Buy to let and rental amounts
Discussion
So the banks are changing/changed their buy to let criteria, lower LTV of 60%? and a 145% return on borrowing... I've just experienced this first hand, and I feel this is going to be the end of the normal buy to let and mainly a cash buyers market, OR rental prices are going to sky rocket to keep the average Joe in the game... my experience below:
Property value £450k.. mortgage of £230k required for re-mortgage purposes, so LTV about 50% which is ok.. but I need a rental income of £1440 to get the mortgage, luckily in Oxford this is pretty normal, but in other areas this is not going to be achievable... I await a deluge of properties hitting the market in the coming years due to people not be able to re-mortgage, OR rental prices increasing to be able to keep these properties in the hands of buy to letters.
Property value £450k.. mortgage of £230k required for re-mortgage purposes, so LTV about 50% which is ok.. but I need a rental income of £1440 to get the mortgage, luckily in Oxford this is pretty normal, but in other areas this is not going to be achievable... I await a deluge of properties hitting the market in the coming years due to people not be able to re-mortgage, OR rental prices increasing to be able to keep these properties in the hands of buy to letters.
Ozzie Osmond said:
Gregmitchell said:
Property value £450k..
.. but I need a rental income of £1,440 to get the mortgage,
This sounds like a business project based around a GROSS rental return of 3.84% if everything goes well. The actual NET return (after inevitable costs, including the mortgage interest, and tax) will be much lower and any wobbles could throw it miles off course... but I need a rental income of £1,440 to get the mortgage,
Seriously, is this considered a viable business project?
Ozzie Osmond said:
10% compound for seven years on a property now worth £450k suggests you bought for £250k - nice return.
You now have £450k of assets and will be looking for a return on those assets. After costs and tax the rental will roughly break-even and this project is a punt on property prices (fair enough) as opposed to a rental business. For many people this can still make sense so long as they don't need any actual cash income from the project.
Regarding the punt on capital value, bear in mind that capital gains on BTL properties are taxed at 28% as opposed to the standard CGT rate of 20%. On the other hand you don't need to pay any CGT unless and until you sell. For the time being you can hopefully achieve further capital growth on that latent tax.
Yup! I'm a charted accountant btw :-) but totally agree, I've weighed up many options, its still not the right time to sell any of the portfolio yet imo.You now have £450k of assets and will be looking for a return on those assets. After costs and tax the rental will roughly break-even and this project is a punt on property prices (fair enough) as opposed to a rental business. For many people this can still make sense so long as they don't need any actual cash income from the project.
Regarding the punt on capital value, bear in mind that capital gains on BTL properties are taxed at 28% as opposed to the standard CGT rate of 20%. On the other hand you don't need to pay any CGT unless and until you sell. For the time being you can hopefully achieve further capital growth on that latent tax.
Ozzie Osmond said:
10% compound for seven years on a property now worth £450k suggests you bought for £250k - nice return.
You now have £450k of assets and will be looking for a return on those assets. After costs and tax the rental will roughly break-even and this project is a punt on property prices (fair enough) as opposed to a rental business. For many people this can still make sense so long as they don't need any actual cash income from the project.
Regarding the punt on capital value, bear in mind that capital gains on BTL properties are taxed at 28% as opposed to the standard CGT rate of 20%. On the other hand you don't need to pay any CGT unless and until you sell. For the time being you can hopefully achieve further capital growth on that latent tax.
Yup! I'm a charted accountant btw :-) but totally agree, I've weighed up many options, its still not the right time to sell any of the portfolio yet imo.You now have £450k of assets and will be looking for a return on those assets. After costs and tax the rental will roughly break-even and this project is a punt on property prices (fair enough) as opposed to a rental business. For many people this can still make sense so long as they don't need any actual cash income from the project.
Regarding the punt on capital value, bear in mind that capital gains on BTL properties are taxed at 28% as opposed to the standard CGT rate of 20%. On the other hand you don't need to pay any CGT unless and until you sell. For the time being you can hopefully achieve further capital growth on that latent tax.
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