BTL - too late to the party?
Discussion
With all the recent changes re tax etc, with BTL mortgage acceptance now stricter and with Brexit on the horn, is it now too late to do anything meaningful re BTL? I currently have enough cash to stump up a 25% (more if necessary but I'd rather not) on a modest house or flat in my general area, and may soon have either a much bigger deposit, or a deposit for a second one.
Based solely on Rightmove prices, yields look to be c. 6.5%.
Looking at maybe a 20 year investment; who knows what house prices will do by then though!
Also, MrsC is currently not earning. I'll check with my accountant but can we push the income through her this avoiding at least income tax?
Think that's all, just jotting down the thoughts in my head.
Thanks.
Based solely on Rightmove prices, yields look to be c. 6.5%.
Looking at maybe a 20 year investment; who knows what house prices will do by then though!
Also, MrsC is currently not earning. I'll check with my accountant but can we push the income through her this avoiding at least income tax?
Think that's all, just jotting down the thoughts in my head.
Thanks.
Myles Peraua said:
With all the recent changes re tax etc, with BTL mortgage acceptance now stricter and with Brexit on the horn, is it now too late to do anything meaningful re BTL? I currently have enough cash to stump up a 25% (more if necessary but I'd rather not) on a modest house or flat in my general area, and may soon have either a much bigger deposit, or a deposit for a second one.
Based solely on Rightmove prices, yields look to be c. 6.5%.
Looking at maybe a 20 year investment; who knows what house prices will do by then though!
Also, MrsC is currently not earning. I'll check with my accountant but can we push the income through her this avoiding at least income tax?
Think that's all, just jotting down the thoughts in my head.
Thanks.
Good question and I'd also be interested to hear peoples thoughts.Based solely on Rightmove prices, yields look to be c. 6.5%.
Looking at maybe a 20 year investment; who knows what house prices will do by then though!
Also, MrsC is currently not earning. I'll check with my accountant but can we push the income through her this avoiding at least income tax?
Think that's all, just jotting down the thoughts in my head.
Thanks.
Do the sums & you will have your answer.
If you can buy cheap enough & rent high enough in a location with high demand for rental property the short answer is it's not to late. But you have to look around. Buying any old property is probably not the sure fire bet it has been with hindsight!
If you can buy cheap enough & rent high enough in a location with high demand for rental property the short answer is it's not to late. But you have to look around. Buying any old property is probably not the sure fire bet it has been with hindsight!
Obviously things are worse now given the following 3 changes:
I'd look at the north west for the best returns. London and the south east are unlikely to stack up financially.
- Changes to rules regarding offsetting mortgage interest against income tax
- Additional 3% stamp duty
- Changes to BTL mortgage stress tests
I'd look at the north west for the best returns. London and the south east are unlikely to stack up financially.
Also, depending on whether you want to have access to the rental income, it could be worth pursuing investing via a Limited Company.
Don't get caught up in the view of a lot of people that think you only need to pay corporation tax via a limited company. This is true if you don't want to extract the cash to your personal account, but if you do you'll be paying income tax as well. There are some other benefits like the £5k dividend allowance which can be useful, but your personal circumstances will dictate whether or not this is the right approach.
Don't get caught up in the view of a lot of people that think you only need to pay corporation tax via a limited company. This is true if you don't want to extract the cash to your personal account, but if you do you'll be paying income tax as well. There are some other benefits like the £5k dividend allowance which can be useful, but your personal circumstances will dictate whether or not this is the right approach.
The party hasn't stopped but a few of us have left early. I got out simply because its a pain in the arse, it really isn't as easy as it sounds (actually it is but there are caveats). You really need to go through your income benefit after tax, you then need to look at the potential capital gains liability if the house increases significantly in value. These are easy to work out. Other costs to consider are building insurance, boiler cover etc.
The not so easy things to work out is the potential stress. I've had more good than bad tenants over the years but the bad far outweigh the good in the trust (lack of) it leaves you with. Resident tenants not paying (and then written to and advise by the local authority on their rights to legally f
k the landlord over) though thankfully the law has started to redress this. The damage caused is simply staggering. I've had a few that kept things immaculate but most leave you with work that needs doing/gardens unattended etc. There are no guarantees with any tenant but you need to be absolutely able to cover loss of rent if the property is left in a st state or someone ups and leaves or just sits in and not pay.
Then there's how you find your tenants. Go direct is the best bet as agents are just leeches. The fees they charge deliver no service but are often geared to work out slightly cheaper if you use their packaged service rather than their finders service. Their checks are worthless. They offer a managed service which is little more than a call answering service, they just pass messages on to you (if you are lucky). Then there are the unscrupulous agents that take the rent but don't forward on. These can mostly be avoided but the best advice is do it yourself and get a basic contract template from RLA.
If you do go renting, do not attach yourself emotionally to your purchased property or any of the tenants. Keep them as arms length individuals that owe you money each moth but treat them as humans if stuff needs fixing. You will get sob/horror stories as to why rent may not be on time etc but treat them as any other business transaction.
If I was in your position, and I am, I would rather turn to the idea of trying some property development. Chances to make a much bigger yield but depends on your profile.
The not so easy things to work out is the potential stress. I've had more good than bad tenants over the years but the bad far outweigh the good in the trust (lack of) it leaves you with. Resident tenants not paying (and then written to and advise by the local authority on their rights to legally f
k the landlord over) though thankfully the law has started to redress this. The damage caused is simply staggering. I've had a few that kept things immaculate but most leave you with work that needs doing/gardens unattended etc. There are no guarantees with any tenant but you need to be absolutely able to cover loss of rent if the property is left in a st state or someone ups and leaves or just sits in and not pay.Then there's how you find your tenants. Go direct is the best bet as agents are just leeches. The fees they charge deliver no service but are often geared to work out slightly cheaper if you use their packaged service rather than their finders service. Their checks are worthless. They offer a managed service which is little more than a call answering service, they just pass messages on to you (if you are lucky). Then there are the unscrupulous agents that take the rent but don't forward on. These can mostly be avoided but the best advice is do it yourself and get a basic contract template from RLA.
If you do go renting, do not attach yourself emotionally to your purchased property or any of the tenants. Keep them as arms length individuals that owe you money each moth but treat them as humans if stuff needs fixing. You will get sob/horror stories as to why rent may not be on time etc but treat them as any other business transaction.
If I was in your position, and I am, I would rather turn to the idea of trying some property development. Chances to make a much bigger yield but depends on your profile.
I'm another one phasing out but I dont have a downer on it its just our main business is all consuming at the moment and I dont trust agents to look after our one remaining property.
Our mortgage man says the BTL market is still going strong people are just pricing in the additional tax.
If you are going to do it get somewhere local and manage it yourself. Do some research into the law, draw up your own contracts (the landlord forums have all this freely available) Pick your own tenants and take your time with it. You can credit reference yourself, I take bank statements, references visit them in their current place. Stuff that no agent is going to have the time to do. I have also only ever picked people I get on with on a personal level too. Never had any even slight problem in crikey just realised its about 8 years!
Our mortgage man says the BTL market is still going strong people are just pricing in the additional tax.
If you are going to do it get somewhere local and manage it yourself. Do some research into the law, draw up your own contracts (the landlord forums have all this freely available) Pick your own tenants and take your time with it. You can credit reference yourself, I take bank statements, references visit them in their current place. Stuff that no agent is going to have the time to do. I have also only ever picked people I get on with on a personal level too. Never had any even slight problem in crikey just realised its about 8 years!
Thanks all, that's all really useful and helpful input.
I'd be looking to buy this as long-term investment rather than for income. Any excess would go back into savings anyway.
I get the point about buying local, that would be ideal for me I think. Some friends have a couple of houses in the North East, the first one is up & running and is making them a frankly amazing 12% on a £45k purchase (£450pcm rent). That sort of purchase, for cash rather than mortgaged, is very attractive on the face of it, although to what extent the value of the property will rise I don't know. They are also managing it themselves so it's one hell of a schlep if anything requires them attending.
I'd be looking to buy this as long-term investment rather than for income. Any excess would go back into savings anyway.
I get the point about buying local, that would be ideal for me I think. Some friends have a couple of houses in the North East, the first one is up & running and is making them a frankly amazing 12% on a £45k purchase (£450pcm rent). That sort of purchase, for cash rather than mortgaged, is very attractive on the face of it, although to what extent the value of the property will rise I don't know. They are also managing it themselves so it's one hell of a schlep if anything requires them attending.
Myles Peraua said:
T Some friends have a couple of houses in the North East, the first one is up & running and is making them a frankly amazing 12% on a £45k purchase (£450pcm rent).
That is the headline figure, but what about the purchase and renovation costs? Were they included in the £45K. Then there are the running costs involved as well. Things like insurance, money costs (if applicable), void periods, periodic maintenance, agency fees (if using an agency) etc. also bring down that rate of return.It's not too late and not all agents are leeches find a decent one and they will take away and stress related to BTL and find you good tenants. My last 3 have stayed for 2,3 years and currently 6 months all have maintained the property at their own cost and made improvements the current couple have just asked permission to change the garden, lay a patio, plant plants etc... all out of their own pocket crack on I said.
Property has always been let within a week. It's a 3 bed semi which I understand are in high demand unlike 1 or 2 bed flats which I wouldn't touch. Likewise I wouldn't go back to students.
Good luck there are some horror stories out there but plenty who have very long term tenants looking after their homes and paying on time.
Property has always been let within a week. It's a 3 bed semi which I understand are in high demand unlike 1 or 2 bed flats which I wouldn't touch. Likewise I wouldn't go back to students.
Good luck there are some horror stories out there but plenty who have very long term tenants looking after their homes and paying on time.
crashley said:
Myles Peraua said:
Also, MrsC is currently not earning. I'll check with my accountant but can we push the income through her this avoiding at least income tax?
Thanks.
Anyone got any thoughts on this? Similar position, lack of real clarity.Thanks.
a) you may not want to do
b) may not be possible because of mortgage restrictions
c) can have Inheritance Tax Issues
d) can have Capital Gains Tax issues
It is not a simple matter of "giving" your share of the income to the other party.
Eric Mc said:
Strictly speaking, if a property is in joint names, then income derived from that property should be split equally between the two owners. If you want to ensure that only one person is taxed on all the income from the property, you have to go through proper legal channels to allow this to happen. This could involve transferring actual ownership to the other person - which
a) you may not want to do
b) may not be possible because of mortgage restrictions
c) can have Inheritance Tax Issues
d) can have Capital Gains Tax issues
It is not a simple matter of "giving" your share of the income to the other party.
As i feared, ty.a) you may not want to do
b) may not be possible because of mortgage restrictions
c) can have Inheritance Tax Issues
d) can have Capital Gains Tax issues
It is not a simple matter of "giving" your share of the income to the other party.
Eric Mc said:
The next Budget is in a couple of weeks time. Hang on until at least then to see if The Chancellor has any more Buy To Let tax shocks up his sleeve.
Agree with this but there is no harm in looking around at the market and putting offers in. There is no way the legals will be ready to exchange in time for the budget, but if there is something unexpected that makes it more attractive again watch those hoses disappear off the market...crashley said:
Eric Mc said:
Strictly speaking, if a property is in joint names, then income derived from that property should be split equally between the two owners. If you want to ensure that only one person is taxed on all the income from the property, you have to go through proper legal channels to allow this to happen. This could involve transferring actual ownership to the other person - which
a) you may not want to do
b) may not be possible because of mortgage restrictions
c) can have Inheritance Tax Issues
d) can have Capital Gains Tax issues
It is not a simple matter of "giving" your share of the income to the other party.
As i feared, ty.a) you may not want to do
b) may not be possible because of mortgage restrictions
c) can have Inheritance Tax Issues
d) can have Capital Gains Tax issues
It is not a simple matter of "giving" your share of the income to the other party.
There is only the presumption of equal equitable ownership if a Property is held as Joint Tenants.
BoRED S2upid said:
It's not too late and not all agents are leeches find a decent one and they will take away and stress related to BTL and find you good tenants. My last 3 have stayed for 2,3 years and currently 6 months all have maintained the property at their own cost and made improvements the current couple have just asked permission to change the garden, lay a patio, plant plants etc... all out of their own pocket crack on I said.
Property has always been let within a week. It's a 3 bed semi which I understand are in high demand unlike 1 or 2 bed flats which I wouldn't touch. Likewise I wouldn't go back to students.
Good luck there are some horror stories out there but plenty who have very long term tenants looking after their homes and paying on time.
exactly. We work very hard as decent letting agents. We often have to clear up the mess of other 'corporate' agents or DIY landlords. Ive been doing this for 20 odd years (Father 25 years before me) we look after at present close to 300 houses each year so that's a fek load of experience of dealing with tenants, laws & regulations each single year. We are successful because our landlords are successful we work on an ethical basis to build up long term relationships. Property has always been let within a week. It's a 3 bed semi which I understand are in high demand unlike 1 or 2 bed flats which I wouldn't touch. Likewise I wouldn't go back to students.
Good luck there are some horror stories out there but plenty who have very long term tenants looking after their homes and paying on time.
Rude-boy said:
If the Property is owned at Tenants in Common though you can redistribute the equity in the property between husband and wife for a more favourable tax position I believe.
There is only the presumption of equal equitable ownership if a Property is held as Joint Tenants.
Are you saying that you can redistribute the INCOME in any old percentage you like without any further legal amendments if the property is held as Tenants in Common?There is only the presumption of equal equitable ownership if a Property is held as Joint Tenants.
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