BTL - Why would you ever buy for cash?

[trowelhead]

MadProfessor said:

As an aside, I've noticed quite a few people moving into BTL to AirBNB. They run the risk of much greater voids but if you get the right property in the right location you can make substantial yields with minimal voids. Studio and small flats in city centres are perfect for this.

Interesting, any more info on this?

[trowelhead]

chibbard said:

We paid cash for a new build flat that we are renting. This way, we have no money worries if/WHEN the housing market changes. It's now giving us a good return. Otherwise, if the money was sitting in the bank it would a) not give us a very good return at all and b) tempt us into dipping into the pot for fast cars/bikes/house improvements etc hahaha.

Exactly, peace of mind.

• no worries about interest rates
• no worries about being forced into reposession over negative equity etc.
• you know where you stand with cashflow (rises in interest rates could potentially wipe out your cashflow with geared btl)
• less worries about tenant not paying for a while (as no outgoings on mortgage)
• If prices fall, no worries as you are still getting your rent paid as before, rents unlikely to drop by much
• fairly illiquid - so more likely to "buy and hold" over long term
• in a good position with people looking to sell fast
• can choose your own tenant types, no restrictions from bank etc.
• can buy cheap properties that usually would not quality for a mortgage

[drainbrain]

After decades of expansion using borrowings, having bought cash only for the last 6 years or so, I'm now buying out my senior loan by selling stock. Mind you, I'm also still buying when real bargains come up, but strictly cash only. Tend to think it's an age thing, though. I always found borrowing to be very very useful, but expansion's become unimportant now and I'm looking forward to becoming burden free.

[kev1974]

MadProfessor said:

As an aside, I've noticed quite a few people moving into BTL to AirBNB. They run the risk of much greater voids but if you get the right property in the right location you can make substantial yields with minimal voids. Studio and small flats in city centres are perfect for this.

AirBnB style letting must be a *massive* time sink surely, having to be around all the time (or pay someone to be around for you) to hand keys over, check in / check out, arrange cleaning every week or less.

Not to mention, BTL mortgages always have various requirements about proper tenancy agreements that need to be in place; for flats, similar requirements are often in the building lease as well.

Of course, you can say well they'll never follow up or never find out that I'm airbnb'ing the place in spite of any mortgage requirements or conflicting lease clauses, and probably they won't while it's all going smoothly, but it's the kind of thing that those companies will use to shaft you with down the line when it suits them or when things get rocky.

[anonymous-user]

This is a serious question and I'd appreciate serious answers. Is there any real money in Buy to Rent after tax? My wife has several properties in S E Asia, which are all rented out, she tends to roll her rental income into the next mortgage, she typically gets a 90% mortgage and pays it off in around 2 years, she realizes no income but spectacular capital gains. (37% in Jakarta last year) all tax free.
She has a small house in the UK mortgage free, but we can't see any real benefit in renting it, in reality all the income would be taxed, and she would pay capital gains on sale, then there is potential damage by tenants, while as our only UK residence we can see capital growth tax free.
As I see it max rental income would be around 5K a year, after tax, and I would be liable to tax on the capital gain, the house is going up at least 10 K a year tax free, so I am better leaving it empty. Am I thinking right?

[Mezger]

Berw said:

This is a serious question and I'd appreciate serious answers. Is there any real money in Buy to Rent after tax? My wife has several properties in S E Asia, which are all rented out, she tends to roll her rental income into the next mortgage, she typically gets a 90% mortgage and pays it off in around 2 years, she realizes no income but spectacular capital gains. (37% in Jakarta last year) all tax free.
She has a small house in the UK mortgage free, but we can't see any real benefit in renting it, in reality all the income would be taxed, and she would pay capital gains on sale, then there is potential damage by tenants, while as our only UK residence we can see capital growth tax free.
As I see it max rental income would be around 5K a year, after tax, and I would be liable to tax on the capital gain, the house is going up at least 10 K a year tax free, so I am better leaving it empty. Am I thinking right?

Very interesting Berw -I'm also in SE Asia, how easy is it to buy property in Jakarta, Manila, Bangkok, KL etc, is it fairly straightfroward or fraught with hurdles for the uninitiated?

[anonymous-user]

Basically you can't buy. In Thailand only Thais can own the freehold, a foreigner can hold the leasehold, In Malaysia a foreigner can own the freehold but you need permission, this can take anything up to 18 months to get, (10 typical) so not easy to pick up a bargain, Indonesia you really need to be Indonesian, which my wife is, she has been into property for years, and has a good reputation wit the bank, and moves quickly as she can arrange mortgages very fast.
Be careful of people who tell you they can get round the rules in Thailand.