BTL - Staying in or shipping out?
Discussion
What are fellow BTLers doing ahead of the various changes that are designed to undermine the private landlord?
I'm torn. Most of my properties are prime and have good equity levels, I had some valuations in today and it's very tempting to lock in gains but this goes against my naturally long term outlook.
But if I look at whats going on globally I can't help but feel the equity markets are doing their usual canary in the coal mine/early indicator job and that combined with the chancellor's 2017 proposals make things look at a bit grim in the medium term at least. I am however not that fussed by the stamp duty shift in March, I think this is being overplayed by agents to galvanise a good start to the year for their books.
I'm also surprised how many people I speak to who own BTLs seem ignorant of how the changes are going to effect them, in fact many seemingly intelligent people I consume a pint with from time to time are totally oblivious. This again makes me think the herd is yet to really react.
These are just my chin stroking ramblings but I'm taking an exit position more seriously than I have done at any previous time. Anyone else?
I'm torn. Most of my properties are prime and have good equity levels, I had some valuations in today and it's very tempting to lock in gains but this goes against my naturally long term outlook.
But if I look at whats going on globally I can't help but feel the equity markets are doing their usual canary in the coal mine/early indicator job and that combined with the chancellor's 2017 proposals make things look at a bit grim in the medium term at least. I am however not that fussed by the stamp duty shift in March, I think this is being overplayed by agents to galvanise a good start to the year for their books.
I'm also surprised how many people I speak to who own BTLs seem ignorant of how the changes are going to effect them, in fact many seemingly intelligent people I consume a pint with from time to time are totally oblivious. This again makes me think the herd is yet to really react.
These are just my chin stroking ramblings but I'm taking an exit position more seriously than I have done at any previous time. Anyone else?
Edited by DoubleSix on Saturday 30th January 23:20
But if you exit can you see yourself really being able to ever get back in? If prices keep rising for another few years which with low interest rates and all these help to buy schemes, they might, would you be able to? Would you kick yourself? Although the world has gone to s
t uk is still attractive to most of the worlds population as a stable place to invest!
t uk is still attractive to most of the worlds population as a stable place to invest!Well I guess that is true of any market, in that whether it continues to rise or fall will prove your decision to be a good or bad one. Although I suppose that barriers to re-entry in something like the equity market (my natural space) are lower.
But it's not often one is given such a clear 'heads up' to a structural shift.
But it's not often one is given such a clear 'heads up' to a structural shift.
DoubleSix said:
A good point.
Can I flip that around and say; you are choosing to stay in because of a perceived lack of alternatives?
You can flip it any which way my friend Can I flip that around and say; you are choosing to stay in because of a perceived lack of alternatives?
. It's all well and good getting out and locking in your return...but unless you do something your cash is going to become worth less and less.We're staying in, expanding our portfolios and keeping on with our seemingly lucrative niche (both in terms of ROI and capital growth).
Honestly, I think the tenant is going to pay the increased costs one way or the other. Chuck an extra 3% on the purchase price? Ok - well that'll have to go on the rent.
I had a chat with my accountant about this, and as a result I wouldn't bother with the incorporated route; most people that aren't skilled in the preparation of annual accounts (however simple they may be in terms of transactions per year) will end up having to pay an accountant to do it for them which might end up costing them £500-£1000 a year, you'll have corporation tax bills to manage, some income tax one way or another whichever way you transfer the earnings out of the company and back to yourself; and unless you're very careful or very specific circumstances apply, potentially a whole world of pain when you want to sell the property on or shut the whole thing down.
Plus, all the chancellor has to do is announce at a future budget some special tax or tax rate for property holding companies with fewer than 10 employees, or something along those lines, and everyone who's gone that incorporated route is suddenly in the doo-doo. Unless you somehow know that something like that has no chance of happening any time in the next 10-20 years then the incorporated route is a total gamble in my opinion, just sucking up the extra stamp duty is painful no doubt but at least it's known pain.
Plus, all the chancellor has to do is announce at a future budget some special tax or tax rate for property holding companies with fewer than 10 employees, or something along those lines, and everyone who's gone that incorporated route is suddenly in the doo-doo. Unless you somehow know that something like that has no chance of happening any time in the next 10-20 years then the incorporated route is a total gamble in my opinion, just sucking up the extra stamp duty is painful no doubt but at least it's known pain.
The proposed changes aren't stopping us from buying another BTL this year (London). I still can't think of anywhere I'd rather put my money, especially with the decidedly queasy outlook in the equity markets.
Apart from which, if it does all go tits up again, at least we'll have a place to shelter from the st-storm!
Apart from which, if it does all go tits up again, at least we'll have a place to shelter from the s
t-storm! Currently we are sticking. Our only property was our home until worked moved me away and the wife followed where we now rent ourselves. Property is in the SE and is getting its residential repayment mortgage paid with capital gains. We are going to be remortgaging to reduce costs which will likely be a BTL interest only.
Our plans are to look at emigrating in two years so we could then sell and maybe use some equity to buy a cheaper but better yeilding property such as a student let. If we didn't have to pay CGT on 3 years worth of gains (£20-30k increase judging by what's sold nearby) I think I'd be pushing the wife to do do this sooner. We could live there again before we go thus saving us this tax liability.
As an accidental landlord I'm probably one of those that the new rules are meant to stop. If we really wanted to stick two fingers up to them we could probably sell our joint property and buy a cheaper one each!
Our plans are to look at emigrating in two years so we could then sell and maybe use some equity to buy a cheaper but better yeilding property such as a student let. If we didn't have to pay CGT on 3 years worth of gains (£20-30k increase judging by what's sold nearby) I think I'd be pushing the wife to do do this sooner. We could live there again before we go thus saving us this tax liability.
As an accidental landlord I'm probably one of those that the new rules are meant to stop. If we really wanted to stick two fingers up to them we could probably sell our joint property and buy a cheaper one each!
kev1974 said:
I had a chat with my accountant about this, and as a result I wouldn't bother with the incorporated route; most people that aren't skilled in the preparation of annual accounts (however simple they may be in terms of transactions per year) will end up having to pay an accountant to do it for them which might end up costing them £500-£1000 a year, you'll have corporation tax bills to manage, some income tax one way or another whichever way you transfer the earnings out of the company and back to yourself; and unless you're very careful or very specific circumstances apply, potentially a whole world of pain when you want to sell the property on or shut the whole thing down.
Plus, all the chancellor has to do is announce at a future budget some special tax or tax rate for property holding companies with fewer than 10 employees, or something along those lines, and everyone who's gone that incorporated route is suddenly in the doo-doo. Unless you somehow know that something like that has no chance of happening any time in the next 10-20 years then the incorporated route is a total gamble in my opinion, just sucking up the extra stamp duty is painful no doubt but at least it's known pain.
You could argue that he could impose a tax on individuals owning property. Plus, all the chancellor has to do is announce at a future budget some special tax or tax rate for property holding companies with fewer than 10 employees, or something along those lines, and everyone who's gone that incorporated route is suddenly in the doo-doo. Unless you somehow know that something like that has no chance of happening any time in the next 10-20 years then the incorporated route is a total gamble in my opinion, just sucking up the extra stamp duty is painful no doubt but at least it's known pain.
At least as incorporated you can still get full allowance on mortgage interest.
For me, I'm seriously considering going incorporated. I have a decent cash surplus every year which if I withdraw I then get hammered on tax
Kudos said:
You could argue that he could impose a tax on individuals owning property.
Not without causing a major election issue.Kudos said:
At least as incorporated you can still get full allowance on mortgage interest.
For now.Kudos said:
For me, I'm seriously considering going incorporated. I have a decent cash surplus every year which if I withdraw I then get hammered on tax
So if these are properties you already own, as far as I know the only way to put them in a company structure is to effectively sell them in, and at or near market value. So major stamp duty issue there, plus a capital gains whammy too. I think it's only worth considering for properties you don't already own?kev1974 said:
So if these are properties you already own, as far as I know the only way to put them in a company structure is to effectively sell them in, and at or near market value. So major stamp duty issue there, plus a capital gains whammy too. I think it's only worth considering for properties you don't already own?
No, new purchases only. DoubleSix said:
What are fellow BTLers doing ahead of the various changes that are designed to undermine the private landlord?
I'm torn. Most of my properties are prime and have good equity levels, I had some valuations in today and it's very tempting to lock in gains but this goes against my naturally long term outlook.
But if I look at whats going on globally I can't help but feel the equity markets are doing their usual canary in the coal mine/early indicator job and that combined with the chancellor's 2017 proposals make things look at a bit grim in the medium term at least. I am however not that fussed by the stamp duty shift in March, I think this is being overplayed by agents to galvanise a good start to the year for their books.
I'm also surprised how many people I speak to who own BTLs seem ignorant of how the changes are going to effect them, in fact many seemingly intelligent people I consume a pint with from time to time are totally oblivious. This again makes me think the herd is yet to really react.
These are just my chin stroking ramblings but I'm taking an exit position more seriously than I have done at any previous time. Anyone else?
How about a hybrid approach, sell some and pay down mortgages on some to keep? (Hedge against eventual rises in rates and removal of tax relief?)I'm torn. Most of my properties are prime and have good equity levels, I had some valuations in today and it's very tempting to lock in gains but this goes against my naturally long term outlook.
But if I look at whats going on globally I can't help but feel the equity markets are doing their usual canary in the coal mine/early indicator job and that combined with the chancellor's 2017 proposals make things look at a bit grim in the medium term at least. I am however not that fussed by the stamp duty shift in March, I think this is being overplayed by agents to galvanise a good start to the year for their books.
I'm also surprised how many people I speak to who own BTLs seem ignorant of how the changes are going to effect them, in fact many seemingly intelligent people I consume a pint with from time to time are totally oblivious. This again makes me think the herd is yet to really react.
These are just my chin stroking ramblings but I'm taking an exit position more seriously than I have done at any previous time. Anyone else?
Edited by DoubleSix on Saturday 30th January 23:20
I am keeping mine and adding, but i would be panicking if i was very highly leveraged, as new tax changes would hammer those with very little equity and lots of debt interest to pay.
I'm looking at purchasing on more BTL before the April change - I'm unsure as to whether I should buy it through a LTD co I have set up (but currently dormant). Or whether I should continue to purchase on a personal basis. One question I have is: what's to stop me purchasing the property as I would normally (personally) and then have my LTD co effectively manage the place - and collect the rent? The income is then going to the LTD co and not me personally.... probably a stupid question...
LDN said:
I'm looking at purchasing on more BTL before the April change - I'm unsure as to whether I should buy it through a LTD co I have set up (but currently dormant). Or whether I should continue to purchase on a personal basis. One question I have is: what's to stop me purchasing the property as I would normally (personally) and then have my LTD co effectively manage the place - and collect the rent? The income is then going to the LTD co and not me personally.... probably a stupid question...
You still, presumably, have to pay money from ltd to you personally to pay the mortgage. Probably still liable for Corp tax as well. Not sure if any benefits from doing it this way to be honest.
Kudos said:
LDN said:
I'm looking at purchasing on more BTL before the April change - I'm unsure as to whether I should buy it through a LTD co I have set up (but currently dormant). Or whether I should continue to purchase on a personal basis. One question I have is: what's to stop me purchasing the property as I would normally (personally) and then have my LTD co effectively manage the place - and collect the rent? The income is then going to the LTD co and not me personally.... probably a stupid question...
You still, presumably, have to pay money from ltd to you personally to pay the mortgage. Probably still liable for Corp tax as well. Not sure if any benefits from doing it this way to be honest.
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