BTL - Staying in or shipping out?

[kev1974]

LDN said:

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.

If the property is a cash purchase though so no mortgage.... and the money stays in the LTD co account.... is there any reason why the LTD co shouldn't just collect the rent and I still buy the property personally?

You will still pay 20% corporation tax on the profits (the full rent) every year.

And surely at some point you will eventually want to get at the money that's building up in the company, and at that point you will be liable for income tax on it.

[Kudos]

supernova77 said:

What happens when the housing market crashes?

Serious question by the way...

if rental income > than outgoings, no big deal.

If not, not sure why you were doing it in the first place

[drmotorsport]

dazwalsh said:

Those landlords who rely on capital growth st themselves, and the remaining landlords snap up the cheap properties

Roll on the crash then, i've been researching starting a BTL business for 3 years while i wait for my deposit/startup funds to get in shape. Now i'm sensing a short term uplift in property prices as people dash to get in before the tax changes pushing my first business asset further out of reach. The estate agents leafleting around these parts begging for fresh stock to sell onto BTL'ers is probably not helping either!

[DoubleSix]

drmotorsport said:

dazwalsh said:

Those landlords who rely on capital growth st themselves, and the remaining landlords snap up the cheap properties

Roll on the crash then, i've been researching starting a BTL business for 3 years while i wait for my deposit/startup funds to get in shape. Now i'm sensing a short term uplift in property prices as people dash to get in before the tax changes pushing my first business asset further out of reach. The estate agents leafleting around these parts begging for fresh stock to sell onto BTL'ers is probably not helping either!

There's another thread running with people expecting/hoping for a 'crash'.

I think it's been going for some years!!

I would anticipate a 'correction' rather than a crash and suspect the meteoric rises in recent times will sheild many.

[98elise]

DoubleSix said:

drmotorsport said:

dazwalsh said:

Those landlords who rely on capital growth st themselves, and the remaining landlords snap up the cheap properties

Roll on the crash then, i've been researching starting a BTL business for 3 years while i wait for my deposit/startup funds to get in shape. Now i'm sensing a short term uplift in property prices as people dash to get in before the tax changes pushing my first business asset further out of reach. The estate agents leafleting around these parts begging for fresh stock to sell onto BTL'ers is probably not helping either!

There's another thread running with people expecting/hoping for a 'crash'.

I think it's been going for some years!!

I would anticipate a 'correction' rather than a crash and suspect the meteoric rises in recent times will sheild many.

There is a whole website/forum dedicated to it.

http://www.housepricecrash.co.uk/

If you think PH has some extreme views then its worth a read. Their view on BLT landlords would make Hitler think twice

Back in the real world I'm also of the view that there will be a correction at some point. I'm a BTL landlord and I don't think the current bubble (like the last) is good for anyone but short term speculators.

My strategy was to buy neglected but fundamentally good houses, refub them fully, then let to families long term. This was going to be my full time occupation once we got to 10 or so. I managed 4 before prices went mental again, and it made no business sense to carry on buying.

My kids are growing up and I doubt they will ever be able to afford a home at current prices.

[Casa1862]

Returns just don't seem to be there at the moment, I got in last year in the Luton/Dunstable area and my 3 bed has gone up a third and rents for £950 pm purchase price £156K, I'm happy with it. I want to add another but just can't find anything remotely worth it, this is typical of what is around, can't see much capital appreciation either, not even added the solicitors/mortgage fees yet, what's the point?

http://www.rightmove.co.uk/property-for-sale/prope...

£3144.00 75% LTV I/O Mortgage 5 yr fixed 3.65% (£262 per month)
£1280.00 Ground rent and Service charge
£400 Gas Boiler Cert/ Maintenance cover
£720 Letting fee
£250 general maintenance (travel cost etc)

£5794.00 Cost per year

Income at £575 per month inc 1 month void

£6325.00 Income per year

[Ken Figenus]

Typo on the mortgage amount? Is it £117k?

Your yield is good at 7.31% - good rent for a low value property.

[oldnbold]

Casa1862 said:

£1280.00 Ground rent and Service charge

That right there is your problem. I avoid anything leasehold, I appriciate for that money in that area you are unlikley to get a freehold house, but look a little bit north, to Notts/ Northants/ Leicestershire for example and you'll find 2 or 3 bed houses for that budget with a simular yield.

My daughter has just purchased a 2 bed detached bungalow in Notts for £114k that will rent for £600 p/m.

I'm keeping all mine by the way, still a much bigger up side for me than down.

Edited by oldnbold on Thursday 4th February 17:06

[Casa1862]

Ken Figenus said:

Typo on the mortgage amount? Is it £117k?

Your yield is good at 7.31% - good rent for a low value property.

its about £250pm for a £86k mortgage with £29k deposit . Ok, some tax relief to come off but also Mortgage fees etc, I make it about £500 per year (unless I'm doing this wrong), surly could do better with the £30K.

Also with Morgage rates looking to drop as owning becomes cheaper than renting, I'd assume the upward pressure on rents will decrease. Could do with better return than sub £1000 per year

[Casa1862]

oldnbold said:

That right there is your problem. I avoid anything leasehold, I appriciate for that money in that area you are unlikley to get a freehold house, but look a little bit north, to Notts/ Northants/ Leicestershire for example and you'll find 2 or 3 bed houses for that budget with a simular yield.

My daughter has just purchased a 2 bed detached bungalow in Notts for £114k that will rent for £600 p/m.

I'm keeping all mine by the way, still a much bigger up side for me than down.

Edited by oldnbold on Thursday 4th February 17:06

I might just look a little further, Luton/Dunstable was cheap but being quite close to London has really shot up, even Milton Keynes is way higher than only 12 months ago.
Also, look at the lease on that that property 99 years form 1989 so 70 years, not sure of renewal cost but not cheap in relation to the purchase price i would think.

[stuarthat]

Btl seem to get a lot of stick ,but I have a feeling that the council will suffer as a few people I know are selling and the council tennants have to be re housed ,obviously the house they where occuping are being sold to private buyers .

[Kudos]

Casa1862 said:

Returns just don't seem to be there at the moment, I got in last year in the Luton/Dunstable area and my 3 bed has gone up a third and rents for £950 pm purchase price £156K, I'm happy with it. I want to add another but just can't find anything remotely worth it, this is typical of what is around, can't see much capital appreciation either, not even added the solicitors/mortgage fees yet, what's the point?

http://www.rightmove.co.uk/property-for-sale/prope...

£3144.00 75% LTV I/O Mortgage 5 yr fixed 3.65% (£262 per month)
£1280.00 Ground rent and Service charge
£400 Gas Boiler Cert/ Maintenance cover
£720 Letting fee
£250 general maintenance (travel cost etc)

£5794.00 Cost per year

Income at £575 per month inc 1 month void

£6325.00 Income per year

Last year bought 3 x 2 beds for £30k a piece. Rent for £450/month. Returns are there.

[Casa1862]

Not seen anything sub £50k since 1990!

Yes, higher yields probably around ( not £450 for £30) but can't see those areas being particularly safe. Didn't even think far far up north was that cheap.

[oldnbold]

Casa1862 said:

Not seen anything sub £50k since 1990!

Yes, higher yields probably around ( not £450 for £30) but can't see those areas being particularly safe. Didn't even think far far up north was that cheap.

Quick search reveals over 1000 properties within 40 miles of Worksop, not that far north about 150 miles or say 2.5 hours from London.

http://www.rightmove.co.uk/property-for-sale/find....

Another quick search reveals that they are likley to rent for $450pm ish.


Look out side the SE bubble and you can pick up decent houses in good area's for not a lot of money.

Edited by oldnbold on Saturday 6th February 13:40

[Jon39]

There are comments about the increase in stamp duty, and possibly (although I did not notice when looking through this topic) the removal of tax relief on BTL mortgage interest.

What I did not see, was any mention of the changes in the (I think) 2014 budget, to Capital Gains Tax. It was reportedly a Liberal Democrat idea, but apart from ticking the envy box it has failed, because the Treasury received less revenue from CGT after that change. Many owners simply refused to sell, so did not become liable.

The important change was the removal of Indexation Relief. This of course means now having to paying tax on inflation. Imagine owning a BTL for the last 15 years. Cost might have been £250,000, with a value now about £1,000,000. A huge chunk of that is an inflationary increase, but even so (simplification) CGT is now based on £750,000.

With an equity ISA, you cannot have the upward magnification (if property prices rise) of BTL debt funding, but you can withdraw at any time without having to pay any CGT.

[trowelhead]

Kudos said:

Last year bought 3 x 2 beds for £30k a piece. Rent for £450/month. Returns are there.

Nice! What area?

Plenty off stuff around Manchester / Liverpool / Leeds costing around £50k that will rent for £500pcm.

There are also cheaper properties in the valleys / old mining towns in the NE that cost far less but i'm not brave enough for those!

[russ_a]

oldnbold said:

Quick search reveals over 1000 properties within 40 miles of Worksop, not that far north about 150 miles or say 2.5 hours from London.

http://www.rightmove.co.uk/property-for-sale/find....

Another quick search reveals that they are likley to rent for $450pm ish.


Look out side the SE bubble and you can pick up decent houses in good area's for not a lot of money.

Edited by oldnbold on Saturday 6th February 13:40

I don't live that far from Worksop and can confirm their isn't a bubble in this area. Prices are pretty stagnant.

[LDN]

trowelhead said:

Kudos said:

Last year bought 3 x 2 beds for £30k a piece. Rent for £450/month. Returns are there.

Nice! What area?

Plenty off stuff around Manchester / Liverpool / Leeds costing around £50k that will rent for £500pcm.

There are also cheaper properties in the valleys / old mining towns in the NE that cost far less but i'm not brave enough for those!

Anything around Manchester that's 50k and will rent for 500 pcm...... I'd love to see!

[trowelhead]

LDN said:

Anything around Manchester that's 50k and will rent for 500 pcm...... I'd love to see!

This kind of stuff:

http://www.rightmove.co.uk/property-for-sale/find....

A random example picked from above:
http://www.rightmove.co.uk/property-for-sale/prope... - on for £48k

http://www.rightmove.co.uk/property-to-rent/proper... - one on same street, let agreed at £520pcm

Edited by trowelhead on Sunday 14th February 00:14

[Sheepshanks]

trowelhead said:

A random example picked from above:
http://www.rightmove.co.uk/property-for-sale/prope... - on for £48k

http://www.rightmove.co.uk/property-to-rent/proper... - one on same street, let agreed at £520pcm

If it's such a no-brainer you have to wonder why someone hasn't snapped it up?

Mate of mine used to buy low-end stuff in Crewe but he said it's dried up now. Most changes hands without coming on the open market.