Is there money to be made in 2nd/3rd properties?
Discussion
Rather than a new capital rate tax in the new budget that will stop us being competitive against places like Ireland I think we should have introduced massive taxes on owning more than one home.
Might have allowed the next generation to buy one, rather than feather the nest of lucky old people for their retirement
Shameful. It made me laugh when people on here previously said
"They are taxing me like it is a business..."
Er, it is a business.
Might have allowed the next generation to buy one, rather than feather the nest of lucky old people for their retirement
Shameful. It made me laugh when people on here previously said
"They are taxing me like it is a business..."
Er, it is a business.
rockin said:
How's the "potential CGT charge" looking on your property portfolio? And do you enjoy paying that income tax every year?
I think you'll find that there is no such thing as a charge levied on 'potential CGT'. I think that's something you've imagined. 
As to income tax, hmmm.........I don't think paying it is exactly 'enjoyable' but there's definitely a certain satisfaction in contributing a bit to the common good fund.
They don't waste it ALL y'know. Schools and NHS and cops and benefits for the poor and so forth all need paid for, and whilst self-employed earnings need to be accounted for, how much we (the self-employed) pay is really up to ourselves and our social consciences.
But yes, there's definitely a satisfaction in being a net contributor rather than a parasite.
Edited by Groat on Friday 5th March 00:26
Clive Milk said:
Rather than a new capital rate tax in the new budget I think we should have introduced massive taxes on owning more than one home.
Might have allowed the next generation to buy one, rather than feather the nest of lucky old people for their retirement
Wot.....like this one that no young first time buyer on a tiny salary seems to want?Might have allowed the next generation to buy one, rather than feather the nest of lucky old people for their retirement
https://www.rightmove.co.uk/properties/78270363#/
or like this one that's probably too cheap to get a mortgage for?
https://www.rightmove.co.uk/properties/77047578#/
Groat said:
LOL! I bought a flat in Dubai (Lake View building in Jumeirah Lakes) where I've never set foot via an agent I never met from builders I never met (Damac). It was let and managed by letting agents I never met to tenants I never met and eventually sold by more agents I never met to a lady from Stoke Newington I never met!
This entire series of transactions and events involved virtually no paperwork or lawyers and the closest I ever got to it was when a partner went to Dubai and visited the building and told me it was "really nice".
Curious why you have gone from high yielding 50k tenement flats in the East End of Glasgow etc to investing in a swanky shiny flat in Dubai?This entire series of transactions and events involved virtually no paperwork or lawyers and the closest I ever got to it was when a partner went to Dubai and visited the building and told me it was "really nice".
Clive Milk said:
Rather than a new capital rate tax in the new budget that will stop us being competitive against places like Ireland I think we should have introduced massive taxes on owning more than one home.
Might have allowed the next generation to buy one, rather than feather the nest of lucky old people for their retirement
Shameful. It made me laugh when people on here previously said
"They are taxing me like it is a business..."
Er, it is a business.
Not sure if serious. You have conflated an investment decision with a luxury purchase decision Might have allowed the next generation to buy one, rather than feather the nest of lucky old people for their retirement
Shameful. It made me laugh when people on here previously said
"They are taxing me like it is a business..."
Er, it is a business.
Groat said:
Thing is, mate, if your investment is for income then what does it matter what the value is?
And remember. The older you get the more meaningless and pointless growth of value becomes.
Total return is total return. I would prefer something that pays no income but appreciates 10% to something that pays 5% in cash and appreciates 5%, despite the total return being the same. Now of course I would really like something that pays 13% in cash but that's begging the question.And remember. The older you get the more meaningless and pointless growth of value becomes.
NickCQ said:
Groat said:
Thing is, mate, if your investment is for income then what does it matter what the value is?
And remember. The older you get the more meaningless and pointless growth of value becomes.
Total return is total return. I would prefer something that pays no income but appreciates 10% to something that pays 5% in cash and appreciates 5%, despite the total return being the same. Now of course I would really like something that pays 13% in cash but that's begging the question.And remember. The older you get the more meaningless and pointless growth of value becomes.
so whats the return on a house purchase at £207k 10 years ago now worth a min of £300k if sold more likely £310k with yearly income average £950 for 2 years then £1000 for 2 years and £1100 for 3 years and £1140 for 2 years ? Gaps of 3 mths total in 10 years.
yes there are deductions for maintenance/carpets/painting of appox. £2700 over 10 years.
The debate on here seems to be quite binary, ISA / pension versus property.
The truth to me, its rarely such.
People investing large sums in BTL are likely high income / worth / both individuals. The tax changes for BTL and the lending changes have been designed I believe to stop private leveraged up speculators from dabbling too much in BTL, and getting themselves in a mess, and subsequently others into their mess.
For some people (I know a small minority, but lets be honest, we are talking about a minority already here with talk of property investments etc) once you have filled your £20k ISA annually, and your £10k annual SIPP contribution, then property can make sense. You have the upside of capital growth, you have the usability of a tangible asset for future downsizing / kids use / parents retirement use / holiday lets, pick as appropriate for your situation and desires, and a flexible income.
If you are lucky enough to have the income / wealth, and you plan to have 1/3 SIPP, 1/3 ISA, 1/3 property outside of your main residence, then that is not a silly thing to be broadly aiming at.
If you have no cash reserves and limited pension, and are sticking £20k into a BTL and are worried about needed the tax relief just to make the books balance, i would suggest other savings and investment options may be better suited to you.
The truth to me, its rarely such.
People investing large sums in BTL are likely high income / worth / both individuals. The tax changes for BTL and the lending changes have been designed I believe to stop private leveraged up speculators from dabbling too much in BTL, and getting themselves in a mess, and subsequently others into their mess.
For some people (I know a small minority, but lets be honest, we are talking about a minority already here with talk of property investments etc) once you have filled your £20k ISA annually, and your £10k annual SIPP contribution, then property can make sense. You have the upside of capital growth, you have the usability of a tangible asset for future downsizing / kids use / parents retirement use / holiday lets, pick as appropriate for your situation and desires, and a flexible income.
If you are lucky enough to have the income / wealth, and you plan to have 1/3 SIPP, 1/3 ISA, 1/3 property outside of your main residence, then that is not a silly thing to be broadly aiming at.
If you have no cash reserves and limited pension, and are sticking £20k into a BTL and are worried about needed the tax relief just to make the books balance, i would suggest other savings and investment options may be better suited to you.
Edited by gibbon on Friday 5th March 10:46
gibbon said:
The debate on here seems to be quite binary, ISA / pension versus property.
The truth to me, its rarely such.
People investing large sums in BTL are likely high income / worth / both individuals. The tax changes for BTL and the lending changes have been designed I believe to stop private leveraged up speculators from dabbling too much in BTL, and getting themselves in a mess, and subsequently others into their mess.
For some people (I know a small minority, but lets be honest, we are talking about a minority already here with talk of property investments etc) once you have filled your £20k ISA annually, and your £10k annual SIPP contribution, then property can make sense. You have the upside of capital growth, you have the usability of a tangible asset for future downsizing / kids use / parents retirement use / holiday lets, pick as appropriate for your situation and desires, and a flexible income.
If you are lucky enough to have the income / wealth, and you plan to have 1/3 SIPP, 1/3 ISA, 1/3 property outside of your main residence, then that is not a silly thing to be broadly aiming at.
If you have no cash reserves and limited pension, and are sticking £20k into a BTL and are worried about needed the tax relief just to make the books balance, i would suggest other savings and investment options may be better suited to you.
exactly - its a broad approach. The truth to me, its rarely such.
People investing large sums in BTL are likely high income / worth / both individuals. The tax changes for BTL and the lending changes have been designed I believe to stop private leveraged up speculators from dabbling too much in BTL, and getting themselves in a mess, and subsequently others into their mess.
For some people (I know a small minority, but lets be honest, we are talking about a minority already here with talk of property investments etc) once you have filled your £20k ISA annually, and your £10k annual SIPP contribution, then property can make sense. You have the upside of capital growth, you have the usability of a tangible asset for future downsizing / kids use / parents retirement use / holiday lets, pick as appropriate for your situation and desires, and a flexible income.
If you are lucky enough to have the income / wealth, and you plan to have 1/3 SIPP, 1/3 ISA, 1/3 property outside of your main residence, then that is not a silly thing to be broadly aiming at.
If you have no cash reserves and limited pension, and are sticking £20k into a BTL and are worried about needed the tax relief just to make the books balance, i would suggest other savings and investment options may be better suited to you.
Edited by gibbon on Friday 5th March 10:46
My work deals with hundreds of landlords some BTL some inherited etc and rental returns are the highest they have every been with very few voids if you buy in the right locations.
superlightr said:
What's the return on a house purchase at £207k 10 years ago now worth £300k with yearly income average £950 for 2 years then £1000 for 2 years and £1100 for 3 years and £1140 for 2 years? Gaps of 3 mths total in 10 years and maintenance/carpets/painting of appox. £2700 over 10 years.
My simple model says c. 8% IRR* before mortgage or tax with some allowance for entry / exit costs (stamp, legals, agents) but no deduction for management costs / your time. Equivalent to 1.9x MOIC*.S&P500 total return over the same period before tax (i.e. none in ISA/pension) was 11% IRR / 2.8x MOIC.
The point of all of this is not to say that one asset is "better" than another, it's just to encourage people to compare them on a like-for-like basis and think about the trade-offs between liquidity and volatility.
Note: IRR = internal rate of return or annualised total return. MOIC = multiple on invested capital, i.e. proceeds over cost.
NickCQ said:
My simple maths says c. 8% IRR* before mortgage or tax with some allowance for entry / exit costs (stamp, legals, agents) but no deduction for management costs / your time. Equivalent to 1.9x MOIC*.
S&P500 total return over the same period before tax (i.e. none in ISA/pension) was 11% IRR / 2.8x MOIC.
The point of all of this is not to say that one asset is "better" than another, it's just to encourage people to compare them on a like-for-like basis and think about the trade-offs between liquidity and volatility.
It's useful to see that like-for-like comparison.S&P500 total return over the same period before tax (i.e. none in ISA/pension) was 11% IRR / 2.8x MOIC.
The point of all of this is not to say that one asset is "better" than another, it's just to encourage people to compare them on a like-for-like basis and think about the trade-offs between liquidity and volatility.
Leading on from your final paragraph there's no doubt some "direct property" can be a useful diversification once the tax wrappers (ISA/SIPP) have been used up (or even alongside them for those who are particularly nervous about stock markets).
superlightr said:
rental returns are the highest they have every been with very few voids if you buy in the right locations.
I think this point is debatable - agreed in nominal £ terms that rents have never been higher but if you think of it in terms of a % yield on the market value of the property they have never been lower in many places.NickCQ said:
8% IRR / 1.9x MOIC versus 11% IRR / 2.8x MOIC
Just to note that this is an interesting illustration of the value of reinvesting dividends and compounding capital. The multiple of money is significantly higher in the latter despite a smaller gap in annualised total return. Of course you could buy additional properties with your rental income but that's going to be lumpy unless you have a very big portfolio.NickCQ said:
Groat said:
Thing is, mate, if your investment is for income then what does it matter what the value is?
And remember. The older you get the more meaningless and pointless growth of value becomes.
Total return is total return. I would prefer something that pays no income but appreciates 10% to something that pays 5% in cash and appreciates 5%, despite the total return being the same. Now of course I would really like something that pays 13% in cash but that's begging the question.And remember. The older you get the more meaningless and pointless growth of value becomes.
wife: "That's nice dear. We'll still be able to afford to both eat and keep warm despite all these awful rising prices"
landlord: "the agent also says the value of the properties is up 10% on last year"
wife: " And of what good is that to us"?
Groat said:
80 year old landlord to wife: "Good news dear. The agent phoned to say the rents are going up 5% from next week"
wife: "That's nice dear. We'll still be able to afford to both eat and keep warm despite all these awful rising prices"
landlord: "the agent also says the value of the properties is up 10% on last year"
wife: " And of what good is that to us"?
At 80 years old why not just sell the place, cash in your £250k or whatever, and have the best final 10 years of your life?! wife: "That's nice dear. We'll still be able to afford to both eat and keep warm despite all these awful rising prices"
landlord: "the agent also says the value of the properties is up 10% on last year"
wife: " And of what good is that to us"?
Condi said:
Groat said:
80 year old landlord to wife: "Good news dear. The agent phoned to say the rents are going up 5% from next week"
wife: "That's nice dear. We'll still be able to afford to both eat and keep warm despite all these awful rising prices"
landlord: "the agent also says the value of the properties is up 10% on last year"
wife: " And of what good is that to us"?
At 80 years old why not just sell the place, cash in your £250k or whatever, and have the best final 10 years of your life?! wife: "That's nice dear. We'll still be able to afford to both eat and keep warm despite all these awful rising prices"
landlord: "the agent also says the value of the properties is up 10% on last year"
wife: " And of what good is that to us"?
Groat said:
I think you'll find that there is no such thing as a charge levied on 'potential CGT'. I think that's something you've imagined.
Ay yes, the "Hotel California" investment plan. What doesn't go as Income Tax it will go as Inheritance Tax instead.A brilliant tax saving strategy - avoid 28% CGT, pay 40% IHT and, errrm, you're dead.
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