Property investment

[David_D]

You'd like to think that 'professionalising' any industry should make it better.

Not a chance! It will, however, be more expensive. Those main board directors won't be doing it for nothing!

[Montello]

A very sensible approach, as long as you are happy with your lot, don't worry about others.

I still can't fathom Sunak trying to prop the housing market up in the short term with SDLT relief. Affordability is as you correctly identify a huge problem and whilst nobody wants to see the value of their main asset decline, a correction is unavoidable without strong wage growth which looks unlikely.

Prices have largely been driven up by demand and low interest rates and range of government meddling that further stokes the market.

In the UK the property market holds a special place in the hearts of middle England and no government will prosper if the market becomes depressed.

[Templogin]

For those of us on the other side of the fence, in social housing, but want to buy, but unable to get anything due to the speculators pushing prices up, less tax relief for BTL, and less meddling from Government tossing out free money hither and yon, would be a great help. Free money only seems to be a problem when it is being given to the surfs!

The number of people who want to live in rented housing, keeping their landlord in a lifestyle to which he has become accustomed, and filling his pension pot is actually tiny. The vast majority want to be investing in their own future. I can understand though people wanting to take the opportunity to line their pockets to the detriment of others. Greed is a powerful force. I just want to BTLi (buy to live in).

Asbestos suit donned!

[wainy001]

Still not totally sure what you mean and maybe the partnership thing is a red herring.

I think you are saying that, if you have a mortgage on a BTL property, then you can only deduct the interest and not the capital element of mortgage payments. (And it's worse now as tax relief is limited to basic rate.) That means you are paying tax on profit you don't "see" because it's gone towards paying down capital.

eg Mortgage payment of £800 of which £700 capital (and so £100 interest) and rent £1,000.

Cashflow "profit" is £200.

Tax (assume higher rate) is 40% x £1,000 with 20% x £100 relief on the interest = total tax bill £380.

So your "investment" is actually costing you currently £180pm!

Of course your real profit is £900 (£1,000 less £100 interest) but that still means a tax charge of 42%.

Yes exactly this but I gave 26 properties so the tax is massive without actually seeing the income it’s actually 90k for this year but the profit is only around 36k and that’s without any repairs etc... and bits exactly as you say due too the tax relief being zero.


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[Jdh1]

For those of us on the other side of the fence, in social housing, but want to buy, but unable to get anything due to the speculators pushing prices up, less tax relief for BTL, and less meddling from Government tossing out free money hither and yon, would be a great help. Free money only seems to be a problem when it is being given to the surfs!

The number of people who want to live in rented housing, keeping their landlord in a lifestyle to which he has become accustomed, and filling his pension pot is actually tiny. The vast majority want to be investing in their own future. I can understand though people wanting to take the opportunity to line their pockets to the detriment of others. Greed is a powerful force. I just want to BTLi (buy to live in).

Asbestos suit donned!

Spoken like a man who's never tried to make money from Buy To Let!

[David_D]

Yes exactly this but I gave 26 properties so the tax is massive without actually seeing the income it’s actually 90k for this year but the profit is only around 36k and that’s without any repairs etc... and bits exactly as you say due too the tax relief being zero.

The tax situation won't improve so you either have to find cash to fund the tax or find some way to reduce the debt (sell some of the portfolio - but then CGT?) or switch some loans to interest-only (if you can, but that just means you still owe teh same amount, obviously).

[Devonian]

Yes exactly this but I gave 26 properties so the tax is massive without actually seeing the income it’s actually 90k for this year but the profit is only around 36k and that’s without any repairs etc... and bits exactly as you say due too the tax relief being zero.


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What sort of properties do you have? £90,000 doesn’t seem a lot for 26 rents. If your interest is £54,000 (as you said that you haven’t included repairs) then you are very highly geared in a market that’s become less tax efficient.

It’s quite possible for a higher rate tax payer ( or close) to have a BTL with high borrowing and high rate of interest to lose money due to the tax situation. Unlikely but I’m sure it does happen.

[demonloop]

The number of people who want to live in rented housing, keeping their landlord in a lifestyle to which he has become accustomed, and filling his pension pot is actually tiny. The vast majority want to be investing in their own future.
I can understand though people wanting to take the opportunity to line their pockets to the detriment of others. Greed is a powerful force.

I’m not sure how true that is.

I’m my experience of a small portfolio, and a good friends experience of a large portfolio, the number of tenants wanting to buy is almost non existent. Maybe it’s a local thing, but all our tenants combined (bar one) have no desire to own a property.

[wainy001]

What sort of properties do you have? £90,000 doesn’t seem a lot for 26 rents. If your interest is £54,000 (as you said that you haven’t included repairs) then you are very highly geared in a market that’s become less tax efficient.

It’s quite possible for a higher rate tax payer ( or close) to have a BTL with high borrowing and high rate of interest to lose money due to the tax situation. Unlikely but I’m sure it does happen.

Mostly all 3 bed semis and valued between 90-130k each


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[wainy001]

The tax situation won't improve so you either have to find cash to fund the tax or find some way to reduce the debt (sell some of the portfolio - but then CGT?) or switch some loans to interest-only (if you can, but that just means you still owe teh same amount, obviously).

There doesn’t seem to be any real answer does there it will cost a fortune to get them into a ltd company and then obv 19% corp tax and then any withdrawals after that are then paid at what I assume will also be the higher rate it’s a lose lose situation


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[wainy001]

I’ve done four full refurbishments over the last 6/7 years of houses/flats. Admittedly bought them as run down and basically renovated to a high standard and made what I would call nominal gains vs the capital outlay.
I know I beat on about garages but to me they are the only property I’m interested in buying moving forward. The last block i purchased last year owe me £8k per unit (with new door/new roof) and are rented out for £120 pcm. 18pc yield. I’ve been offered £25k per garage if I want to sell. Very lucky to have bought 20 on this site.
I simply don’t see the return on investment with residential that I do with garages. I’ve just finished a 3 bed end of terrace that I paid £500k for and now owes me £675k. (Have put a kitchen diner extension on and everything new bar the brickwork), but I’d struggle to get £700k for it. I just don’t see the draw to residential unless I chance my investment stance with them. Buying to refurb and flip just doesn’t equate in the area I am. Too many buyers and not enough stock keeps demand high and buyers prepared to pay more...
As I said above, I’m firmly on the hunt for garage blocks moving forward. Rent them out so they are producing an income and if I want to sell one off for maximum price to an end user I can...not for everyone but the gains are simply superb.

Wow this is very interesting


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[Yeti]

Wow this is very interesting


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That last deal in my post above is on paper worth £340k gross profit to me on resale or £28800 per year yield on an outlay of £160k.
I paid no stamp duty as the initial outlay was £139k for the site and the roof/doors was separate.
I can sell one garage off at a time as and when I need to as opposed to selling the whole investment if I needed to liquidate for funds.
If I’m lucky enough to find another 4/5 sites with the same yields (I have had similar success in the past on smaller sites), I think I can safely call it a day and be done with the stress of “investments” etc and just let the portfolio tick over..
(My old boss made £400k profit in six months on a 10 garage site which he paid £100k for. Sold to the supermarket chain Lidl as a ransom strip due to the store requiring the space for a store expansion/extra car parking to fulfil planning requirements.)
It’s not glamorous but by heck I’ve found my calling in life!

[wainy001]

That last deal in my post above is on paper worth £340k gross profit to me on resale or £28800 per year yield on an outlay of £160k.
I paid no stamp duty as the initial outlay was £139k for the site and the roof/doors was separate.
I can sell one garage off at a time as and when I need to as opposed to selling the whole investment if I needed to liquidate for funds.
If I’m lucky enough to find another 4/5 sites with the same yields (I have had similar success in the past on smaller sites), I think I can safely call it a day and be done with the stress of “investments” etc and just let the portfolio tick over..
(My old boss made £400k profit in six months on a 10 garage site which he paid £100k for. Sold to the supermarket chain Lidl as a ransom strip due to the store requiring the space for a store expansion/extra car parking to fulfil planning requirements.)
It’s not glamorous but by heck I’ve found my calling in life!

What area is this London I presume?


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[Yeti]

What area is this London I presume?


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South east London.

[Jdh1]

Mostly all 3 bed semis and valued between 90-130k each


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Doesn't that mean you have approximately £2.6M of property (assuming a low average of £100k per property) and only £90,000 worth of rent before expenses? That's less than 3.5% gross. That would mean you're renting £100,000 semi detached houses out for £345 a month. That can't be right can it? I must have missed something.

[Templogin]

Spoken like a man who's never tried to make money from Buy To Let!

Fair comment! The unsuccessful ones are probably keeping quiet, although they are always quiet about the asset growth.

[wainy001]

Doesn't that mean you have approximately £2.6M of property (assuming a low average of £100k per property) and only £90,000 worth of rent before expenses? That's less than 3.5% gross. That would mean you're renting £100,000 semi detached houses out for £345 a month. That can't be right can it? I must have missed something.

Morning it’s about 2.9m overall we achieve about 5% and rent averages about £500 per month

I have been using dividends too pay the tax so an increased wage on paper without seeing the actual cash.... it’s all very long term but in a right mess now of either leave it and find around 30k a year personal tax (3 partners) or transfer to a limited company at great cost

There is about 600k in it to withdraw as the tax has been paid but again the actual cash just isn’t there it prob has 3-4K a month spare.

As you can tell I’m very very uneducated on all of this but very hard working and somehow have built a decent portfolio


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[Jdh1]

Morning it’s about 2.9m overall we achieve about 5% and rent averages about £500 per month

I have been using dividends too pay the tax so an increased wage on paper without seeing the actual cash.... it’s all very long term but in a right mess now of either leave it and find around 30k a year personal tax (3 partners) or transfer to a limited company at great cost

There is about 600k in it to withdraw as the tax has been paid but again the actual cash just isn’t there it prob has 3-4K a month spare.

As you can tell I’m very very uneducated on all of this but very hard working and somehow have built a decent portfolio


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I'm confused! You said above:

"Yes exactly this but I have 26 properties so the tax is massive without actually seeing the income it’s actually 90k for this year but the profit is only around 36k and that’s without any repairs etc... and bits exactly as you say due too the tax relief being zero."

Ah...I think it's dawning! Are you saying the TAX is £90k, not the income?

[wainy001]

I'm confused! You said above:

"Yes exactly this but I have 26 properties so the tax is massive without actually seeing the income it’s actually 90k for this year but the profit is only around 36k and that’s without any repairs etc... and bits exactly as you say due too the tax relief being zero."

Ah...I think it's dawning! Are you saying the TAX is £90k, not the income?

Yes sorry if I didn’t put that across clearly but yes that’s the tax position


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