Discussion
Don’t understand the school of thought that
“ but the bulk of the money injected to paying off the mortgages is down by the tenant”
Any money spent paying down the mortgage is *your* money (return on capital), not the tenants.
You’ve paid tax on that income to pay down the mortgage. It’s not “the tenants money”.
(I have no issue with BTL / or people paying down the mortgage on BTL - I just dislike the notion it’s not your money. It is)
“ but the bulk of the money injected to paying off the mortgages is down by the tenant”
Any money spent paying down the mortgage is *your* money (return on capital), not the tenants.
You’ve paid tax on that income to pay down the mortgage. It’s not “the tenants money”.
(I have no issue with BTL / or people paying down the mortgage on BTL - I just dislike the notion it’s not your money. It is)
thekingisdead said:
Don’t understand the school of thought that
“ but the bulk of the money injected to paying off the mortgages is down by the tenant”
Any money spent paying down the mortgage is *your* money (return on capital), not the tenants.
You’ve paid tax on that income to pay down the mortgage. It’s not “the tenants money”.
(I have no issue with BTL / or people paying down the mortgage on BTL - I just dislike the notion it’s not your money. It is)
What about if use the banks money to pay for it? A friend has several BTLs he buys them under market value then remortgages and takes his money back out so effectively he has none of his own cash tied up in the property. Has many on interest only mortgages too the difference between the mortgage and the rent can be 80% “ but the bulk of the money injected to paying off the mortgages is down by the tenant”
Any money spent paying down the mortgage is *your* money (return on capital), not the tenants.
You’ve paid tax on that income to pay down the mortgage. It’s not “the tenants money”.
(I have no issue with BTL / or people paying down the mortgage on BTL - I just dislike the notion it’s not your money. It is)
Phooey said:
Pretty much the same thinking as me.
I'm not interested in HMOs or student/multi let properties. I was thinking along the lines of 3 bedroom modern semi-detached houses (seem more of a shortage over 2 beds) for approx 230k each. Rent will be approx £900/mth give or take. LTV them at approx 50-60% over 15yrs - repayment. Tennant is paying the mortgage effectively. Rinse and repeat x 4or5 = £40-50k/yr pension. Something for hopefully my daughter to inherit.
Ideally I would want to see a tax specialist who can advise whether the above^^ would be better to put into a Ltd co (SPV?) or not.
In theory should be simple, but because the gov don't like BTL, it needs to be set up correctly from day 1.
If you’re going down that route, do your sums carefully!I'm not interested in HMOs or student/multi let properties. I was thinking along the lines of 3 bedroom modern semi-detached houses (seem more of a shortage over 2 beds) for approx 230k each. Rent will be approx £900/mth give or take. LTV them at approx 50-60% over 15yrs - repayment. Tennant is paying the mortgage effectively. Rinse and repeat x 4or5 = £40-50k/yr pension. Something for hopefully my daughter to inherit.
Ideally I would want to see a tax specialist who can advise whether the above^^ would be better to put into a Ltd co (SPV?) or not.
In theory should be simple, but because the gov don't like BTL, it needs to be set up correctly from day 1.
Cost of setting up a structure may not be low, and running a ltd structure isn’t free. Transaction costs will eat most of your first year’s income from each property you add. Ltd mortgages won’t be cheap either, if you can get one. Managing to get all that done in a way that works for inheritance is even harder (= more expensive)... but is possible.
Onetrackmind said:
I’m about to pick up a 2/3 bed BTL house. The plan is to pick up a few more and eventually use them as a pension.
I’ve looked at the stock market and, at one point, was going to go down the road of using low-cost indexes as a pension to amass a sum to live off when I retire. It seems the returns from indexes will be higher than BTL, however, I would have to add monthly deposits to these indexes over a much longer period of time to reach my goal.
If I go for say 4 BTL properties, once the deposits are saved, the tenants are effectively paying off the mortgage so I won’t need to add monthly deposits to reach the goal. Of course, there will be repairs and vacant periods, but the bulk of the money injected to paying off the mortgages is down by the tenant.
I don’t really intend to profit off these for 15-20 years, but once I get to that point, the rental incomes, combined with some pensions should be a decent retirement income. At least that’s the plan.
Note the ever-increasing difficulty in removing bad tenants- the government is no imposing a 6 month notice period. That's a long time to wait with no income from a property that the tenant might well be trashing. Also note the way the goalposts are moved with almost zero notice & no thought to consequences.I’ve looked at the stock market and, at one point, was going to go down the road of using low-cost indexes as a pension to amass a sum to live off when I retire. It seems the returns from indexes will be higher than BTL, however, I would have to add monthly deposits to these indexes over a much longer period of time to reach my goal.
If I go for say 4 BTL properties, once the deposits are saved, the tenants are effectively paying off the mortgage so I won’t need to add monthly deposits to reach the goal. Of course, there will be repairs and vacant periods, but the bulk of the money injected to paying off the mortgages is down by the tenant.
I don’t really intend to profit off these for 15-20 years, but once I get to that point, the rental incomes, combined with some pensions should be a decent retirement income. At least that’s the plan.
“ What about if use the banks money to pay for it? A friend has several BTLs he buys them under market value then remortgages and takes his money back out so effectively he has none of his own cash tied up in the property. Has many on interest only mortgages too the difference between the mortgage and the rent can be 80%”
It’s his money. That debt will always have to be repaid.
He is using the bank to release *his* capital from an illiquid asset. For which they charge interest.
It’s still his money he receiving, even if it’s been earned through an appreciating asset not through compensation for work.
I’m amazed people can view this as “not my money”
It’s his money. That debt will always have to be repaid.
He is using the bank to release *his* capital from an illiquid asset. For which they charge interest.
It’s still his money he receiving, even if it’s been earned through an appreciating asset not through compensation for work.
I’m amazed people can view this as “not my money”
LooneyTunes said:
If you’re going down that route, do your sums carefully!
Cost of setting up a structure may not be low, and running a ltd structure isn’t free. Transaction costs will eat most of your first year’s income from each property you add. Ltd mortgages won’t be cheap either, if you can get one. Managing to get all that done in a way that works for inheritance is even harder (= more expensive)... but is possible.
Yes, would need to sit down with someone who knows this stuff inside out. I appreciate the game has changed significantly (for the worse) in the UK, I'm just mindful it's going to change again. But at the end of the day - there's always going to be demand for rented property - so you'd think (hope!) the gov don't tip the scales too far that it backfires on them.Cost of setting up a structure may not be low, and running a ltd structure isn’t free. Transaction costs will eat most of your first year’s income from each property you add. Ltd mortgages won’t be cheap either, if you can get one. Managing to get all that done in a way that works for inheritance is even harder (= more expensive)... but is possible.
thekingisdead said:
“ What about if use the banks money to pay for it? A friend has several BTLs he buys them under market value then remortgages and takes his money back out so effectively he has none of his own cash tied up in the property. Has many on interest only mortgages too the difference between the mortgage and the rent can be 80%”
It’s his money. That debt will always have to be repaid.
He is using the bank to release *his* capital from an illiquid asset. For which they charge interest.
It’s still his money he receiving, even if it’s been earned through an appreciating asset not through compensation for work.
I’m amazed people can view this as “not my money”
Thats essentially how ive done it, IO mortgages, the payments are usually sub 20% of the gross rent, repeating the remortgage process every 5 years on a lower LTV and the rate gets better each time. in 20 years i reckon for each 1 house i sell i should be able to pay off 3 or 4 mortgages.It’s his money. That debt will always have to be repaid.
He is using the bank to release *his* capital from an illiquid asset. For which they charge interest.
It’s still his money he receiving, even if it’s been earned through an appreciating asset not through compensation for work.
I’m amazed people can view this as “not my money”
Each time i have remortgaged i have taken 75% out, bought a battered heap at auction, refurbed and taken out more than what i put in.
Where it has worked for me is doing the vast chunk of all the work myself, and a lucky ride on the housing market since 2012. From an initial 50k cash investment i reckon total mortgage free equity stands about 250k after 8 years over those 5 houses.
The next few years are going to be interesting, crash? dip? boom? a f
king asteroid wiping us all out, who knows.I don't see the attraction of BTLs at the moment:
Paper thin yields easily undone by a void, bad tenant or need to do refurb works
Need to be leveraged so at risk of negative equity with knock-on impact on other assets
Heavily taxed on entry and exit
Require time or money to manage
Illiquid and inflexible
An easy cash-cow for additional future taxes/regulation
Paper thin yields easily undone by a void, bad tenant or need to do refurb works
Need to be leveraged so at risk of negative equity with knock-on impact on other assets
Heavily taxed on entry and exit
Require time or money to manage
Illiquid and inflexible
An easy cash-cow for additional future taxes/regulation
will_ said:
I don't see the attraction of BTLs at the moment:
Paper thin yields easily undone by a void, bad tenant or need to do refurb works
Need to be leveraged so at risk of negative equity with knock-on impact on other assets
Heavily taxed on entry and exit
Require time or money to manage
Illiquid and inflexible
An easy cash-cow for additional future taxes/regulation
And yet.....Paper thin yields easily undone by a void, bad tenant or need to do refurb works
Need to be leveraged so at risk of negative equity with knock-on impact on other assets
Heavily taxed on entry and exit
Require time or money to manage
Illiquid and inflexible
An easy cash-cow for additional future taxes/regulation
https://opascotland.com/lot/details/25839
Yield of 10% and easy scope to make that 15% from excellent tenant who's been there since forever and is going nowhere.
FRI lease means very limited cost expenditure
Needs no leverage to purchase.....costs pocket money
Zero tax on entry and no reason to exit
Agent would take 5%+vat max to manage rent
Super easy to resell or refinance
Very unlikely to suffer future regulatory risks.....more likely to be a protected species
Am I wrong?
will_ said:
I don't see the attraction of BTLs at the moment:
Paper thin yields easily undone by a void, bad tenant or need to do refurb works
Need to be leveraged so at risk of negative equity with knock-on impact on other assets
Heavily taxed on entry and exit
Require time or money to manage
Illiquid and inflexible
An easy cash-cow for
I’m not seeing any of that. I’m seeing decent yields v cash in the bank or any other non high risk investment, zero voids for the past 9 years, zero missed payments, zero time per month management. Ok there is regulation and taxes to pay but it’s a business there should be with any business. How many businesses have been severely impacted by covid? Hospitality nackered, most consumer businesses have seen profits down as people spend less however if you have good tenants both employed you’re unlikely to see any affect. Paper thin yields easily undone by a void, bad tenant or need to do refurb works
Need to be leveraged so at risk of negative equity with knock-on impact on other assets
Heavily taxed on entry and exit
Require time or money to manage
Illiquid and inflexible
An easy cash-cow for
BoRED S2upid said:
will_ said:
I don't see the attraction of BTLs at the moment:
Paper thin yields easily undone by a void, bad tenant or need to do refurb works
Need to be leveraged so at risk of negative equity with knock-on impact on other assets
Heavily taxed on entry and exit
Require time or money to manage
Illiquid and inflexible
An easy cash-cow for
I’m not seeing any of that. I’m seeing decent yields v cash in the bank or any other non high risk investment, zero voids for the past 9 years, zero missed payments, zero time per month management. Ok there is regulation and taxes to pay but it’s a business there should be with any business. How many businesses have been severely impacted by covid? Hospitality nackered, most consumer businesses have seen profits down as people spend less however if you have good tenants both employed you’re unlikely to see any affect. Paper thin yields easily undone by a void, bad tenant or need to do refurb works
Need to be leveraged so at risk of negative equity with knock-on impact on other assets
Heavily taxed on entry and exit
Require time or money to manage
Illiquid and inflexible
An easy cash-cow for
Whilst BTL may previously have been attractive, it isn't so attractive now.
will_ said:
BoRED S2upid said:
will_ said:
I don't see the attraction of BTLs at the moment:
Paper thin yields easily undone by a void, bad tenant or need to do refurb works
Need to be leveraged so at risk of negative equity with knock-on impact on other assets
Heavily taxed on entry and exit
Require time or money to manage
Illiquid and inflexible
An easy cash-cow for
I’m not seeing any of that. I’m seeing decent yields v cash in the bank or any other non high risk investment, zero voids for the past 9 years, zero missed payments, zero time per month management. Ok there is regulation and taxes to pay but it’s a business there should be with any business. How many businesses have been severely impacted by covid? Hospitality nackered, most consumer businesses have seen profits down as people spend less however if you have good tenants both employed you’re unlikely to see any affect. Paper thin yields easily undone by a void, bad tenant or need to do refurb works
Need to be leveraged so at risk of negative equity with knock-on impact on other assets
Heavily taxed on entry and exit
Require time or money to manage
Illiquid and inflexible
An easy cash-cow for
Whilst BTL may previously have been attractive, it isn't so attractive now.
BoRED S2upid said:
I don’t see why now makes a difference? As my first post explains the right property and the right tenants and it doesn’t matter when you enter the market it can still work. I think the area is key though or the decent yields.
I'm sure that there are examples where, at today's asking prices and rents, a net yield of circa 10% PA is achievable (which personally I would aim for, given the risks and hassle), but I imagine that is pretty rare. I'm also sure that a good house in a good area with a good tenant will be reasonably trouble free, but that cannot be guaranteed, and if it goes wrong it can be expensive.Given that landlords now need to fund an additional 3% in stamp-duty at the start, and pay tax on income rather than profits (as mortgage interest is being excluded as a tax deductible expense), and pay 28% tax on the profit at the end (which will likely be accrued in one "hit" and therefore is difficult to mitigate) and in light of the likely increase in rights for tenants and costs and difficulties of extracting bad tenants, it is not a particularly attractive "investment" more generally.
This thread is quite interesting on this subject:
https://www.pistonheads.com/gassing/topic.asp?h=0&...
https://www.pistonheads.com/gassing/topic.asp?h=0&...
will_ said:
Given that landlords now need to fund an additional 3% in stamp-duty at the start, and pay tax on income rather than profits (as mortgage interest is being excluded as a tax deductible expense), and pay 28% tax on the profit at the end (which will likely be accrued in one "hit" and therefore is difficult to mitigate) and in light of the likely increase in rights for tenants and costs and difficulties of extracting bad tenants, it is not a particularly attractive "investment" more generally.
^^^ This. IMO new investors shouldn't see BTL as an automatic "go to". BTL probably only makes sense if,- They are looking for "diversification" in the context of a portfolio of other investments, or
- They intend to become a professional landlord with multiple properties owned through a limited company.
I'm currently selling up all of my resi properties. The changes to the taxes and tenancy laws mean that a portfolio I've been building up for 20+ years is no longer worth the hassle. It's a shame that landlords are treated so badly in this country.
I'm going to stick it all in commercial instead, as the returns are so much higher and the recession will bring plenty of low priced units. I'm just not sure what kind of properly to go for yet, seeing as the whole Work From Home thing looks like it'll impact office space demand, which was my preferred route.
I'm going to stick it all in commercial instead, as the returns are so much higher and the recession will bring plenty of low priced units. I'm just not sure what kind of properly to go for yet, seeing as the whole Work From Home thing looks like it'll impact office space demand, which was my preferred route.
Dick Dastardly said:
I'm currently selling up all of my resi properties. The changes to the taxes and tenancy laws mean that a portfolio I've been building up for 20+ years is no longer worth the hassle. It's a shame that landlords are treated so badly in this country.
I'm going to stick it all in commercial instead, as the returns are so much higher and the recession will bring plenty of low priced units. I'm just not sure what kind of properly to go for yet, seeing as the whole Work From Home thing looks like it'll impact office space demand, which was my preferred route.
Have you any commercial experience? I'm going to stick it all in commercial instead, as the returns are so much higher and the recession will bring plenty of low priced units. I'm just not sure what kind of properly to go for yet, seeing as the whole Work From Home thing looks like it'll impact office space demand, which was my preferred route.
A mate of mine, bought a commercial property via his SIPP a couple if years ago, and split it into 4. His LTD company rents the whole thing of his SIPP and uses one of the units. The other 3 are rented out, 2 shops and an office, and pay the LTD company for the use.
The LTD company pays his SIPP what it woukd cost to rent the unit he uses, but there are costs involved in using his pension scheme to manage it.
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