BTL - Why would you ever buy for cash?

[Salgar]

Just a question, perhaps I'm missing something (I'm also not in this situation at all but was wondering)

When you see all the articles in the newspapers, and on the internet, you always see yield %ages thrown around all over the place. These yields are always calculated, imho, in a stupid way, because they're all assuming you bought the flat/house for cash.

e.g. If we're looking at a £100000 house, which is rentable for £500/month.

According to these articles the yield would be 500*12/100000 = 6%, on top of that, you have to remove tax, which, if you were at 40%, would be on the full amount (because you have no mortgage interest to offset) which brings it down to 3.6% yield.

However, if you were to mortgage it, it would look something like

rent-mortgage-(tax-taxoninterest)/deposit = 12*(500-185*-(126**))/25000 = 2268/25000 = 9.1% yield

• 3 year fixed looked up briefly on moneysupermarket

• I know the BTL tax rules are changing in april to increase the amount of tax paid

Is there anything wrong with my logic here? The only downside I see is being exposed to interest rates, but it seems like a risk worth taking (at least at the moment).

[Salgar]

Yes and no,

Even if you take the 2020 scenario, tax would increase to 200 from 126, it still has a higher yield than buying outright.

12*(500-185-200)/25000 = 1380/25000 = 5.5% yield