BTL as a pension fund - why not?
Discussion
edh said:
Do try and get a sense of humour - I can point at a payslip or a bank statement....
It's clear you don't understand LVT. Come back when you do and we can discuss it on another thread. Until then I can't help you. btw it has nothing to do with "stuffing barrat(sic) boxes on greenbelt".
Yeah, it was supposed to be a half assed joke of a reply ad opposed to being a bell end response. The written word has much to answer for....It's clear you don't understand LVT. Come back when you do and we can discuss it on another thread. Until then I can't help you. btw it has nothing to do with "stuffing barrat(sic) boxes on greenbelt".
LVT would have to be offset against reductions in other taxes or people will avoid further taxes.
You'll find that the vast majority of lvt proponents hope to drive the land into use, principally for house building as that produces the greatest economic utilisation per foot. Those same people expect that to drive house prices down.
Its the politics of envy again, I'm afraid. Even if some of those youngsters lobbying for it are to young to have seen the damage soaking the rich did last time, to all but the rich.
Assuming lvt is coupled with IT reductions, or replaces it entirely, you'll see a massive artificial market distortion that will progressively cripple hmrc. You can't buck the market.
LucreLout said:
Pretty much that just leaves unwillingness.
The explanation for why the young don't buy one bed flats preferring to rent nicer places IS because they aspire to more.
To more than they can afford to buy.
I'd quite like a five bed detached but can't afford it so I bought what I could afford instead.
Exactly, EVERYONE does this! Aspiration is key and given the current trajectory of the UK economy its probably not a great idea to demoralize the workforce. The explanation for why the young don't buy one bed flats preferring to rent nicer places IS because they aspire to more.
To more than they can afford to buy.
I'd quite like a five bed detached but can't afford it so I bought what I could afford instead.
Anyway, lets put the trend of housing affordability and increasing levels of credit required aside. Lets forgot that sustained stable employment is required for such debt and probably a good idea to forget about pensions for the generation in question. While we're at it lets ignore all the: economic contingent liabilities stacking up, vast amounts of capital tied up in unproductive assets (housing), and increasing concern over related issues. Forgetting all that and how it is important for a leveraged long term 'investment'.... its a great idea, buy 10.
It seems to me all forms of pension planning bar putting money in isas is somewhat of a gamble. Make your choices based on what you think is best at the time and live with it. Clearly spreading over multiple forms of investment is best, but given the choice of investing in a personal pension and in BTL, i would lean to BTL for the long term.
Wasn't that long ago that annuities were paying 10-12k per £100,000 in the pot, now its about 5k maybe? Who's to say in 20 years it won't be 10k again, great, but it might be 2.5k, its a gamble.
With regard to government taxing landlords more, maybe they will. They would have to be careful, what would the impact be, lots of 2 bed flats and houses flooding the market, pushing prices down? Who would buy them? Would banks lend people money on depreciating houses? If they wanted to use punitive CGT to fill the coffers, that is based on people selling so would raise zero if landlords are in for the long term. To be honest its a bit harsh taxing landlords more anyway, all they are trying to do is provide a retirement for themselves, isn't that what governments keep telling us we need to think about?
As for house prices crashing i'm not sure if thats in anyone's interest. Prices, even outside london, are too high in relation to wages though. I bought one in '88 in a northern town for 29k on a salary of 9k, i still have it, its worth about 120k now but young apprentices doing the same now are on about 15k, so in theory the house should be about 60k max. I think they will just gradually correct over many years. Its all guesswork though, we'd all be millionaires if we could predict the future.
Wasn't that long ago that annuities were paying 10-12k per £100,000 in the pot, now its about 5k maybe? Who's to say in 20 years it won't be 10k again, great, but it might be 2.5k, its a gamble.
With regard to government taxing landlords more, maybe they will. They would have to be careful, what would the impact be, lots of 2 bed flats and houses flooding the market, pushing prices down? Who would buy them? Would banks lend people money on depreciating houses? If they wanted to use punitive CGT to fill the coffers, that is based on people selling so would raise zero if landlords are in for the long term. To be honest its a bit harsh taxing landlords more anyway, all they are trying to do is provide a retirement for themselves, isn't that what governments keep telling us we need to think about?
As for house prices crashing i'm not sure if thats in anyone's interest. Prices, even outside london, are too high in relation to wages though. I bought one in '88 in a northern town for 29k on a salary of 9k, i still have it, its worth about 120k now but young apprentices doing the same now are on about 15k, so in theory the house should be about 60k max. I think they will just gradually correct over many years. Its all guesswork though, we'd all be millionaires if we could predict the future.
Edited by ITP on Wednesday 26th November 21:38
Eric Mc said:
What type of downward expectation should those seeking a place to live make?
A shed?
A hovel?
A barn?
A tip supplied by a rack renter?
Ten in a room?
Should we re-embrace the accommodation standards of the pre-World War 1 era where it was deemed OK for poorer families and the lower paid to live in the most appalling circumstances.
The whole way this nation views property as a "financial investment" rather than a legal right to a home really needs a major readjustment. We made this adjustment once before (around 100 years ago) and the mindset needs readjusting again.
Excuse me? "Legal right to a home". WTF do you mean? Of course everyone has a "legal right" to own a home. If not I need to find a criminal lawyer damn quick as I appear to own a home. I believe the system is that one has to be able to organise one's affairs so they can get a mortgage and buy one, Or get one free from the Council.A shed?
A hovel?
A barn?
A tip supplied by a rack renter?
Ten in a room?
Should we re-embrace the accommodation standards of the pre-World War 1 era where it was deemed OK for poorer families and the lower paid to live in the most appalling circumstances.
The whole way this nation views property as a "financial investment" rather than a legal right to a home really needs a major readjustment. We made this adjustment once before (around 100 years ago) and the mindset needs readjusting again.
Do you read The Guardian a lot?
Huntsman said:
We seem to have drifted off a bit since I asked the question, but all interesting stuff.
As a datapoint, I bought my first house in 1997 for £53k on a £14k graduate engineer salary, same house today is £160k, we're taking on engineering graduates at work at £22k. They can't do what I did by a long way.
Anyhoo, nothing in this thread screams don't do BTL. For sure, there's risks, but as as long term plan to bring in come income?
15 years ago the FTSE 100 was over 6k, but less than 7k, this year, its been over 6k, but less than 7k with a couple of massive dips along the way, suppose I invest my cash in the markets and plan to retire when a massive dip happens? I have to wait? Does look like other forms of investment are much better than BTL?
You are discounting dividends, its quite a different story if you take dividends into account.As a datapoint, I bought my first house in 1997 for £53k on a £14k graduate engineer salary, same house today is £160k, we're taking on engineering graduates at work at £22k. They can't do what I did by a long way.
Anyhoo, nothing in this thread screams don't do BTL. For sure, there's risks, but as as long term plan to bring in come income?
15 years ago the FTSE 100 was over 6k, but less than 7k, this year, its been over 6k, but less than 7k with a couple of massive dips along the way, suppose I invest my cash in the markets and plan to retire when a massive dip happens? I have to wait? Does look like other forms of investment are much better than BTL?
I'd say the chancellor this one or another one will go after pension tax relief first - that's a £50billion option to go at (no idea what say the buy to let mortgage interest tax relief could equate to but I'd wager it would be vastly less)
Point is one is not a progressive tax (pension tax relief) while the other is either income tax or company dividend tax.
Point is one is not a progressive tax (pension tax relief) while the other is either income tax or company dividend tax.
Eric Mc said:
I didn't say "legal right to OWN a home".
But I think that a civilised state should be able to ensure that its citizens can access habitable accommodation (either through owning, renting from the private sector or through state schemes).
I believe that is in the vast majority of cases the case in the uk no?But I think that a civilised state should be able to ensure that its citizens can access habitable accommodation (either through owning, renting from the private sector or through state schemes).
Ownership is however a different question.
Isn't another option to say plainly put in a deposit on a buy to let but with a repayment mortgage then gift it to your child/children if you live 7 years after gifting them then its tax free.
Why is this a good idea... You'll be giving them Inheritance while still alive for a mere deposit. What's not to like about that?
Why is this a good idea... You'll be giving them Inheritance while still alive for a mere deposit. What's not to like about that?
Welshbeef said:
I'd say the chancellor this one or another one will go after pension tax relief first - that's a £50billion option to go at (no idea what say the buy to let mortgage interest tax relief could equate to but I'd wager it would be vastly less)
The next labour chancer of the exchequer probably will abolish hrt relief. That will be very bad for the young. Why? The middle aged, like me, will cease further pension contributions and direct that wall of money at residential property.Companies will find it much harder to raise finance due to bombed out equity prices, which will depress base rates for a very long time. Those housing deposits won't be growing, but the old giffers money wave will be washing over property driving it up.
LucreLout said:
The next labour chancer of the exchequer probably will abolish hrt relief. That will be very bad for the young. Why? The middle aged, like me, will cease further pension contributions and direct that wall of money at residential property.
Companies will find it much harder to raise finance due to bombed out equity prices, which will depress base rates for a very long time. Those housing deposits won't be growing, but the old giffers money wave will be washing over property driving it up.
From what I can see for those who don't have buy to lets or are not yet on the property ladder they seem blinded by the fact that extra taxes can simply be put against those pesky landlords... Well only if they make any money from it - you might not genuinely make any profit on the revenue at all but simply be building up capital gains - now to up the tax take on capital gains its already what 28% what do they propose it goes up to? Companies will find it much harder to raise finance due to bombed out equity prices, which will depress base rates for a very long time. Those housing deposits won't be growing, but the old giffers money wave will be washing over property driving it up.
I'd actually say the big one should be to have CGT on principle residence also - why is it except? All those gains simply ignored (remember buy to let's are only a 1/5 if that of property sales v actual ownership) that alone would drastically cut down the never ending escalation of property price inflation.
Imagine those who bought a house 60 years ago for £1k say now worth £500k all that untaxed earned income - instead they would be paying what £200-250k CGT on it.
It could be an emergency measure to pay down the Govt debt but also bring back house prices /hold them at a level where people will be able to stretch to.
Watch this space
1. Higher rate pension tax relief is going
2. CGT removal from residential principle properties (also catches those evading CGT on buy to let's claiming they are not).
3. Which ever govt does these two gets voted out but the next govt will not change those as you'd be giving a tax break to millionaires
Someone earlier said that they are fed up of people talking about the house they bought for £100K now worth £200K but forgetting the fact that with purchase price, interest, Fees, SD and other things adds up to £200K anyway. Lets have a look
Purchase price £100K
Legals £1K
SD £1K
Interest @ 4%pa £58.5K
Insurance @ £250pa £6.25K
During this time you carry out 1 refurb £25K
Other odds & Sods £10K
This lot comes to £201.5K
So near enough bang on. The key is you then own it outright.
Pointless buying a BTL id the rent doesn't cover the mortgage and this is becoming more difficult.
Manage it right and it works, and holiday lets BTL are even better if managed correctly.
Me? 90% of my pension is currently bricks and mortar.
Purchase price £100K
Legals £1K
SD £1K
Interest @ 4%pa £58.5K
Insurance @ £250pa £6.25K
During this time you carry out 1 refurb £25K
Other odds & Sods £10K
This lot comes to £201.5K
So near enough bang on. The key is you then own it outright.
Pointless buying a BTL id the rent doesn't cover the mortgage and this is becoming more difficult.
Manage it right and it works, and holiday lets BTL are even better if managed correctly.
Me? 90% of my pension is currently bricks and mortar.
Sir Bagalot said:
Pointless buying a BTL id the rent doesn't cover the mortgage and this is becoming more difficult.
Not bought any BTL properties lately, selling them off as it happens, however can you actually get mortgages where the rent doesn't cover the mortgage nowdays?....Couldn't when I was buying them a few years ago.I always made sure I had min 40% deposit just in case interest rates went up...which it will again at some point I would think.
Edited by mrpurple on Wednesday 26th November 23:56
"BTL as a pension fund - why not"
Because it is an illiquid investment and there is a significant risk that a future governments will meddle with the private rented sector. If this happens it will be very difficult to exit an investment which may have ceased to be viable. In my view problems could take the following forms:
1. Increased taxation. There is no good reason for this, but that doesn't mean it won't happen.
2. Rent controls.
3. Regulation. This is the biggy and it is already starting to happen. Local authorities will eventually be able to licence all rented accommodation to ensure that landlords are providing "decent homes". That's good for everyone because it drives out the rogue landlords right? Well no. Local authorities are often ideologically opposed to private landlords and they tend to try to regulate them to far stricter standards than they work to with their own properties. Oh, and there's a licence fee as well obviously which is essentially a form of local taxation.
4. Competition from large corporations and insurance companies, perhaps in JV with local authorities. The government is falling over itself to draw pensions and insurance companies into the PRS. Volume housing built in JV with local authorities on favourable terms might make the traditional PRS a tough place to be.
Because it is an illiquid investment and there is a significant risk that a future governments will meddle with the private rented sector. If this happens it will be very difficult to exit an investment which may have ceased to be viable. In my view problems could take the following forms:
1. Increased taxation. There is no good reason for this, but that doesn't mean it won't happen.
2. Rent controls.
3. Regulation. This is the biggy and it is already starting to happen. Local authorities will eventually be able to licence all rented accommodation to ensure that landlords are providing "decent homes". That's good for everyone because it drives out the rogue landlords right? Well no. Local authorities are often ideologically opposed to private landlords and they tend to try to regulate them to far stricter standards than they work to with their own properties. Oh, and there's a licence fee as well obviously which is essentially a form of local taxation.
4. Competition from large corporations and insurance companies, perhaps in JV with local authorities. The government is falling over itself to draw pensions and insurance companies into the PRS. Volume housing built in JV with local authorities on favourable terms might make the traditional PRS a tough place to be.
LucreLout said:
Yeah, it was supposed to be a half assed joke of a reply ad opposed to being a bell end response. The written word has much to answer for....
LVT would have to be offset against reductions in other taxes or people will avoid further taxes.
You'll find that the vast majority of lvt proponents hope to drive the land into use, principally for house building as that produces the greatest economic utilisation per foot. Those same people expect that to drive house prices down.
Its the politics of envy again, I'm afraid. Even if some of those youngsters lobbying for it are to young to have seen the damage soaking the rich did last time, to all but the rich.
Assuming lvt is coupled with IT reductions, or replaces it entirely, you'll see a massive artificial market distortion that will progressively cripple hmrc. You can't buck the market.
A tax on the unimproved value of land is not designed to "soak the rich" per se but to encourage the most productive use of land. It could not be a flat rate as, for example, in many areas building is prohibited or very difficult. Combined with a rebalancing of the tax system away from income (at the very least getting rid of the 45p top rate) it makes a lot of sense in today's world.LVT would have to be offset against reductions in other taxes or people will avoid further taxes.
You'll find that the vast majority of lvt proponents hope to drive the land into use, principally for house building as that produces the greatest economic utilisation per foot. Those same people expect that to drive house prices down.
Its the politics of envy again, I'm afraid. Even if some of those youngsters lobbying for it are to young to have seen the damage soaking the rich did last time, to all but the rich.
Assuming lvt is coupled with IT reductions, or replaces it entirely, you'll see a massive artificial market distortion that will progressively cripple hmrc. You can't buck the market.
Companies may chose to base themselves in Luxemburg, people may move to Monaco, land doesn't move.
JagLover said:
LucreLout said:
Yeah, it was supposed to be a half assed joke of a reply ad opposed to being a bell end response. The written word has much to answer for....
LVT would have to be offset against reductions in other taxes or people will avoid further taxes.
You'll find that the vast majority of lvt proponents hope to drive the land into use, principally for house building as that produces the greatest economic utilisation per foot. Those same people expect that to drive house prices down.
Its the politics of envy again, I'm afraid. Even if some of those youngsters lobbying for it are to young to have seen the damage soaking the rich did last time, to all but the rich.
Assuming lvt is coupled with IT reductions, or replaces it entirely, you'll see a massive artificial market distortion that will progressively cripple hmrc. You can't buck the market.
A tax on the unimproved value of land is not designed to "soak the rich" per se but to encourage the most productive use of land. It could not be a flat rate as, for example, in many areas building is prohibited or very difficult. Combined with a rebalancing of the tax system away from income (at the very least getting rid of the 45p top rate) it makes a lot of sense in today's world.LVT would have to be offset against reductions in other taxes or people will avoid further taxes.
You'll find that the vast majority of lvt proponents hope to drive the land into use, principally for house building as that produces the greatest economic utilisation per foot. Those same people expect that to drive house prices down.
Its the politics of envy again, I'm afraid. Even if some of those youngsters lobbying for it are to young to have seen the damage soaking the rich did last time, to all but the rich.
Assuming lvt is coupled with IT reductions, or replaces it entirely, you'll see a massive artificial market distortion that will progressively cripple hmrc. You can't buck the market.
Companies may chose to base themselves in Luxemburg, people may move to Monaco, land doesn't move.
98elise said:
Why is it distasteful investing in a basic human need? What are your feelings on food, energy, clothing, water, sanitation etc.
It is not really investing. It is buying up existing assets and pushing prices out of reach of (potential) owner occupiers.I would call that hoarding, basically farming the next generation.
We can import and invest to produce more food/energy/clothing/water.
For housing, the existing owners ensure planning rules limit supply to far less than household formation rate. The government and banks also increase credit availability, the consequence is that it simply becomes more expensive.
im going to have 50k sitting aroudn doing very little in a few weeks. not sure whether to buy a 200k 1 bed in zone 3 (where im moving to) or pay down my existing mortgage (which is very affordable and only x2.5 our salary)...
decisions, decisions...we are only 29 so can ride out any dips in the market on the BTL but could also be mortgage free on our main house in 3-4 years i reckon..
decisions, decisions...we are only 29 so can ride out any dips in the market on the BTL but could also be mortgage free on our main house in 3-4 years i reckon..
ITP said:
To be honest its a bit harsh taxing landlords more anyway, all they are trying to do is provide a retirement for themselves
All the next generation are doing are trying to do is house themselves with some control over their own lives e.g. risk of eviction for any reason with 2 months notice, put up a picture without breaking a contract, periodic inspections of their home.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.
Winnners are generally the financial sector charging interest, governments taxing transactions and those who bought many years ago having the equity to leverage up.
Losers are those that work for a living but have insufficient net income to both pay rent and build up a deposit to buy an asset that is double the income ratio that the previous generation had to deal with.
Notice that the losers are generally the ones doing any work. The winners are farming the losers.
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