 1980's beige melamine kitchen over modern shaker that's fine. You'll find shaker style in just about every kitchen suppliers. 1980's melamine not so much.

Personally I think the original kitchen doors were hideous. Even in their day they were the budget option. The tenant seemed pleased and she got to choose the colours. Personally I'd have a preferred a darker door and lighter tops but I'm never going to be living there.

It also had an avocado bathroom you might have liked.

Edited by 98elise on Friday 26th April 17:20

[Louis Balfour]

SS427 Camaro said:

Mars said:

Hiking rent. It's comments like these that undermine anything else you might have to say.

In my area, my rents were absolutely consistent with the housing association's, however they had a very limited supply of them and were totally disinterested in buying any more. In fact, on the odd occasion I'd see what was coming up for auction (the perfect place for a housing organisation to purchase something cheap), they sent no representation.

My tenants were all eastern European - really nice people who generally looked after the houses with a sense of pride that an owner would have. We would get calls from their friends a few times a year asking if we had any other houses to let because ours were amongst the nicest ones they'd seen.

I'm not in the business of exploiting people. Fair rent for a fair house. I wasn't actually upset that my rents gave no profit - as quoted above that is kind of the point. I would see my profits when the houses were sold. Putting money back into the houses meant consistent occupation, happy tenants (I work full time elsewhere so the few rental problems the better), and the houses could be sold without too much fuss.

I'm sure stereotypes form from real examples but not all LLs are Rachmans. It makes more business sense to keep your tenants happy.

Good old Uncle Peter…..

You haven't read that book.

If you had, you wouldn't have posted it because it doesn't support your trite anti-landlord motifs.

[SS427 Camaro]

Louis Balfour said:

You haven't read that book.

If you had, you wouldn't have posted it because it doesn't support your trite anti-landlord motifs.

Aah touch a nerve did I….

[Louis Balfour]

SS427 Camaro said:

Louis Balfour said:

You haven't read that book.

If you had, you wouldn't have posted it because it doesn't support your trite anti-landlord motifs.

Aah touch a nerve did I….

No, you displayed your ignorance. Which also seems to extend to knowing how to use the quote facility.

But do carry on.

[Pit Pony]

Downward said:

Biggy Stardust said:

Downward said:

Yet 1 in 21 Adults are landlords…

What's the trend over the last few years & the projection for the next few?

Less hopefully.

You'd rather have big business running rental housing ?

My current tenant wouldn't be living in a nice house if a corporate body were her landlord.

[MrBogSmith]

cheesejunkie said:

"They should just work harder"

I am capable of agreeing with some of the points on this thread, not all landlords are wkers, although many are taking advantage of a system that others can't afford to capital that they have not worked any harder for than their tenants.

But "they should all just work harder" is so far outside the reality of most's situations to be hilarious if it wasn't someone's honestly held view. Who's dripping bitterness with that comment?

I know some don't like my suggestion that it's not the hardest job in the world. But it's not. Taking rent is easy compared to real work but those doing it don't like to admit it.

It's clearly more nuanced than that (which applies the most of the thread).

There are some landlords for whom it's extremely passive and hands off. That's what we aimed for with our BTL company.

I know others who it's more than a full time job, especially those who blur the lines between development and rental when they do so much work doing up and maintaining properties.



.

[ITP]

markh1973 said:

ITP said:

Don’t worry, once private landlords are squeezed out by overbearing regulation combined with the only buisness model that is now taxed on turnover, rather than profit, your new landlords will most likely be someone like below.
You know, the people who decide if you can have a mortgage to get on the ladder, but are also in the market for the house you may want to buy…..



So what’s needed is to ban private landlords from owning more than 2. Brilliant plan.

Edited by ITP on Friday 26th April 10:05

Can you point me in the direction of the business model which is taxed on turnover?

Yes I can. It’s owning a rental property as a private individual rather than limited company/corporation/bank etc. The tax treatment is now different between the 2, even though they are providing the same service to a tenant. This 2 tier system has been enacted only in recent years.

As a rough example, there are many other small details, but to keep it basic for the main issues an example is below (those from London won’t recognise these numbers as they are in a bubble all of their own).

Previous system from a few years ago (still valid for Ltd company ownership of house)
House £150k
Btl morg £100k interest only say 5%

Rent £750/month. £9k/year
Morg £5k/year
10% allowance wear/tear £900/year

Profit £4100/year (9k minus 5k minus £900)

40% tax (if higher rate payer) =£1640

So net profit to LL is £9k - 5k morg int. - £1640 tax = £2360/year.

That’s putting 50k down to buy, 66% Ltv mortgage.


Now the number are different for private owners

You are now not allowed to offset morg interest costs (apart from a nominal 20% tax credit) or 10% wear and tear. Therefore you are taxed on turnover bar a token gesture.

In the example above tax would be on 9k - just 1k (20% of the 5k interest) which is 8k. 40% tax of that is £3200.

So from a 9k income your net is now only £800/year.
(£9k - 5k interest - £3.2k tax).

This is why private landlords are exiting, it only works if you have no mortgage on the property. In the example above if the LTV was 80-90% it would be a loss. Or the interest rate was higher the same. Which is a factor now for many in the last 18 months.

Good riddance and first world problems you may say, but if you think bug corps and banks etc taking over these properties due to the govt
policy forcing private landlords out will somehow save you money and bring rents down in afraid you are sorely mistaken.

[98elise]

ITP said:

markh1973 said:

ITP said:

Don’t worry, once private landlords are squeezed out by overbearing regulation combined with the only buisness model that is now taxed on turnover, rather than profit, your new landlords will most likely be someone like below.
You know, the people who decide if you can have a mortgage to get on the ladder, but are also in the market for the house you may want to buy…..



So what’s needed is to ban private landlords from owning more than 2. Brilliant plan.

Edited by ITP on Friday 26th April 10:05

Can you point me in the direction of the business model which is taxed on turnover?

Yes I can. It’s owning a rental property as a private individual rather than limited company/corporation/bank etc. The tax treatment is now different between the 2, even though they are providing the same service to a tenant. This 2 tier system has been enacted only in recent years.

As a rough example, there are many other small details, but to keep it basic for the main issues an example is below (those from London won’t recognise these numbers as they are in a bubble all of their own).

Previous system from a few years ago (still valid for Ltd company ownership of house)
House £150k
Btl morg £100k interest only say 5%

Rent £750/month. £9k/year
Morg £5k/year
10% allowance wear/tear £900/year

Profit £4100/year (9k minus 5k minus £900)

40% tax (if higher rate payer) =£1640

So net profit to LL is £9k - 5k morg int. - £1640 tax = £2360/year.

That’s putting 50k down to buy, 66% Ltv mortgage.


Now the number are different for private owners

You are now not allowed to offset morg interest costs (apart from a nominal 20% tax credit) or 10% wear and tear. Therefore you are taxed on turnover bar a token gesture.

In the example above tax would be on 9k - just 1k (20% of the 5k interest) which is 8k. 40% tax of that is £3200.

So from a 9k income your net is now only £800/year.
(£9k - 5k interest - £3.2k tax).

This is why private landlords are exiting, it only works if you have no mortgage on the property. In the example above if the LTV was 80-90% it would be a loss. Or the interest rate was higher the same. Which is a factor now for many in the last 18 months.

Good riddance and first world problems you may say, but if you think bug corps and banks etc taking over these properties due to the govt
policy forcing private landlords out will somehow save you money and bring rents down in afraid you are sorely mistaken.

It's not strictly turnover though. It's only loan interest that's no longer deductible for private landlords. Other expenses can be be deducted.

It's quite possible to make a loss, and owe tax though which is a bizarre situation. No other business is taxed that way, and even in this particular business its only small operators targeted. It should apply to all or none.

[Panamax]

98elise said:

It's quite possible to make a loss, and owe tax though which is a bizarre situation.

Every business has to live with the difference between "business accounts" and "tax accounts", that's just the way things work. It would not be correct to suggest that landlords are singled out for harsh treatment.

[ITP]

98elise said:

ITP said:

markh1973 said:

ITP said:

Don’t worry, once private landlords are squeezed out by overbearing regulation combined with the only buisness model that is now taxed on turnover, rather than profit, your new landlords will most likely be someone like below.
You know, the people who decide if you can have a mortgage to get on the ladder, but are also in the market for the house you may want to buy…..



So what’s needed is to ban private landlords from owning more than 2. Brilliant plan.

Edited by ITP on Friday 26th April 10:05

Can you point me in the direction of the business model which is taxed on turnover?

Yes I can. It’s owning a rental property as a private individual rather than limited company/corporation/bank etc. The tax treatment is now different between the 2, even though they are providing the same service to a tenant. This 2 tier system has been enacted only in recent years.

As a rough example, there are many other small details, but to keep it basic for the main issues an example is below (those from London won’t recognise these numbers as they are in a bubble all of their own).

Previous system from a few years ago (still valid for Ltd company ownership of house)
House £150k
Btl morg £100k interest only say 5%

Rent £750/month. £9k/year
Morg £5k/year
10% allowance wear/tear £900/year

Profit £4100/year (9k minus 5k minus £900)

40% tax (if higher rate payer) =£1640

So net profit to LL is £9k - 5k morg int. - £1640 tax = £2360/year.

That’s putting 50k down to buy, 66% Ltv mortgage.


Now the number are different for private owners

You are now not allowed to offset morg interest costs (apart from a nominal 20% tax credit) or 10% wear and tear. Therefore you are taxed on turnover bar a token gesture.

In the example above tax would be on 9k - just 1k (20% of the 5k interest) which is 8k. 40% tax of that is £3200.

So from a 9k income your net is now only £800/year.
(£9k - 5k interest - £3.2k tax).

This is why private landlords are exiting, it only works if you have no mortgage on the property. In the example above if the LTV was 80-90% it would be a loss. Or the interest rate was higher the same. Which is a factor now for many in the last 18 months.

Good riddance and first world problems you may say, but if you think bug corps and banks etc taking over these properties due to the govt
policy forcing private landlords out will somehow save you money and bring rents down in afraid you are sorely mistaken.

It's not strictly turnover though. It's only loan interest that's no longer deductible for private landlords. Other expenses can be be deducted.

It's quite possible to make a loss, and owe tax though which is a bizarre situation. No other business is taxed that way, and even in this particular business its only small operators targeted. It should apply to all or none.

Of course there are some costs still allowable, I did say it was a rough guide, but if does indicate how private landlords are being quite aggressively forced out by a tax practice not used anywhere else in buisness with not allowing finance costs. This is for many landlords the biggest cost by far, which can mean , although not a 100% tax on turnover it’s not far off in reality.

[98elise]

Panamax said:

98elise said:

It's quite possible to make a loss, and owe tax though which is a bizarre situation.

Every business has to live with the difference between "business accounts" and "tax accounts", that's just the way things work. It would not be correct to suggest that landlords are singled out for harsh treatment.

Which other business are not allowed to deduct loan interest? Genuinely interested because I thought it was pretty much allowable across the board.

I used to work for one of the biggest corporate real estate companies in the country and I'm pretty sure they could.

I'm no accountant though!

[Louis Balfour]

98elise said:

ITP said:

markh1973 said:

ITP said:

Don’t worry, once private landlords are squeezed out by overbearing regulation combined with the only buisness model that is now taxed on turnover, rather than profit, your new landlords will most likely be someone like below.
You know, the people who decide if you can have a mortgage to get on the ladder, but are also in the market for the house you may want to buy…..



So what’s needed is to ban private landlords from owning more than 2. Brilliant plan.

Edited by ITP on Friday 26th April 10:05

Can you point me in the direction of the business model which is taxed on turnover?

Yes I can. It’s owning a rental property as a private individual rather than limited company/corporation/bank etc. The tax treatment is now different between the 2, even though they are providing the same service to a tenant. This 2 tier system has been enacted only in recent years.

As a rough example, there are many other small details, but to keep it basic for the main issues an example is below (those from London won’t recognise these numbers as they are in a bubble all of their own).

Previous system from a few years ago (still valid for Ltd company ownership of house)
House £150k
Btl morg £100k interest only say 5%

Rent £750/month. £9k/year
Morg £5k/year
10% allowance wear/tear £900/year

Profit £4100/year (9k minus 5k minus £900)

40% tax (if higher rate payer) =£1640

So net profit to LL is £9k - 5k morg int. - £1640 tax = £2360/year.

That’s putting 50k down to buy, 66% Ltv mortgage.


Now the number are different for private owners

You are now not allowed to offset morg interest costs (apart from a nominal 20% tax credit) or 10% wear and tear. Therefore you are taxed on turnover bar a token gesture.

In the example above tax would be on 9k - just 1k (20% of the 5k interest) which is 8k. 40% tax of that is £3200.

So from a 9k income your net is now only £800/year.
(£9k - 5k interest - £3.2k tax).

This is why private landlords are exiting, it only works if you have no mortgage on the property. In the example above if the LTV was 80-90% it would be a loss. Or the interest rate was higher the same. Which is a factor now for many in the last 18 months.

Good riddance and first world problems you may say, but if you think bug corps and banks etc taking over these properties due to the govt
policy forcing private landlords out will somehow save you money and bring rents down in afraid you are sorely mistaken.

It's not strictly turnover though. It's only loan interest that's no longer deductible for private landlords. Other expenses can be be deducted.

It's quite possible to make a loss, and owe tax though which is a bizarre situation. No other business is taxed that way, and even in this particular business its only small operators targeted. It should apply to all or none.

Why do you think it was enacted?

I am not entirely sure, but my best guesses are:

1. To win votes, i.e. political.
2. Because small LLs were perceived as a risk in the economy.
3. Small LLs are more likely to be fiddling than big ones. Ltd co. oversight etc.
4. Because the perception was that all serious landlords were Ltd (which they weren't)
5 That all serious landlords had no or little gearing = unaffected.
6. George Osborne didn't much like the hoi polloi bettering themselves
7. A general push towards driving out small landlords in favour of big corporates.

[markh1973]

ITP said:

98elise said:

ITP said:

markh1973 said:

ITP said:

Don’t worry, once private landlords are squeezed out by overbearing regulation combined with the only buisness model that is now taxed on turnover, rather than profit, your new landlords will most likely be someone like below.
You know, the people who decide if you can have a mortgage to get on the ladder, but are also in the market for the house you may want to buy…..



So what’s needed is to ban private landlords from owning more than 2. Brilliant plan.

Edited by ITP on Friday 26th April 10:05

Can you point me in the direction of the business model which is taxed on turnover?

Yes I can. It’s owning a rental property as a private individual rather than limited company/corporation/bank etc. The tax treatment is now different between the 2, even though they are providing the same service to a tenant. This 2 tier system has been enacted only in recent years.

As a rough example, there are many other small details, but to keep it basic for the main issues an example is below (those from London won’t recognise these numbers as they are in a bubble all of their own).

Previous system from a few years ago (still valid for Ltd company ownership of house)
House £150k
Btl morg £100k interest only say 5%

Rent £750/month. £9k/year
Morg £5k/year
10% allowance wear/tear £900/year

Profit £4100/year (9k minus 5k minus £900)

40% tax (if higher rate payer) =£1640

So net profit to LL is £9k - 5k morg int. - £1640 tax = £2360/year.

That’s putting 50k down to buy, 66% Ltv mortgage.


Now the number are different for private owners

You are now not allowed to offset morg interest costs (apart from a nominal 20% tax credit) or 10% wear and tear. Therefore you are taxed on turnover bar a token gesture.

In the example above tax would be on 9k - just 1k (20% of the 5k interest) which is 8k. 40% tax of that is £3200.

So from a 9k income your net is now only £800/year.
(£9k - 5k interest - £3.2k tax).

This is why private landlords are exiting, it only works if you have no mortgage on the property. In the example above if the LTV was 80-90% it would be a loss. Or the interest rate was higher the same. Which is a factor now for many in the last 18 months.

Good riddance and first world problems you may say, but if you think bug corps and banks etc taking over these properties due to the govt
policy forcing private landlords out will somehow save you money and bring rents down in afraid you are sorely mistaken.

It's not strictly turnover though. It's only loan interest that's no longer deductible for private landlords. Other expenses can be be deducted.

It's quite possible to make a loss, and owe tax though which is a bizarre situation. No other business is taxed that way, and even in this particular business its only small operators targeted. It should apply to all or none.

Of course there are some costs still allowable, I did say it was a rough guide, but if does indicate how private landlords are being quite aggressively forced out by a tax practice not used anywhere else in buisness with not allowing finance costs. This is for many landlords the biggest cost by far, which can mean , although not a 100% tax on turnover it’s not far off in reality.

So it's not even vaguely a business that is taxed on turnover, Loan interest is essentially deductible in part.

The 20% of your interest that you can get a deduction for is pretty much in the ballpark of a corporate where the interest (assuming it's deductible) will save tax at the relevant tax rate (somewhere between 19% and 26.5%).

Corporates can also make losses but still pay tax and the notion that a corporate (particularly the big corporates) can deduct all of their financing costs is a fallacy.

[ITP]

Not sure if it’s in the ‘ballpark’ when the example I gave is that a ltd company can offset £5000, the whole of the interest cost, and a private landlord can now only offset £1000, when it was previously the same £5000. But never mind, maybe my ballpark is different!

[Killboy]

98elise said:

Well the tenant liked it. Shaker style is pretty standard on a modern kitchen. It was certainly better than the worn worktops and 1980's beige laminate doors. Maybe you like that look? I suppose somebody must!

"It's exactly did say?" Not sure what that means. Apologies if your first language isn't English but I'm still none the wiser from your first post.

Properties look their best on rightmove because that's when you're renting it. What preventative maintenance are you expecting after that? I can't think of anything that needs servicing or maintenance beyond the gas and electrical safety stuff.

Edited by 98elise on Friday 26th April 07:28

Lets not get ahead of ourselves. You "new kitchen" consists of the same floor tiles, same wall tiles, same appliances, exactly the same unit layout and what even looks like the same cupboard doors as previously except the one above the extractor. Its looks like some veneer, handles, a kitchen sink and a counter top. And I'd love to know if you gave the tenant the option, or you did this in a bit to update it slightly on the cheap to maximize what the next set of tenants would be in for.

"Properties look their best on rightmove because that's when you're renting it" - Yeah, exactly what I'm saying, properties look their best when on the market. Perhaps new tenancies should be forced to begin with a surveyors report to unearth the nonsense landlords cover up with a lick of paint.

P.S. I'm a "landlord". Landlords provide a service as properties, but tenants provide a service then with rent. Unless you're doing charitable work, its business.

[markh1973]

ITP said:

Not sure if it’s in the ‘ballpark’ when the example I gave is that a ltd company can offset £5000, the whole of the interest cost, and a private landlord can now only offset £1000, when it was previously the same £5000. But never mind, maybe my ballpark is different!

Individual - tax saved on £5k of interest = £1,000

Corporate - let's assume a large one - tax saved on £5k of interest = £1,250 (25% of £5,000)

Looks like the same ballpark to me

[markh1973]

98elise said:

Panamax said:

98elise said:

It's quite possible to make a loss, and owe tax though which is a bizarre situation.

Every business has to live with the difference between "business accounts" and "tax accounts", that's just the way things work. It would not be correct to suggest that landlords are singled out for harsh treatment.

Which other business are not allowed to deduct loan interest? Genuinely interested because I thought it was pretty much allowable across the board.

I used to work for one of the biggest corporate real estate companies in the country and I'm pretty sure they could.

I'm no accountant though!

Corporates will need to consider allowable purpose and the Corporate Interest Restriction to give you two examples of why interest may not all be deductible.

[AmyRichardson]

Looking at the example, I'd suggest that a view needs to be taken on the mortgage, as the majority of that cost should be squared against the running down of a debt.

This was how a lot of small renters operated; low effort, low profit but a clunky asset to liquidate at the end of the day.

[98elise]

Killboy said:

98elise said:

Well the tenant liked it. Shaker style is pretty standard on a modern kitchen. It was certainly better than the worn worktops and 1980's beige laminate doors. Maybe you like that look? I suppose somebody must!

"It's exactly did say?" Not sure what that means. Apologies if your first language isn't English but I'm still none the wiser from your first post.

Properties look their best on rightmove because that's when you're renting it. What preventative maintenance are you expecting after that? I can't think of anything that needs servicing or maintenance beyond the gas and electrical safety stuff.

Edited by 98elise on Friday 26th April 07:28

Lets not get ahead of ourselves. You "new kitchen" consists of the same floor tiles, same wall tiles, same appliances, exactly the same unit layout and what even looks like the same cupboard doors as previously except the one above the extractor. Its looks like some veneer, handles, a kitchen sink and a counter top. And I'd love to know if you gave the tenant the option, or you did this in a bit to update it slightly on the cheap to maximize what the next set of tenants would be in for.

"Properties look their best on rightmove because that's when you're renting it" - Yeah, exactly what I'm saying, properties look their best when on the market. Perhaps new tenancies should be forced to begin with a surveyors report to unearth the nonsense landlords cover up with a lick of paint.

P.S. I'm a "landlord". Landlords provide a service as properties, but tenants provide a service then with rent. Unless you're doing charitable work, its business.

This is what I wrote immediately before the pictures

"1 had new kitchen doors and worktops as the cupboards were sound, and the layout was fine"

The originals were beige melamine from the 80's, the replacements were oak shaker style with metal handles. I thought that was pretty obvious from the pictures. Maybe you're viewing it on a phone?

The option I gave my tenant was what doors and counter tops (within reason). They need to go with the tiles so there weren't a lot of options though.

I refurbish my rentals regardless. They tend to be properties in need of updating. As I said that one didn’t need new cupboards because they were sound.

Edited to add....

This one was a bigger refub.

A confined and barely functional kitchen



So we took down the wall and went back to plaster before fitting a kitchen. We also stuck a new boiler in. The orginal was from the 60's!



The bathroom was functional so I could have just given it a paint and stuck some new flooring down, but that avocado suite just had to go.



Again strip back to plaster and start again.





I wouldn't let a property I wouldn't be happy living in myself.

Edited by 98elise on Friday 26th April 18:14

[ITP]

markh1973 said:

ITP said:

Not sure if it’s in the ‘ballpark’ when the example I gave is that a ltd company can offset £5000, the whole of the interest cost, and a private landlord can now only offset £1000, when it was previously the same £5000. But never mind, maybe my ballpark is different!

Individual - tax saved on £5k of interest = £1,000

Corporate - let's assume a large one - tax saved on £5k of interest = £1,250 (25% of £5,000)

Looks like the same ballpark to me

No, now you are only allowed to offset £1000 against tax, instead of £5000. So as a 40% taxpayer you only save £400 instead of £2000 previously. (£1250 for a corporate rate of 25%)

So £1250 is not in the same ballpark as £400. It’s over 300% more.