Is BTL still possible?
Discussion
B9 said:
Groat, assuming the logic behind spending the profit is to buy new properties (or invest in the ones you have to increase capital, i.e. extensions), how do you get the money out in the end? You've mentioned income a few times as a benefit to property investment over S&S, so curious how it plays out if you have to keep spending it (it feels the same as a dividend which is reinvested?)
In terms of exit strategy, is ent relief available? Build portfolio and eventually sell (CGT with a small amount of income tax)? Diversify portfolio into another product/service which doesn't attract 28% and then sell that at 20%? (I'm making this up, probably not possible)
you have to be a trading company to get entrepreneurs relief - property letting dosent countIn terms of exit strategy, is ent relief available? Build portfolio and eventually sell (CGT with a small amount of income tax)? Diversify portfolio into another product/service which doesn't attract 28% and then sell that at 20%? (I'm making this up, probably not possible)
B9 said:
Groat, assuming the logic behind spending the profit is to buy new properties (or invest in the ones you have to increase capital, i.e. extensions), how do you get the money out in the end? You've mentioned income a few times as a benefit to property investment over S&S, so curious how it plays out if you have to keep spending it (it feels the same as a dividend which is reinvested?)
In terms of exit strategy, is ent relief available? Build portfolio and eventually sell (CGT with a small amount of income tax)? Diversify portfolio into another product/service which doesn't attract 28% and then sell that at 20%? (I'm making this up, probably not possible)
Why would anyone want to "get the money out in the end"? In terms of exit strategy, is ent relief available? Build portfolio and eventually sell (CGT with a small amount of income tax)? Diversify portfolio into another product/service which doesn't attract 28% and then sell that at 20%? (I'm making this up, probably not possible)
Well I'm sure many people would want to for many reasons, but I'm just as sure there are people who wouldn't.
I'm in the "wouldn't" camp, and in my plan there'll be no IHT or CGT paid on any of my properties ever. Not as the established interpretations of legislation currently stand anyway. (Don't let that lead you to assume I'm against taxation, because I'm not).
Entrepreneurs relief applies to assets that are used for business as opposed to investment activities and rental properties are generally considered to be the latter and therefore excluded. However, I can think of several real life scenarios where the lines between business and investment activities with property are at least blurred if not obliterated, and wherever there's room for debate there's room for an individual's interpretation to be presented and favoured under scrutiny etc etc blah blah blah.
B9 said:
Groat said:
Guys, workaround tax strategies aren't exactly rocket science.
But the thread title is "Is BTL still possible"?
Like it or not, the answer, pretty obviously, is 'YES'.
Would you mind if I PM you about this at some point?But the thread title is "Is BTL still possible"?
Like it or not, the answer, pretty obviously, is 'YES'.
Eventually my inability to supply the details he was requesting led him to exclaim "You're just wasting my time, aren't you"?
I said "Mate, two things. Number 1, I told you from the start of this conversation that it was of no benefit to either of us. And number 2, it was YOU who called ME, so if anyone's wasting anyone's time it's you".
And then he hung up in what I felt was a bad mood.
I hate to say it, but I think involving me in PM ping-pong about property matters is very likely to go down a similar route. I'm just an old duffer who owns properties but retired from active involvement in the industry 5 years ago, so anything I ever did know is already past its sell by date.
Boom78 said:
Hi guys
I’ve been considering buying a small 2nd house or flat in my local area to rent out, ideally on a repayment mortgage plus deposit. The ultimate goal isn’t an income but to have a 2nd property purchased and paid off in X years as a future investment. Eg sell off.
Is there still a market for mortgages for this sort of thing? What killed the old BTL market? Was it just people trying to unsuccessfully make monthly income
You need a spreadsheet. I’ve been considering buying a small 2nd house or flat in my local area to rent out, ideally on a repayment mortgage plus deposit. The ultimate goal isn’t an income but to have a 2nd property purchased and paid off in X years as a future investment. Eg sell off.
Is there still a market for mortgages for this sort of thing? What killed the old BTL market? Was it just people trying to unsuccessfully make monthly income
Do the sums.
Best case worse case most likely case.
Get on some land lord forums.
Read, research and read some more.
Alot of my advice came from Landlordzone. And https://www.propertyinvestmentproject.co.uk/
6 years in, and I dare not go and look back at my spreadsheet. We struck lucky and found an ex.council.house that was resdy to rent out, priced low enough to put our deposit at 25%.
We went for the family market. The first tenancy could have gone horribly wrong.
The technical profit we make is all ploughed back into.paying down the interest only mortgage.
So the income tax makes it a negative cash flow. But that's because we treat that as a tax inefficient pension payment.
My cost model didn't factor in house price rises, or my wife's total reluctance to put the rent up.
I assumed the value wouldn't rise but i assumed that every year we would put the rent up by 1.5%.
The biggest issues are looking in future. Do I buy a second hand scaffold tower and repoint the back of the house myself, or pay someone. At least the tax will be lower.
Do we redo the kitchen, or allow it to be unfashionable, but functional. It's that landlord spec. Functional and clean, small but practical.
Because I hate letting agents, almost as much as Umbrella companies, we used open rent. If you work it right, you get to see how many people are interested. Lots due to a shortage in a nice area.
We were able to choose from 7 people who viewed and wanted it. 14 viewed out of 30 enquiries.
Current tenants are a young couple, with an infant school aged child. Bloke joined the police six months before, and they were moving out of a flat that was too small.
The pandemic did not give them.a reason to stop paying. And I try to fix stuff, as soon as they tell me about them.
But. I'm under no illusion. There are a small percentage of tenants who are nightmares. I think doing the viewings is better than using an agent. They don't give a s
t. Really. Groat said:
A chap phoned me today about the motor accident I'd had that wasn't my fault. From the outset I made it very clear that his call was going to be of no benefit to either of us. However he continued for a good 10-15 minutes with his pretty determined effort to get information about an incident about which he actually appeared to know nothing at all, other than that there had been an incident.
Eventually my inability to supply the details he was requesting led him to exclaim "You're just wasting my time, aren't you"?
I said "Mate, two things. Number 1, I told you from the start of this conversation that it was of no benefit to either of us. And number 2, it was YOU who called ME, so if anyone's wasting anyone's time it's you".
And then he hung up in what I felt was a bad mood.
I hate to say it, but I think involving me in PM ping-pong about property matters is very likely to go down a similar route. I'm just an old duffer who owns properties but retired from active involvement in the industry 5 years ago, so anything I ever did know is already past its sell by date.
Eventually my inability to supply the details he was requesting led him to exclaim "You're just wasting my time, aren't you"?
I said "Mate, two things. Number 1, I told you from the start of this conversation that it was of no benefit to either of us. And number 2, it was YOU who called ME, so if anyone's wasting anyone's time it's you".
And then he hung up in what I felt was a bad mood.
I hate to say it, but I think involving me in PM ping-pong about property matters is very likely to go down a similar route. I'm just an old duffer who owns properties but retired from active involvement in the industry 5 years ago, so anything I ever did know is already past its sell by date.
I had a no fault recently, nobody in the car so pretty clear cut.
Some guy rang me three times, trying to trick me into disclosing there was someone in the car, taking a different approach each time. Watched too much line of duty I think!
When I called him out on this he pretty much hung up on me, or as close as you can get to hanging up, I got a grunt I think, haha.
Re topic, no idea. But I've been looking at buying a city crash pad, but the 2nd home stamp was off putting. Think it was something like an extra 15k on top of 4k. That puts a dent in the yield sums for any short or medium term purchase. And the kind of flat that would allow me optimise the yield etc is very unappealing. So it would be more about the long term appreciation for me if I were to try it.
Some guy rang me three times, trying to trick me into disclosing there was someone in the car, taking a different approach each time. Watched too much line of duty I think!
When I called him out on this he pretty much hung up on me, or as close as you can get to hanging up, I got a grunt I think, haha.
Re topic, no idea. But I've been looking at buying a city crash pad, but the 2nd home stamp was off putting. Think it was something like an extra 15k on top of 4k. That puts a dent in the yield sums for any short or medium term purchase. And the kind of flat that would allow me optimise the yield etc is very unappealing. So it would be more about the long term appreciation for me if I were to try it.
Edited by aparna on Friday 30th July 10:49
Badda said:
Tarring all letting agents with the same brush is ludicrous and no diffferent to tarring all Tenants in the same manner.
My kids went to university, and subsequently have rented post university. Whilst doing a contract in Derby I rented a place for 6 months.
So I see the letting agent, from the tenants view.
Their business model, requires churn. They need new tenants every 6 months. I'd like new tenants every 4 to 6 years.
Pit Pony said:
6 years in, and I dare not go and look back at my spreadsheet. We struck lucky and found an ex.council.house that was resdy to rent out, priced low enough to put our deposit at 25%.
We went for the family market. The first tenancy could have gone horribly wrong.
The technical profit we make is all ploughed back into.paying down the interest only mortgage.
So the income tax makes it a negative cash flow. But that's because we treat that as a tax inefficient pension payment.
My cost model didn't factor in house price rises, or my wife's total reluctance to put the rent up.
I assumed the value wouldn't rise but i assumed that every year we would put the rent up by 1.5%.
That wins my "BTL Nonsense of the Week" rosette We went for the family market. The first tenancy could have gone horribly wrong.
The technical profit we make is all ploughed back into.paying down the interest only mortgage.
So the income tax makes it a negative cash flow. But that's because we treat that as a tax inefficient pension payment.
My cost model didn't factor in house price rises, or my wife's total reluctance to put the rent up.
I assumed the value wouldn't rise but i assumed that every year we would put the rent up by 1.5%.
The highlighted bit is worthy of a double 
What you SHOULD do is divest yourself of this back-monkey and phone Nik at IM about a pension.
(PS: Your comments about letting agents are a close runner-up for the rosette
)Edited by Groat on Friday 30th July 17:46
Pit Pony said:
You need a spreadsheet.
Do the sums.
Best case worse case most likely case.
Get on some land lord forums.
Read, research and read some more.
Alot of my advice came from Landlordzone. And https://www.propertyinvestmentproject.co.uk/
6 years in, and I dare not go and look back at my spreadsheet. We struck lucky and found an ex.council.house that was resdy to rent out, priced low enough to put our deposit at 25%.
We went for the family market. The first tenancy could have gone horribly wrong.
The technical profit we make is all ploughed back into.paying down the interest only mortgage.
So the income tax makes it a negative cash flow. But that's because we treat that as a tax inefficient pension payment.
My cost model didn't factor in house price rises, or my wife's total reluctance to put the rent up.
I assumed the value wouldn't rise but i assumed that every year we would put the rent up by 1.5%.
The biggest issues are looking in future. Do I buy a second hand scaffold tower and repoint the back of the house myself, or pay someone. At least the tax will be lower.
Do we redo the kitchen, or allow it to be unfashionable, but functional. It's that landlord spec. Functional and clean, small but practical.
Because I hate letting agents, almost as much as Umbrella companies, we used open rent. If you work it right, you get to see how many people are interested. Lots due to a shortage in a nice area.
We were able to choose from 7 people who viewed and wanted it. 14 viewed out of 30 enquiries.
Current tenants are a young couple, with an infant school aged child. Bloke joined the police six months before, and they were moving out of a flat that was too small.
The pandemic did not give them.a reason to stop paying. And I try to fix stuff, as soon as they tell me about them.
But. I'm under no illusion. There are a small percentage of tenants who are nightmares. I think doing the viewings is better than using an agent. They don't give a st. Really.
i suspect im being a bit stupid here but how are you planning to make any money out of this? you are using highly taxed income (as tax relief on btl interest repayments is restricted) to repay the mortgage principal, if i understand your post correctly, and are not factoring any increase in value of the property into your returns so arent you essentially just doing the same thing as putting your mortgage capital repayment money into a bank account? in fact wouldnt a bank account be safer as it dosent expose you to the downside risk of the property being less than what you paid for it?Do the sums.
Best case worse case most likely case.
Get on some land lord forums.
Read, research and read some more.
Alot of my advice came from Landlordzone. And https://www.propertyinvestmentproject.co.uk/
6 years in, and I dare not go and look back at my spreadsheet. We struck lucky and found an ex.council.house that was resdy to rent out, priced low enough to put our deposit at 25%.
We went for the family market. The first tenancy could have gone horribly wrong.
The technical profit we make is all ploughed back into.paying down the interest only mortgage.
So the income tax makes it a negative cash flow. But that's because we treat that as a tax inefficient pension payment.
My cost model didn't factor in house price rises, or my wife's total reluctance to put the rent up.
I assumed the value wouldn't rise but i assumed that every year we would put the rent up by 1.5%.
The biggest issues are looking in future. Do I buy a second hand scaffold tower and repoint the back of the house myself, or pay someone. At least the tax will be lower.
Do we redo the kitchen, or allow it to be unfashionable, but functional. It's that landlord spec. Functional and clean, small but practical.
Because I hate letting agents, almost as much as Umbrella companies, we used open rent. If you work it right, you get to see how many people are interested. Lots due to a shortage in a nice area.
We were able to choose from 7 people who viewed and wanted it. 14 viewed out of 30 enquiries.
Current tenants are a young couple, with an infant school aged child. Bloke joined the police six months before, and they were moving out of a flat that was too small.
The pandemic did not give them.a reason to stop paying. And I try to fix stuff, as soon as they tell me about them.
But. I'm under no illusion. There are a small percentage of tenants who are nightmares. I think doing the viewings is better than using an agent. They don't give a s
t. Really. i could kind of get it if you are anticipating the value of the property increasing, but you specifically say you havent modelled that
Tresco said:
I'm coming out of BTL, it's worked for me but then I've seen substantial capital appreciation being in the SE plus I've not suffered from the now punitive tax treatment if my portfolio had been funded.
My yields were generally 3% nett, a pal has a portfolio in the North of England and calculates his are 7%-8%+.
I had a particularly difficult tenant last year - refused access, didn't accept our subsequent notice to vacate, stopped paying rent and left the house in a very poor state and I just thought at my age it was hassle I didn't need, if I'd had a larger portfolio I would have employed a property manager.
As part of your investments I still think BTL works - put in a relatively small amount of equity, borrow as much as you can and let your tenant service your debt for the next 25-30 years, you should turn say £40k into £200-£300k just don't expect too much of an income along the way.
The capital gains is the killer - I’m assuming you’ve seen solid capital growth so might be facing £100-200k tax bill on sale. My yields were generally 3% nett, a pal has a portfolio in the North of England and calculates his are 7%-8%+.
I had a particularly difficult tenant last year - refused access, didn't accept our subsequent notice to vacate, stopped paying rent and left the house in a very poor state and I just thought at my age it was hassle I didn't need, if I'd had a larger portfolio I would have employed a property manager.
As part of your investments I still think BTL works - put in a relatively small amount of equity, borrow as much as you can and let your tenant service your debt for the next 25-30 years, you should turn say £40k into £200-£300k just don't expect too much of an income along the way.
db10 said:
i suspect im being a bit stupid here but how are you planning to make any money out of this? you are using highly taxed income (as tax relief on btl interest repayments is restricted) to repay the mortgage principal, if i understand your post correctly, and are not factoring any increase in value of the property into your returns so arent you essentially just doing the same thing as putting your mortgage capital repayment money into a bank account? in fact wouldnt a bank account be safer as it dosent expose you to the downside risk of the property being less than what you paid for it?
i could kind of get it if you are anticipating the value of the property increasing, but you specifically say you havent modelled that
Wife owns 95% through Form 17. She earns just over £12k so is taxed on her profit at 20%. i could kind of get it if you are anticipating the value of the property increasing, but you specifically say you havent modelled that
My model assumed some increase in rent every year, and was flimsy when it came to repairs. Haven't had too many, so far, but is that luck ?
My model was looking at paying off the loan before we retire, and continuing to rent it out. The profit at that point would be £7500 a year. Which is a nice supplement to the old age pension. (We both have some private pension provision as well)
I didn't factor house price inflation into my model as, well, you don't know what it might be and I'm a pessimist.
To be honest, I think what will happen is that well realise that we'd rather cash in the money fairly soon after we retire. But that's 10 years away.
DSLiverpool said:
The new rules to allow shops to be easily turned into flats / bedsits will probably bring a glut of new additional cheap property into the equation.
Some years age: Didn't shelter estimate that there were 250,000 empty properties above those shops which could easily be converted to residential, and the only thing stopping developers and investors was what? Not enough return for the investment or planning rules? I cant remember. If there is a housing crisis, it can only be a good thing. Will it impact rents ? Maybe. Supply vs demand vs what people can actually afford vs cold hard investment decisions.
What seems to be happening in big cities is whole blocks of apartments built purely for rental.
Welshbeef said:
People want a house with a garden - flats are as dead as Keir Starmer's attempt to expel Momentum from the party.
People all want Ferraris too but that hasn't stopped the production of cheaper brands.(There is currently unprecedented demand for rental apartments - which is what essentially drives 'Build-to-Rent').
Edited by Groat on Sunday 1st August 13:22
Groat said:
People all want Ferraris too but that hasn't stopped the production of cheaper brands.
(There is currently unprecedented demand for rental apartments - which is what essentially drives 'Build-to-Rent').
https://www.google.co.uk/amp/s/www.housebeautiful.com/uk/lifestyle/property/amp34356375/rents-property-types/(There is currently unprecedented demand for rental apartments - which is what essentially drives 'Build-to-Rent').
Edited by Groat on Sunday 1st August 13:22
Plenty of resources stating demand is for houses away from flats -> due to lockdowns obvs.
Welshbeef said:
https://www.google.co.uk/amp/s/www.housebeautiful....
Plenty of resources stating demand is for houses away from flats -> due to lockdowns obvs.
Humour me.Plenty of resources stating demand is for houses away from flats -> due to lockdowns obvs.
Go on Rightmove.
Search any town or city in the UK. Then 'houses to rent'. Note the number of results. Then 'flats to rent'. Note the number of results.
Compare the two.
See the problem with the 'flats are dead' notion?
How many builders are going to stop their multi storey build-to-rent project and put a handful of build-to-rent houses on the site instead?
At a guess I'd say NONE.
Ask yourself why?
Groat said:
Humour me.
Go on Rightmove.
Search any town or city in the UK. Then 'houses to rent'. Note the number of results. Then 'flats to rent'. Note the number of results.
Compare the two.
See the problem with the 'flats are dead' notion?
How many builders are going to stop their multi storey build-to-rent project and put a handful of build-to-rent houses on the site instead?
At a guess I'd say NONE.
Ask yourself why?
Because they have committed developments/planning permission & the return they yield from flats is higher. Also in London we see foreign buyers come in and buy the entire high rise outright off planGo on Rightmove.
Search any town or city in the UK. Then 'houses to rent'. Note the number of results. Then 'flats to rent'. Note the number of results.
Compare the two.
See the problem with the 'flats are dead' notion?
How many builders are going to stop their multi storey build-to-rent project and put a handful of build-to-rent houses on the site instead?
At a guess I'd say NONE.
Ask yourself why?
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