Is it time to sell my BTL?
Discussion
I've been renting out my old flat for about 3 years, the town it's located in is currently being redeveloped, which I hoped would add value, but actually the redevelopment involves adding about 500 more flats, which could actually reduce the value of my flat.
Once the BTL tax changes finish coming in in 2020, the flat will bring in £180 per month after deductions and after tax. That assumes no void periods, no maintenance costs and no tenancy costs (so that amount could easily be halved or more).
On top of that, I'm failing the BTL stress tests, despite only having 60% LTV, this means that it's difficult to re-mortgage, so my only choices are a product switch with the same lender, and the rates are never favourable. The only way to pass the stress tests is to reduce the loan by £30k, which I don't really want to do.
All of this coupled with falling property prices and the impending doom of Brexit makes me think I should sell up.
Any thoughts?
Once the BTL tax changes finish coming in in 2020, the flat will bring in £180 per month after deductions and after tax. That assumes no void periods, no maintenance costs and no tenancy costs (so that amount could easily be halved or more).
On top of that, I'm failing the BTL stress tests, despite only having 60% LTV, this means that it's difficult to re-mortgage, so my only choices are a product switch with the same lender, and the rates are never favourable. The only way to pass the stress tests is to reduce the loan by £30k, which I don't really want to do.
All of this coupled with falling property prices and the impending doom of Brexit makes me think I should sell up.
Any thoughts?
Jockman said:
I think one of the intentions of recent changes in taxation on second homes was to encourage amateur landlords (no offense intended) to exit the market so you will join many others who have sold up too.
The ultimate consequences of this legislation remain unclear.
RICS are fairly clear that they are seeing a fall in rental property stock, resulting in rising rents, which will continue for the next 5 years.The ultimate consequences of this legislation remain unclear.
We're selling all of our BTL's. You get a low yield with too much risk of someone deciding not to pay. Add to that recent taxes hikes aimed at private landlords (but not ltd company landlords), and it's not really a good investment these days, even with rents going up.
Labours LVT/rent caps, and rising interest rates will finally kill it off.
98elise said:
RICS are fairly clear that they are seeing a fall in rental property stock, resulting in rising rents, which will continue for the next 5 years.
We're selling all of our BTL's. You get a low yield with too much risk of someone deciding not to pay. Add to that recent taxes hikes aimed at private landlords (but not ltd company landlords), and it's not really a good investment these days, even with rents going up.
Labours LVT/rent caps, and rising interest rates will finally kill it off.
This seems to be a common prediction.We're selling all of our BTL's. You get a low yield with too much risk of someone deciding not to pay. Add to that recent taxes hikes aimed at private landlords (but not ltd company landlords), and it's not really a good investment these days, even with rents going up.
Labours LVT/rent caps, and rising interest rates will finally kill it off.
Jockman said:
I think one of the intentions of recent changes in taxation on second homes was to encourage amateur landlords (no offense intended) to exit the market so you will join many others who have sold up too.
The ultimate consequences of this legislation remain unclear.
The main consequence has been as intended which is to deleverage the BTL market so that it doesn’t pose a risk in any downturn or be the trigger to any downturn. Personally, I think that the property changes have been the only sensible thing the current Govt have achieved. We do need a housing market where owner occupiers are not forced to pay more to outcompete investment capital and where that investment capital does not pose a system risk to homeowner values. BTL is still a perfectly viable investment product but you just can’t gear yourself to the eyeballs and become part of the housing problem but rather be rewarded for being part of the solution. The ultimate consequences of this legislation remain unclear.
Mr Pointy said:
A colleague has changed his BTLs to AirBNB & is much happier with the returns.
I was tempted to do this but Mrs SLR was not having it.So we sold it. We were also in the same boat we moved house and kept the old one. Did not want to take the hit on it as the value when we moved was about 10% less than when we bought it. Then over the last few years its recovered and now about +20% so we are getting out whilst we have no CGT to pay.
DonkeyApple said:
Jockman said:
I think one of the intentions of recent changes in taxation on second homes was to encourage amateur landlords (no offense intended) to exit the market so you will join many others who have sold up too.
The ultimate consequences of this legislation remain unclear.
The main consequence has been as intended which is to deleverage the BTL market so that it doesn’t pose a risk in any downturn or be the trigger to any downturn. Personally, I think that the property changes have been the only sensible thing the current Govt have achieved. We do need a housing market where owner occupiers are not forced to pay more to outcompete investment capital and where that investment capital does not pose a system risk to homeowner values. BTL is still a perfectly viable investment product but you just can’t gear yourself to the eyeballs and become part of the housing problem but rather be rewarded for being part of the solution. The ultimate consequences of this legislation remain unclear.
The increase in stamp duty is not a way of deleveraging the investment property market and neither are the changes to tax law.
If deleveraging the market was the sole aim there are far more specific and targeted ways of doing it.
They appear to have used a combination of revenue gathering and ill thought out cheap vote winning tactics designed to appeal to those tenants who are unable to think through the effects that these changes will have in their real world living.
What we will be left with will be the same number of tenants fighting it out for an ever diminishing pool of available rental properties with the inevitable rises in rent as a result of increased costs and the laws of supply and demand.
Since the government sold off their own stock of social housing they have become more and more reliant on the 'amateur' landlord to take up the shortfall but as of yet they haven't explained how they plan to house people who are unable to buy and now also won't be able to find decent rental properties.
The Governments repeated broken promises about building more homes, what good is that for the significant percentage of the population who will never, no matter how cheap it becomes to buy, be able to afford the deposit for a property of their own.
This isn't the fault of the 'amateur' landlord however easy it may be to blame them for the perceived failiure of the housing market.
The current Government can thank the shambolic opposition that they are still in power, the only saving grace is that under Labour the country would have already collapsed instead of heading towards it.
Not at all. The Stamp has been targeted at investment capital ie it is targeting the hnw wealth storage market, the corporates, the trusts, the investors, the speculators. Homes are are for country’s people to live in and raise families. There are a myriad of other markets for us to go speculating and investing to excess in. The Stamp changes are about removing excess and unecassary and damaging global capital from the system to protect the working people.
Tightening of lending regulation and the taxaction on rental income are about deleveraging. Again to protect homeowners from a market being collapsed through reckless speculation.
And why do you think the Govt are stalling on building new homes? You only need to let ok at the population demographic data for the U.K. to realise that we are about to enter a period of excess property supply through Boomer mortality rises. The reality is that we know that the rate of supply via probate is going to be increasingly rapidly (just look at the spike in the rate of Boomer celebs dying off for a graphical representation of what is happening in the West) so the last thing you want to be doing is deliberately adding recklessly to that supply with excess construction knowing that you’ll outstrip demand. It is really rather difficult to remove excess supply from a residential property market.
Tightening of lending regulation and the taxaction on rental income are about deleveraging. Again to protect homeowners from a market being collapsed through reckless speculation.
And why do you think the Govt are stalling on building new homes? You only need to let ok at the population demographic data for the U.K. to realise that we are about to enter a period of excess property supply through Boomer mortality rises. The reality is that we know that the rate of supply via probate is going to be increasingly rapidly (just look at the spike in the rate of Boomer celebs dying off for a graphical representation of what is happening in the West) so the last thing you want to be doing is deliberately adding recklessly to that supply with excess construction knowing that you’ll outstrip demand. It is really rather difficult to remove excess supply from a residential property market.
DonkeyApple said:
Jockman said:
I think one of the intentions of recent changes in taxation on second homes was to encourage amateur landlords (no offense intended) to exit the market so you will join many others who have sold up too.
The ultimate consequences of this legislation remain unclear.
The main consequence has been as intended which is to deleverage the BTL market so that it doesn’t pose a risk in any downturn or be the trigger to any downturn. Personally, I think that the property changes have been the only sensible thing the current Govt have achieved. We do need a housing market where owner occupiers are not forced to pay more to outcompete investment capital and where that investment capital does not pose a system risk to homeowner values. BTL is still a perfectly viable investment product but you just can’t gear yourself to the eyeballs and become part of the housing problem but rather be rewarded for being part of the solution. The ultimate consequences of this legislation remain unclear.
You can do much better in S&S or funds, and there are some great tax benefits. I've been maxing out our pension payments and ISA's for a few years now. And the returns have been massively better than my residential property.
that’s a singular moment in time. You can pick any moment to justify a view but the reality is that in both scenarios here we are looking at 40-70 year investment horizons, from the time you start earning to when you die. I wouldn’t be all in equities for my economic life planning. I would be diversified and property is the near perfect starting point of that diversification.
When you start saving you have very little money so pretty much have no choice but to purchase small equity units but once you’ve built sufficient wealth you both need to and have the wealth to be able to diversify. Tax wrappers tend to restrict this but I wouldn’t hold all my wealth within just a couple of legally defined wrappers either. That is a risk I would also diversify from.
There are advantages to the equity markets and to property. There are disadvantages to both. I prefer to include both within my overall portfolio.
Investment property is rightly being curtailed and deleveraged but it’s still a highly viable investment just not for the speculator or chancer. Those types have a world of other markets to play with and should never have been allowed to screw homeowners and future homeowners with their speculative capital.
The FTSE yields about 3.5 and a solid BTL is a bit above that but is easy to apply a 2x leverage to without viably altering the risk. Both have unquantifiable potential capital performance but most of us would be fair to assume that both will gain over time. Property has the risk of tennent default or major maintenance but an investor hedges that risk out via insurance, it’s the gambler who takes the punt on saving a few quid. The equity markets are more volatile.
Or let’s put it another way, for a decade we had PHers crowing about how property was a one way bet, it would never go down, money was free. We are now back in reality in this regard and everyone now has sobered up to the real world reality that debt has a cost, risks are real and that man maths is not a recognised means for calculating true returns. But what we are seeing now is the similar sort of comments regards the equity markets which have been pumped by QE for a decade along with cheap debt allowing companies to synthesise growth. And with this has come the posts regarding 20+% annual returns on funds. But we know that is not sustainable. We know that there is really no such thing as ‘star’ fund managers just managers whose lucky streak lasts longer than average and who have the backing of enormous PR marketing machines to attract money. 20 years ago we watched Asian indices go negative. Negative.
It’s all about balance. I wouldn’t be all in equities. I wouldn’t be all in specific legal wrappers. I wouldn’t be all in property.
When you start saving you have very little money so pretty much have no choice but to purchase small equity units but once you’ve built sufficient wealth you both need to and have the wealth to be able to diversify. Tax wrappers tend to restrict this but I wouldn’t hold all my wealth within just a couple of legally defined wrappers either. That is a risk I would also diversify from.
There are advantages to the equity markets and to property. There are disadvantages to both. I prefer to include both within my overall portfolio.
Investment property is rightly being curtailed and deleveraged but it’s still a highly viable investment just not for the speculator or chancer. Those types have a world of other markets to play with and should never have been allowed to screw homeowners and future homeowners with their speculative capital.
The FTSE yields about 3.5 and a solid BTL is a bit above that but is easy to apply a 2x leverage to without viably altering the risk. Both have unquantifiable potential capital performance but most of us would be fair to assume that both will gain over time. Property has the risk of tennent default or major maintenance but an investor hedges that risk out via insurance, it’s the gambler who takes the punt on saving a few quid. The equity markets are more volatile.
Or let’s put it another way, for a decade we had PHers crowing about how property was a one way bet, it would never go down, money was free. We are now back in reality in this regard and everyone now has sobered up to the real world reality that debt has a cost, risks are real and that man maths is not a recognised means for calculating true returns. But what we are seeing now is the similar sort of comments regards the equity markets which have been pumped by QE for a decade along with cheap debt allowing companies to synthesise growth. And with this has come the posts regarding 20+% annual returns on funds. But we know that is not sustainable. We know that there is really no such thing as ‘star’ fund managers just managers whose lucky streak lasts longer than average and who have the backing of enormous PR marketing machines to attract money. 20 years ago we watched Asian indices go negative. Negative.
It’s all about balance. I wouldn’t be all in equities. I wouldn’t be all in specific legal wrappers. I wouldn’t be all in property.
DonkeyApple said:
that’s a singular moment in time. You can pick any moment to justify a view but the reality is that in both scenarios here we are looking at 40-70 year investment horizons, from the time you start earning to when you die. I wouldn’t be all in equities for my economic life planning. I would be diversified and property is the near perfect starting point of that diversification.
When you start saving you have very little money so pretty much have no choice but to purchase small equity units but once you’ve built sufficient wealth you both need to and have the wealth to be able to diversify. Tax wrappers tend to restrict this but I wouldn’t hold all my wealth within just a couple of legally defined wrappers either. That is a risk I would also diversify from.
There are advantages to the equity markets and to property. There are disadvantages to both. I prefer to include both within my overall portfolio.
Investment property is rightly being curtailed and deleveraged but it’s still a highly viable investment just not for the speculator or chancer. Those types have a world of other markets to play with and should never have been allowed to screw homeowners and future homeowners with their speculative capital.
The FTSE yields about 3.5 and a solid BTL is a bit above that but is easy to apply a 2x leverage to without viably altering the risk. Both have unquantifiable potential capital performance but most of us would be fair to assume that both will gain over time. Property has the risk of tennent default or major maintenance but an investor hedges that risk out via insurance, it’s the gambler who takes the punt on saving a few quid. The equity markets are more volatile.
Or let’s put it another way, for a decade we had PHers crowing about how property was a one way bet, it would never go down, money was free. We are now back in reality in this regard and everyone now has sobered up to the real world reality that debt has a cost, risks are real and that man maths is not a recognised means for calculating true returns. But what we are seeing now is the similar sort of comments regards the equity markets which have been pumped by QE for a decade along with cheap debt allowing companies to synthesise growth. And with this has come the posts regarding 20+% annual returns on funds. But we know that is not sustainable. We know that there is really no such thing as ‘star’ fund managers just managers whose lucky streak lasts longer than average and who have the backing of enormous PR marketing machines to attract money. 20 years ago we watched Asian indices go negative. Negative.
It’s all about balance. I wouldn’t be all in equities. I wouldn’t be all in specific legal wrappers. I wouldn’t be all in property.
I agree. Until now I had an even spread of BTL and S&S (mainly funds). When you start saving you have very little money so pretty much have no choice but to purchase small equity units but once you’ve built sufficient wealth you both need to and have the wealth to be able to diversify. Tax wrappers tend to restrict this but I wouldn’t hold all my wealth within just a couple of legally defined wrappers either. That is a risk I would also diversify from.
There are advantages to the equity markets and to property. There are disadvantages to both. I prefer to include both within my overall portfolio.
Investment property is rightly being curtailed and deleveraged but it’s still a highly viable investment just not for the speculator or chancer. Those types have a world of other markets to play with and should never have been allowed to screw homeowners and future homeowners with their speculative capital.
The FTSE yields about 3.5 and a solid BTL is a bit above that but is easy to apply a 2x leverage to without viably altering the risk. Both have unquantifiable potential capital performance but most of us would be fair to assume that both will gain over time. Property has the risk of tennent default or major maintenance but an investor hedges that risk out via insurance, it’s the gambler who takes the punt on saving a few quid. The equity markets are more volatile.
Or let’s put it another way, for a decade we had PHers crowing about how property was a one way bet, it would never go down, money was free. We are now back in reality in this regard and everyone now has sobered up to the real world reality that debt has a cost, risks are real and that man maths is not a recognised means for calculating true returns. But what we are seeing now is the similar sort of comments regards the equity markets which have been pumped by QE for a decade along with cheap debt allowing companies to synthesise growth. And with this has come the posts regarding 20+% annual returns on funds. But we know that is not sustainable. We know that there is really no such thing as ‘star’ fund managers just managers whose lucky streak lasts longer than average and who have the backing of enormous PR marketing machines to attract money. 20 years ago we watched Asian indices go negative. Negative.
It’s all about balance. I wouldn’t be all in equities. I wouldn’t be all in specific legal wrappers. I wouldn’t be all in property.
We're exiting BTL to go into student let or holiday homes (or possibly commercial) so it's not all my eggs in one basket.
We were not speculators in BTL though. We went into it hoping to build a business, and any capital gain would be my kids problem! I bought when I felt prices were reasonable and hoped to do a couple every year doing a full refurb, then letting it at a reasonable rate to get quality long term tenants (aiming for the family market). Once prices went bonkers again we stopped.
Now we're being squeezed it's time to exit.
98elise said:
I agree. Until now I had an even spread of BTL and S&S (mainly funds).
We're exiting BTL to go into student let or holiday homes (or possibly commercial) so it's not all my eggs in one basket.
Genuine question, isnt student housing just BTL with a limited customer market place?We're exiting BTL to go into student let or holiday homes (or possibly commercial) so it's not all my eggs in one basket.
DonkeyApple said:
It’s certainly a difficult time to decide what property exposure to run. Given all the risks of Brexit, rising rats and Corbyn etc.
Exciting times in the coming year of so and potentially huge opportunities if the country does indeed go south.Certainly make sure any investment are balanced with a foot in both long and short camps.
Brexit is a real concern, Corbyn even more so but the rats, rising or otherwise, I’d not factored them in.
nikaiyo2 said:
98elise said:
I agree. Until now I had an even spread of BTL and S&S (mainly funds).
We're exiting BTL to go into student let or holiday homes (or possibly commercial) so it's not all my eggs in one basket.
Genuine question, isnt student housing just BTL with a limited customer market place?We're exiting BTL to go into student let or holiday homes (or possibly commercial) so it's not all my eggs in one basket.
HMO or miniMOs are still a great option for getting the yields up.
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