Is BTL still possible?
Discussion
Phooey said:
Thanks. I get what you’re saying and I do hear mostly of the idea of IO. The numbers obviously stack up well for you and it’s definitely an interesting thought. X by 5 and it’s quite a profitable business. I have this thing in my head though that I like to own the asset at the end of the term.
It’s a bit counterintuitive, but if you can borrow at 2% and rent out at 5% then you probably want to do as much of that for as long as you can!That said, I also want to sleep at night so don’t want to overleverage and will also pay down debt.
dmahon said:
In that case it is less attractive I guess, but taxes are a fact of life and I think orthogonal to BTL as an investment class.
If you don't want to pay taxes on your investment then put £20k a year into your ISA. If you don't want to pay taxes on your income put it in a pension, then withdraw 25% tax free.
Taxes, while a factor of life, can be mitigated in several ways. BLT is about the least tax efficient investment going, and while some people may be able to put it in their wife's name to avoid some of the tax, we are getting into increasingly niche situations here which not many people are going to identify with.
Condi said:
If you don't want to pay taxes on your investment then put £20k a year into your ISA.
If you don't want to pay taxes on your income put it in a pension, then withdraw 25% tax free.
Taxes, while a factor of life, can be mitigated in several ways. BLT is about the least tax efficient investment going, and while some people may be able to put it in their wife's name to avoid some of the tax, we are getting into increasingly niche situations here which not many people are going to identify with.
But before you get to the tax side you have a fairly safe 10% top line ROI based on my numbers above. That’s not easy with stocks.If you don't want to pay taxes on your income put it in a pension, then withdraw 25% tax free.
Taxes, while a factor of life, can be mitigated in several ways. BLT is about the least tax efficient investment going, and while some people may be able to put it in their wife's name to avoid some of the tax, we are getting into increasingly niche situations here which not many people are going to identify with.
I think BTL can be a strong investment, but yes it’s highly dependent on your wider financial picture, tax profile, company wrapper, having the right leverage in place etc.
dmahon said:
I think BTL can be a strong investment, but yes it’s highly dependent on your wider financial picture, tax profile, company wrapper, having the right leverage in place etc.
Not entirely sure I agree with the "safe 10% return" as you describe it, but certainly BTL does involve having the right structure in place to make it work efficiently. However, many people who own BTL do not have them in efficient structures, and if you were to take an example of a 40% taxpayer with the property in his own name...
40% tax on your wages to get the deposit.
Stamp Duty and additional stamp duty on the purchase price.
40% of your rental income less allowable expenses as income tax
25% CGT on disposal
Once you stick all those numbers into a calculator against other investments for most people it is a not the most sensible decision.
I appreciate there's no one right answer but can anyone give me an idea of the best way to organise and run a portfolio?
The MiL currently owns 2 or 3 properties outright, owns her own place and has a lump sum in the bank.
Obviously this will all be subject to a huge IHT bill at some point in the future which would be nice to minimise.
None of us have any idea on the options available or who would be best to speak to about it.
The MiL currently owns 2 or 3 properties outright, owns her own place and has a lump sum in the bank.
Obviously this will all be subject to a huge IHT bill at some point in the future which would be nice to minimise.
None of us have any idea on the options available or who would be best to speak to about it.
Groat said:
Saw this in the FT yesterday.It’s what the government wants.
Though how it will work out with huge swathes of new builds all rented in one spot remains to be seen.
dmahon said:
It’s a bit counterintuitive, but if you can borrow at 2% and rent out at 5% then you probably want to do as much of that for as long as you can!
Good point! and when you put it like that.. 
Are your BTLs in a LTD company? So many mixed views on this so interested to hear your opinion
Phooey said:
Good point! and when you put it like that..
Are your BTLs in a LTD company? So many mixed views on this so interested to hear your opinion
Yes I am in a LTD company, but when I add more leverage I am doing so in a personal name to get better mortgage rates.Are your BTLs in a LTD company? So many mixed views on this so interested to hear your opinion
I don’t want to find myself shilling for BTL, but I honestly think its still a decent investment.
I accept some is down to my personal situation (no PAYE income for me or wife and able to fund ISAs from another source) but I still think it has a place for many people.
dmahon said:
Yes I am in a LTD company, but when I add more leverage I am doing so in a personal name to get better mortgage rates.
I don’t want to find myself shilling for BTL, but I honestly think its still a decent investment.
I accept some is down to my personal situation (no PAYE income for me or wife and able to fund ISAs from another source) but I still think it has a place for many people.
Cheers. Makes sense - I understand at the moment there are few mortgage products for LTD companies - maybe this will increase as more landlords set up companies. I don’t want to find myself shilling for BTL, but I honestly think its still a decent investment.
I accept some is down to my personal situation (no PAYE income for me or wife and able to fund ISAs from another source) but I still think it has a place for many people.
I don't have any BTLs myself, but like you I still think it can and will always be a decent investment hence my interest in the subject.
Groat said:
Bet they have it in a tax efficient structure 
dmahon said:
I accept some is down to my personal situation (no PAYE income for me or wife and able to fund ISAs from another source) but I still think it has a place for many people.
What would appear to make most sense is to put money in your pension while working (huge tax saving), take out 25% of your pension at retirement when your income reduces as well, and then use that money to buy a BTL. Then you're effectively buying an annuity, albeit one with some leverage. Phooey said:
Good point! and when you put it like that..
Are your BTLs in a LTD company? So many mixed views on this so interested to hear your opinion
The thieving mortgage co's in the UK charge a much higher interest rate for BTL's in LTD Company name so still better off in personal names providing one of you is basic rate tax payerAre your BTLs in a LTD company? So many mixed views on this so interested to hear your opinion
Groat said:
I've just bought one for £55k. https://www.quicksalepropertyauctions.com/property...
By the time it's ready to let (£650pcm) it'll have cost £70k.
(No loans thanks. Prefer not to share the profit).
Eta: The people I bought it from paid £35k for it in mid-June
That would be £300-£350k in the SE but would still only let for around £1200-1500pcm so 5/6 times the cost for only twice the rent, that's why there is little income from BTL in the SE.By the time it's ready to let (£650pcm) it'll have cost £70k.
(No loans thanks. Prefer not to share the profit).
Eta: The people I bought it from paid £35k for it in mid-June
Edited by Groat on Monday 23 August 00:44
Capital growth may well be another matter.
I was talking to someone today in the gym. She works for a small letting agents in Nottingham and said pretty much what I already thought.. the tenants are repricing the market to new levels. They are very short of stock and most properties that come on the market has had the asking rental overbid. Where have all these tenants come from?? Is it simply the case that most accidental / part-time landlords have sold up = less properties to rent?
Edited by Phooey on Saturday 28th August 19:43
Phooey said:
I was talking to someone today in the gym. She works for a small letting agents in Nottingham and said pretty much what I already thought.. the tenants are repricing the market to new levels. They are very short of stock and most properties that come on the market has had the asking rental overbid. Where have all these tenants come from?? Is it simply the case that most accidental / part-time landlords have sold up = less properties to rent?
Yes, Fewer properties, Multiple whammy of the following, leading landlords to sell up:Edited by Phooey on Saturday 28th August 19:43
George Osborne's tax changes
Local authority licensing
Legislation swinging even further towards tenant protection.
CGT rises ahead potentially.
Of course, those who remain in the market are enjoying higher rents, that compensate for the aggro.
Zio Di Roma said:
Groat said:
Saw this in the FT yesterday.It’s what the government wants.
Though how it will work out with huge swathes of new builds all rented in one spot remains to be seen.
Profits 0.3bn
~ 7.5% return
I assume they borrow £4bn at near zero interest rates.
It sounds semi reasonable but it irks me that if/when something goes tits up, Lloyds will be TBTF and oooo those poor renters, so mega bailouts for Lloyds.
It’s just poor feeding wealth to the rich enabled by the representatives of us all, apparently for everyone’s benefit.
Zio Di Roma said:
Phooey said:
I was talking to someone today in the gym. She works for a small letting agents in Nottingham and said pretty much what I already thought.. the tenants are repricing the market to new levels. They are very short of stock and most properties that come on the market has had the asking rental overbid. Where have all these tenants come from?? Is it simply the case that most accidental / part-time landlords have sold up = less properties to rent?
Yes, Fewer properties, Multiple whammy of the following, leading landlords to sell up:Edited by Phooey on Saturday 28th August 19:43
George Osborne's tax changes
Local authority licensing
Legislation swinging even further towards tenant protection.
CGT rises ahead potentially.
Of course, those who remain in the market are enjoying higher rents, that compensate for the aggro.
Two properties I looked at recently had sellers who were planning to do this.
It’s another transient anomaly. It’ll be interesting to see how it pans out in the next 18 months.
Not a good time to be buying/selling/renting, worse still because of government tampering.
Condi said:
Not entirely sure I agree with the "safe 10% return" as you describe it, but certainly BTL does involve having the right structure in place to make it work efficiently.
However, many people who own BTL do not have them in efficient structures, and if you were to take an example of a 40% taxpayer with the property in his own name...
40% tax on your wages to get the deposit.
Stamp Duty and additional stamp duty on the purchase price.
40% of your rental income less allowable expenses as income tax
25% CGT on disposal
Once you stick all those numbers into a calculator against other investments for most people it is a not the most sensible decision.
Yup.However, many people who own BTL do not have them in efficient structures, and if you were to take an example of a 40% taxpayer with the property in his own name...
40% tax on your wages to get the deposit.
Stamp Duty and additional stamp duty on the purchase price.
40% of your rental income less allowable expenses as income tax
25% CGT on disposal
Once you stick all those numbers into a calculator against other investments for most people it is a not the most sensible decision.
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