Buy to Let, still worth doing ?
Discussion
jonny70 said:
98elise said:
say you finance the property with a 100% IO mortgage (secured against your own home) + an offset account.
Back of the fag packet calculations, Interest @ 3%, and the yield @7%. so you are making say net 4%, pay that into the offset each month.
@40% tax you will own the property in 26 years with no money of your own invested
@0% tax (say if your partner is not working) then you will own the propery in 16 years with no money of your own invested.
Obviously thats both ends of the tax scale, so there are a lot of variables inbetween so say the average would be about 20 years.
Thats without any rent rises (which would drop the term by few years), but also no interest rate rises. It also ignores any other costs like gas certs, insurance etc. I've purposely ignored management fee's as I manage my properties myself.
If you have a deposit, or savings to put in the offset, then this will drop the term considerably.
So your own home is lets say worth 200k you have paid the mortgage off , so you do an offset and take 100k ,so you use that 100k for btl and have a 100k offset mortage on your home?Back of the fag packet calculations, Interest @ 3%, and the yield @7%. so you are making say net 4%, pay that into the offset each month.
@40% tax you will own the property in 26 years with no money of your own invested
@0% tax (say if your partner is not working) then you will own the propery in 16 years with no money of your own invested.
Obviously thats both ends of the tax scale, so there are a lot of variables inbetween so say the average would be about 20 years.
Thats without any rent rises (which would drop the term by few years), but also no interest rate rises. It also ignores any other costs like gas certs, insurance etc. I've purposely ignored management fee's as I manage my properties myself.
If you have a deposit, or savings to put in the offset, then this will drop the term considerably.
Zingari said:
I'm not too sure its all its cracked up to be. Take this example.
You can purchase a terraced house for £50k in a lot of areas (and some for less) but the rental is around £300pcm. So per year that's £3,600. Take off say £1k for insurance, repairs etc gives you £2,600 gross.
Now if you have £50k you can get 3% gross interest which give you £1,500 a year.
So you buy a house, rent it out and get a potential load of hassle for £1,100? I'm out.
It's fine if you are happy to take a bit of a risk - for example you may have many years' worth of trouble free renting, when you're getting £1000 pa for nothing, but some years you won't - but at the end of the day you will still be making more money than having it in the bank. And, after 10 years, your 50k in the bank will be worth probably 30k due to inflation, whereas your house with the same inflation applied would be worth £70k.You can purchase a terraced house for £50k in a lot of areas (and some for less) but the rental is around £300pcm. So per year that's £3,600. Take off say £1k for insurance, repairs etc gives you £2,600 gross.
Now if you have £50k you can get 3% gross interest which give you £1,500 a year.
So you buy a house, rent it out and get a potential load of hassle for £1,100? I'm out.
Zingari said:
I'm not too sure its all its cracked up to be. Take this example.
You can purchase a terraced house for £50k in a lot of areas (and some for less) but the rental is around £300pcm. So per year that's £3,600. Take off say £1k for insurance, repairs etc gives you £2,600 gross.
Now if you have £50k you can get 3% gross interest which give you £1,500 a year.
So you buy a house, rent it out and get a potential load of hassle for £1,100? I'm out.
50k property in the right area achieves 450 PCM in the N. West You can purchase a terraced house for £50k in a lot of areas (and some for less) but the rental is around £300pcm. So per year that's £3,600. Take off say £1k for insurance, repairs etc gives you £2,600 gross.
Now if you have £50k you can get 3% gross interest which give you £1,500 a year.
So you buy a house, rent it out and get a potential load of hassle for £1,100? I'm out.
Zingari said:
I'm not too sure its all its cracked up to be. Take this example.
You can purchase a terraced house for £50k in a lot of areas (and some for less) but the rental is around £300pcm. So per year that's £3,600. Take off say £1k for insurance, repairs etc gives you £2,600 gross.
Now if you have £50k you can get 3% gross interest which give you £1,500 a year.
So you buy a house, rent it out and get a potential load of hassle for £1,100? I'm out.
What if you have 10K and buy the same house with a mortgage?You can purchase a terraced house for £50k in a lot of areas (and some for less) but the rental is around £300pcm. So per year that's £3,600. Take off say £1k for insurance, repairs etc gives you £2,600 gross.
Now if you have £50k you can get 3% gross interest which give you £1,500 a year.
So you buy a house, rent it out and get a potential load of hassle for £1,100? I'm out.
http://www.rightmove.co.uk/property-for-sale/prope...
£250pcm all day long.
http://www.rightmove.co.uk/property-for-sale/prope...
£350/400pcm all day long
http://www.rightmove.co.uk/property-for-sale/prope...
£300/325 all day long.
How many would you like?
3 for 50k. Grand a month. 700 nett
£250pcm all day long.
http://www.rightmove.co.uk/property-for-sale/prope...
£350/400pcm all day long
http://www.rightmove.co.uk/property-for-sale/prope...
£300/325 all day long.
How many would you like?
3 for 50k. Grand a month. 700 nett
Edited by groak on Monday 12th November 23:31
groak said:
http://www.rightmove.co.uk/property-for-sale/prope...
£250pcm all day long.
http://www.rightmove.co.uk/property-for-sale/prope...
£350/400pcm all day long
http://www.rightmove.co.uk/property-for-sale/prope...
£300/325 all day long.
How many would you like?
3 for 50k. Grand a month. 700 nett
Mighty depressing!£250pcm all day long.
http://www.rightmove.co.uk/property-for-sale/prope...
£350/400pcm all day long
http://www.rightmove.co.uk/property-for-sale/prope...
£300/325 all day long.
How many would you like?
3 for 50k. Grand a month. 700 nett
Edited by groak on Monday 12th November 23:31
Justayellowbadge said:
Zingari said:
I'm not too sure its all its cracked up to be. Take this example.
You can purchase a terraced house for £50k in a lot of areas (and some for less) but the rental is around £300pcm. So per year that's £3,600. Take off say £1k for insurance, repairs etc gives you £2,600 gross.
Now if you have £50k you can get 3% gross interest which give you £1,500 a year.
So you buy a house, rent it out and get a potential load of hassle for £1,100? I'm out.
What if you have 10K and buy the same house with a mortgage?You can purchase a terraced house for £50k in a lot of areas (and some for less) but the rental is around £300pcm. So per year that's £3,600. Take off say £1k for insurance, repairs etc gives you £2,600 gross.
Now if you have £50k you can get 3% gross interest which give you £1,500 a year.
So you buy a house, rent it out and get a potential load of hassle for £1,100? I'm out.
They come at a greater risk though, so need proper management.
Mbetts said:
groak said:
http://www.rightmove.co.uk/property-for-sale/prope...
£250pcm all day long.
http://www.rightmove.co.uk/property-for-sale/prope...
£350/400pcm all day long
http://www.rightmove.co.uk/property-for-sale/prope...
£300/325 all day long.
How many would you like?
3 for 50k. Grand a month. 700 nett
Mighty depressing!£250pcm all day long.
http://www.rightmove.co.uk/property-for-sale/prope...
£350/400pcm all day long
http://www.rightmove.co.uk/property-for-sale/prope...
£300/325 all day long.
How many would you like?
3 for 50k. Grand a month. 700 nett
Zingari said:
I'm not too sure its all its cracked up to be. Take this example.
You can purchase a terraced house for £50k in a lot of areas (and some for less) but the rental is around £300pcm. So per year that's £3,600. Take off say £1k for insurance, repairs etc gives you £2,600 gross.
Now if you have £50k you can get 3% gross interest which give you £1,500 a year.
So you buy a house, rent it out and get a potential load of hassle for £1,100? I'm out.
Many people would calculate their return based on the cash used though. So with a £50k house, I have a £30k mortgage which costs me £1200 a year. Assume £1000 costs and £300 a month rent, this gives me £1400 a year. That's a 7% return on my £20k, which isn't bad at all. If the rent can be as high as £400 a month, my return increases to 13%. surely this a more realistic method of calculating the return?You can purchase a terraced house for £50k in a lot of areas (and some for less) but the rental is around £300pcm. So per year that's £3,600. Take off say £1k for insurance, repairs etc gives you £2,600 gross.
Now if you have £50k you can get 3% gross interest which give you £1,500 a year.
So you buy a house, rent it out and get a potential load of hassle for £1,100? I'm out.
clarkey said:
Many people would calculate their return based on the cash used though. So with a £50k house, I have a £30k mortgage which costs me £1200 a year. Assume £1000 costs and £300 a month rent, this gives me £1400 a year. That's a 7% return on my £20k, which isn't bad at all. If the rent can be as high as £400 a month, my return increases to 13%. surely this a more realistic method of calculating the return?
I agree a much better method than using the normal yeild calculation. Mine are giving me about 15% net after tax.98elise said:
megaphone said:
BoRED S2upid said:
98elise said:
then the best way is to remortgage your own home on an offset interest only mortgage.
You can still offset the interest against tax.
Really? I didn't know that. So he can remortgage his own house to buy the BTL and still reduce the tax he pays on the BTL by offsetting the mortgage on his home? I thought it was only the interest on the mortgage payments on the BTL that were allowed? You can still offset the interest against tax.
Edited by 98elise on Monday 5th November 13:02
You never lose access to the money, so if you decide to buy the next property, you have a deposit on tap.
And if that is legal by saying it is for the BTL property, then it can't be a cash deal can it?
oyster said:
Is it legal to offset interest for tax on a mortgage based not on a business asset? Have you had that clarified by either a tax accountant or HMRC?
And if that is legal by saying it is for the BTL property, then it can't be a cash deal can it?
If the purpose of the loan is to buy the BTL, its allowable, had this confirmed by an accountant - best if you have an audit trail showing the money coming in, then all being used to pay for the property (no diversion of any of it into new cars etc )And if that is legal by saying it is for the BTL property, then it can't be a cash deal can it?
Edited by Burrow01 on Thursday 15th November 14:09
oyster said:
Is it legal to offset interest for tax on a mortgage based not on a business asset? Have you had that clarified by either a tax accountant or HMRC?
And if that is legal by saying it is for the BTL property, then it can't be a cash deal can it?
Yes it's legal. The mortgage doesn't actually have to be secured against the rental property.And if that is legal by saying it is for the BTL property, then it can't be a cash deal can it?
oyster said:
98elise said:
megaphone said:
BoRED S2upid said:
98elise said:
then the best way is to remortgage your own home on an offset interest only mortgage.
You can still offset the interest against tax.
Really? I didn't know that. So he can remortgage his own house to buy the BTL and still reduce the tax he pays on the BTL by offsetting the mortgage on his home? I thought it was only the interest on the mortgage payments on the BTL that were allowed? You can still offset the interest against tax.
Edited by 98elise on Monday 5th November 13:02
You never lose access to the money, so if you decide to buy the next property, you have a deposit on tap.
And if that is legal by saying it is for the BTL property, then it can't be a cash deal can it?
With regard to the cash deal, did you mean for the BTL purchase? If so it will be a cash deal if you organise the mortgage first. You raise the morrgage on your own home, so you can do this before you find the BTL. That way you are ready to purchase cash when you find the right property. You don't need a survey or a valuation etc, and you have the cash in your bank account. To the seller and agent you are a cash buyer, which puts you in a strong position.
groak said:
http://www.rightmove.co.uk/property-for-sale/prope...
£250pcm all day long.
http://www.rightmove.co.uk/property-for-sale/prope...
£350/400pcm all day long
http://www.rightmove.co.uk/property-for-sale/prope...
£300/325 all day long.
How many would you like?
3 for 50k. Grand a month. 700 nett
But that doesn't include any idea of costs of getting them ready for rent. £250pcm all day long.
http://www.rightmove.co.uk/property-for-sale/prope...
£350/400pcm all day long
http://www.rightmove.co.uk/property-for-sale/prope...
£300/325 all day long.
How many would you like?
3 for 50k. Grand a month. 700 nett
Edited by groak on Monday 12th November 23:31
Zingari said:
I'm not too sure its all its cracked up to be. Take this example.
You can purchase a terraced house for £50k in a lot of areas (and some for less) but the rental is around £300pcm. So per year that's £3,600. Take off say £1k for insurance, repairs etc gives you £2,600 gross.
Now if you have £50k you can get 3% gross interest which give you £1,500 a year.
So you buy a house, rent it out and get a potential load of hassle for £1,100? I'm out.
Some people will argue that:You can purchase a terraced house for £50k in a lot of areas (and some for less) but the rental is around £300pcm. So per year that's £3,600. Take off say £1k for insurance, repairs etc gives you £2,600 gross.
Now if you have £50k you can get 3% gross interest which give you £1,500 a year.
So you buy a house, rent it out and get a potential load of hassle for £1,100? I'm out.
A) you'd get higher rent than the numbers you quote
B) you get capital appreciation on the property
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