My buy to let business the beginning
Discussion
sgrimshaw said:
Defcon5 said:
What does the agent do for their £50 a month?
I pay a similar amount (11%) for Full Management, these are the bullet points of what they do:- Fully advertise the property on the lettings market
- Reference prospective tenants upon application approval
- Prepare legal documentation
- Notify service companies of user change
- Prepare inventory & schedule of condition
- Monitor monthly rent for landlord’s account
- Visit and report on property condition on a regular basis
- Arrange repairs and maintenance on instruction
- Undertake a termination check at the end of the tenancy
- Arrange deposit resolution and release
In 20 years I've never seen one of my tenants, everything goes through the Agent.
If any maintenance issues arise costing more than the pre-approved limit I get a phone call from the Agent asking if I want them to proceed or if I want to arrange the work myself.
11% might sound a lot, but if you don't want to be "hand on" IMO it's worth it.
Hoofy said:
What happens when the tenant stops paying and decides to put a hole in every door and wall for a laugh?
At that point you firstly congratulate yourself on having the foresight to have purchased comprehensive landlords insurance and then instruct the Agent to commence proceedings to get them out.I've been fortunate not to have been in this situation, or is it down to the fact that the Agents have always found me good tenants. I rather think it is the latter.
sgrimshaw said:
Or use a Ltd company.
So pay corporation tax and income tax? And the stamp duty surcharge? And higher mortgage rates? Recommending using a limited company for resi BTL is risky, it doesn’t fit most situations.
It’s perfect for commercial investments, provided you have a good accountant who can get around the fact you are being taxed twice.
To add to the above for the original poster, if you haven’t spoken to an accountant then it’s worth doing so to explore all of these options. Depending on your long term plans and if you would rather reinvest to build up a big asset base, or would rather enjoy the additional income now, then the best way to set things up differs a lot.
One bit of advice I’d give is to find an accountant that also invests in property so they are up to date with the laws and tax changes. That’s the mistake I made years ago, using an accountant that couldn’t really advise on this stuff as he wasn’t very knowledgeable on the subject. And BTL rules are changing every year at the moment.
One bit of advice I’d give is to find an accountant that also invests in property so they are up to date with the laws and tax changes. That’s the mistake I made years ago, using an accountant that couldn’t really advise on this stuff as he wasn’t very knowledgeable on the subject. And BTL rules are changing every year at the moment.
sgrimshaw said:
Conceptualy, mostly everything 
The only thing which has changed is the treatment of mortgage interest.
No longer a deductible expense, been replaced by a tax credit (20%).
Fair enough. I didn’t look into the other expenses as 80% of my costs are mortgage interest so it hits me hard. I haven’t bought a new residential property for years because as soon as this law changed I planned on selling up and putting it all into commercial anyway, which is a plan I’m half way into. The only thing which has changed is the treatment of mortgage interest.
No longer a deductible expense, been replaced by a tax credit (20%).
Dick Dastardly said:
Recommending using a limited company for resi BTL is risky, it doesn’t fit most situations.
It’s perfect for commercial investments, provided you have a good accountant who can get around the fact you are being taxed twice.
Wasn't recommending, it is an option though. It’s perfect for commercial investments, provided you have a good accountant who can get around the fact you are being taxed twice.
sgrimshaw said:
Hoofy said:
What happens when the tenant stops paying and decides to put a hole in every door and wall for a laugh?
At that point you firstly congratulate yourself on having the foresight to have purchased comprehensive landlords insurance and then instruct the Agent to commence proceedings to get them out.I've been fortunate not to have been in this situation, or is it down to the fact that the Agents have always found me good tenants. I rather think it is the latter.
I only wrote the above because I know someone who had that happen to them and the agent just left the landlord to it!
Dick Dastardly said:
To add to the above for the original poster, if you haven’t spoken to an accountant then it’s worth doing so to explore all of these options. Depending on your long term plans and if you would rather reinvest to build up a big asset base, or would rather enjoy the additional income now, then the best way to set things up differs a lot.
One bit of advice I’d give is to find an accountant that also invests in property so they are up to date with the laws and tax changes. That’s the mistake I made years ago, using an accountant that couldn’t really advise on this stuff as he wasn’t very knowledgeable on the subject. And BTL rules are changing every year at the moment.
This is what gets me. A lot of posters on PH are BTL owners and make out it's so easy and straightforward but surely there are a lot of hurdles to overcome with ever changing rules as the tax man needs to find more revenue and society is trying ever harder to protect the tenant.One bit of advice I’d give is to find an accountant that also invests in property so they are up to date with the laws and tax changes. That’s the mistake I made years ago, using an accountant that couldn’t really advise on this stuff as he wasn’t very knowledgeable on the subject. And BTL rules are changing every year at the moment.
leef44 said:
This is what gets me. A lot of posters on PH are BTL owners and make out it's so easy and straightforward but surely there are a lot of hurdles to overcome with ever changing rules as the tax man needs to find more revenue and society is trying ever harder to protect the tenant.
I personally wouldn't do it without a Full Management Service.leef44 said:
This is what gets me. A lot of posters on PH are BTL owners and make out it's so easy and straightforward but surely there are a lot of hurdles to overcome with ever changing rules as the tax man needs to find more revenue and society is trying ever harder to protect the tenant.
The rules don’t change that often regarding tax and it’s a very simple business to operate especially if fully managed. I haven’t spoken to my tenants ever or my management agent in 12 months I presume the house is still standing the money is still arriving. Buy2Let PJ said:
Unfortunately the letting agent did see me coming and while I was busy negotiating the monthly fee down he was adding stuff to the setup charges and I didn’t realise what was going on. It’s fair to say in that negotiation I definitely came second.
Out of interest, what did you get tucked up on and to what extent?leef44 said:
Dick Dastardly said:
To add to the above for the original poster, if you haven’t spoken to an accountant then it’s worth doing so to explore all of these options. Depending on your long term plans and if you would rather reinvest to build up a big asset base, or would rather enjoy the additional income now, then the best way to set things up differs a lot.
One bit of advice I’d give is to find an accountant that also invests in property so they are up to date with the laws and tax changes. That’s the mistake I made years ago, using an accountant that couldn’t really advise on this stuff as he wasn’t very knowledgeable on the subject. And BTL rules are changing every year at the moment.
This is what gets me. A lot of posters on PH are BTL owners and make out it's so easy and straightforward but surely there are a lot of hurdles to overcome with ever changing rules as the tax man needs to find more revenue and society is trying ever harder to protect the tenant.One bit of advice I’d give is to find an accountant that also invests in property so they are up to date with the laws and tax changes. That’s the mistake I made years ago, using an accountant that couldn’t really advise on this stuff as he wasn’t very knowledgeable on the subject. And BTL rules are changing every year at the moment.
Edited by 98elise on Monday 21st September 13:22
One question I have often asked, is what is the ROI on my BTL property?
For example, one of my BTL properties:
Income (after agents fees) = £18k
Mortgage costs = £3k
Maintenance/Insurance annual = £3k average
Personal Tax = £6k (40% of £15k)
Annual profit = £6k
Initial investment (deposit/SD/legals) = £45k
Initial cost of house = £190k
Value of house now = £330k
ROI's
ROI on initial £45k investment = 13%
ROI on initial value of house = 3%
ROI on value of house now = 2%
Clearly, whilst the annual income is important for me, the capital growth has been good over the 15 years I have owned the property (plus 3 others in same area). So when people ask what ROI are you achieving, which figure should I be giving? What is the normal? In my mind, I have put £45k down, so it is the 13%, but that seems well out of kilter with the normal 4 - 5 % being achieved?!
Edited to add, it shows how unattractive BTL can be now though, with the current property value, risk of minimal capital growth and returns! Glad I bought mine 15 years ago.
For example, one of my BTL properties:
Income (after agents fees) = £18k
Mortgage costs = £3k
Maintenance/Insurance annual = £3k average
Personal Tax = £6k (40% of £15k)
Annual profit = £6k
Initial investment (deposit/SD/legals) = £45k
Initial cost of house = £190k
Value of house now = £330k
ROI's
ROI on initial £45k investment = 13%
ROI on initial value of house = 3%
ROI on value of house now = 2%
Clearly, whilst the annual income is important for me, the capital growth has been good over the 15 years I have owned the property (plus 3 others in same area). So when people ask what ROI are you achieving, which figure should I be giving? What is the normal? In my mind, I have put £45k down, so it is the 13%, but that seems well out of kilter with the normal 4 - 5 % being achieved?!
Edited to add, it shows how unattractive BTL can be now though, with the current property value, risk of minimal capital growth and returns! Glad I bought mine 15 years ago.
Edited by alfabeat on Monday 21st September 12:35
Dick Dastardly said:
So pay corporation tax and income tax? And the stamp duty surcharge? And higher mortgage rates?
Recommending using a limited company for resi BTL is risky, it doesn’t fit most situations.
It’s perfect for commercial investments, provided you have a good accountant who can get around the fact you are being taxed twice.
An individual still pays the extra stamp duty. It applies to every domestic property purchase that is not your main residence that you already own.Recommending using a limited company for resi BTL is risky, it doesn’t fit most situations.
It’s perfect for commercial investments, provided you have a good accountant who can get around the fact you are being taxed twice.
alfabeat said:
One question I have often asked, is what is the ROI on my BTL property?
For example, one of my BTL properties:
Income (after agents fees) = £18k
Mortgage costs = £3k
Maintenance/Insurance annual = £3k average
Personal Tax = £6k (40% of £15k)
Annual profit = £6k
Initial investment (deposit/SD/legals) = £45k
Initial cost of house = £190k
Value of house now = £330k
ROI's
ROI on initial £45k investment = 13%
ROI on initial value of house = 3%
ROI on value of house now = 2%
Clearly, whilst the annual income is important for me, the capital growth has been good over the 15 years I have owned the property (plus 3 others in same area). So when people ask what ROI are you achieving, which figure should I be giving? What is the normal? In my mind, I have put £45k down, so it is the 13%, but that seems well out of kilter with the normal 4 - 5 % being achieved?!
Edited to add, it shows how unattractive BTL can be now though, with the current property value, risk of minimal capital growth and returns! Glad I bought mine 15 years ago.
It could be wise to look at it based on the actual real money you have sat in the house(S). For example, one of my BTL properties:
Income (after agents fees) = £18k
Mortgage costs = £3k
Maintenance/Insurance annual = £3k average
Personal Tax = £6k (40% of £15k)
Annual profit = £6k
Initial investment (deposit/SD/legals) = £45k
Initial cost of house = £190k
Value of house now = £330k
ROI's
ROI on initial £45k investment = 13%
ROI on initial value of house = 3%
ROI on value of house now = 2%
Clearly, whilst the annual income is important for me, the capital growth has been good over the 15 years I have owned the property (plus 3 others in same area). So when people ask what ROI are you achieving, which figure should I be giving? What is the normal? In my mind, I have put £45k down, so it is the 13%, but that seems well out of kilter with the normal 4 - 5 % being achieved?!
Edited to add, it shows how unattractive BTL can be now though, with the current property value, risk of minimal capital growth and returns! Glad I bought mine 15 years ago.
Edited by alfabeat on Monday 21st September 12:35
What’s your total equity....the amount you’d walk away with if you sold up and paid the mortgage off and the CGT bill etc.
That figure is what’s important as that is your real “investment” now.
So if you sold the property and walked away with £200k, the £6k annual profit on that would mean you currently make a 3% ROI.
That’s the way I started to look at mine, and it made me decide to sell up. BTL is done, more so in the more affluent areas like London, Cambridge.
I figured (pre Covid) that the cash I would walk away with after selling a house, would make a better return in stocks and shares, with £20k put into mine and my wife’s ISAs each year, negating any future CGT.
I also cleaned out one too many blocked sewer and gritty toilet. Not to mention being Curry’s best customer of washing machines and fridge freezers. Full management takes too big a slice of the NET profit, so doing it yourself is the best answer, but doing it yourself sucks big time.
The new rules, tighter eviction restrictions, new electrical regulations and other red tape, has killed it off.
Mr Noble said:
It could be wise to look at it based on the actual real money you have sat in the house(S).
What’s your total equity....the amount you’d walk away with if you sold up and paid the mortgage off and the CGT bill etc.
That figure is what’s important as that is your real “investment” now.
So if you sold the property and walked away with £200k, the £6k annual profit on that would mean you currently make a 3% ROI.
That’s the way I started to look at mine, and it made me decide to sell up. BTL is done, more so in the more affluent areas like London, Cambridge.
I figured (pre Covid) that the cash I would walk away with after selling a house, would make a better return in stocks and shares, with £20k put into mine and my wife’s ISAs each year, negating any future CGT.
I also cleaned out one too many blocked sewer and gritty toilet. Not to mention being Curry’s best customer of washing machines and fridge freezers. Full management takes too big a slice of the NET profit, so doing it yourself is the best answer, but doing it yourself sucks big time.
The new rules, tighter eviction restrictions, new electrical regulations and other red tape, has killed it off.
Ahh yes, good point, that makes sense. Thanks. I have 4 student lets, and im thinking ive had enough after 15 years (self managed). What’s your total equity....the amount you’d walk away with if you sold up and paid the mortgage off and the CGT bill etc.
That figure is what’s important as that is your real “investment” now.
So if you sold the property and walked away with £200k, the £6k annual profit on that would mean you currently make a 3% ROI.
That’s the way I started to look at mine, and it made me decide to sell up. BTL is done, more so in the more affluent areas like London, Cambridge.
I figured (pre Covid) that the cash I would walk away with after selling a house, would make a better return in stocks and shares, with £20k put into mine and my wife’s ISAs each year, negating any future CGT.
I also cleaned out one too many blocked sewer and gritty toilet. Not to mention being Curry’s best customer of washing machines and fridge freezers. Full management takes too big a slice of the NET profit, so doing it yourself is the best answer, but doing it yourself sucks big time.
The new rules, tighter eviction restrictions, new electrical regulations and other red tape, has killed it off.
Off today (2.5 hour drive) to sort out jobs, incl a trip to Currys of course 😂
BoRED S2upid said:
leef44 said:
This is what gets me. A lot of posters on PH are BTL owners and make out it's so easy and straightforward but surely there are a lot of hurdles to overcome with ever changing rules as the tax man needs to find more revenue and society is trying ever harder to protect the tenant.
The rules don’t change that often regarding tax and it’s a very simple business to operate especially if fully managed. I haven’t spoken to my tenants ever or my management agent in 12 months I presume the house is still standing the money is still arriving. sgrimshaw said:
I personally wouldn't do it without a Full Management Service.
Can it really be that straightforward? 
What percentage management fees do you pay?sgrimshaw said:
Hoofy said:
What happens when the tenant stops paying and decides to put a hole in every door and wall for a laugh?
At that point you firstly congratulate yourself on having the foresight to have purchased comprehensive landlords insurance and then instruct the Agent to commence proceedings to get them out.I've been fortunate not to have been in this situation, or is it down to the fact that the Agents have always found me good tenants. I rather think it is the latter.
AlexC1981 said:
sgrimshaw said:
Hoofy said:
What happens when the tenant stops paying and decides to put a hole in every door and wall for a laugh?
At that point you firstly congratulate yourself on having the foresight to have purchased comprehensive landlords insurance and then instruct the Agent to commence proceedings to get them out.I've been fortunate not to have been in this situation, or is it down to the fact that the Agents have always found me good tenants. I rather think it is the latter.
I deal with students, and up until this year, for obvious reasons, it has been great. Never been out of pocket rent wise (ok, sometimes a little late), and generally keep the house in the condition they took it on. Thats across 4 houses over 15 years. I like students. Generally always polite, and good tenants. If not, then they are gone in the year so not a major drama.
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