Buy to let – sell now before you get into deep poo.

Any of you folks play the buy to let game?

I think something is heading your way that might give you a shock if you are not careful.

From Telegraph here.

At the bottom of the page.

“NOW

Your buy-to-let earns £20,000 a year and the interest-only mortgage costs £13,000 a year. Tax is due on the difference or profit. So you pay tax on £7,000, meaning £2,800 for HMRC and £4,200 for you.

2020

Tax is now due on your full rental income of £20,000, less a tax credit equivalent to basic-rate tax on the interest. So you pay 40pc tax on £20,000 (ie £8,000), less the 20pc credit (20pc of £13,000 = £2,600), meaning £5,400 for HMRC and £1,600 for you. Your tax bill has therefore gone up by 93pc.

Now, say Bank Rate – and in turn your mortgage rate – rises by a small fraction, lifting your mortgage cost to £15,000, while your rent remains at £20,000.

You will have to pay £5,000 tax in this scenario, so you make no profit at all.”

Looks like the housing market might cool down after that and time to invest in something else … 😯

Good should be easier for me to buy my first place.

Read how Connie Cheuk (pictured above), a landlord with five properties, will see her tax bill rise by almost 40pc. She is even contemplating giving up her 18-year career as a teacher as a means of reducing the tax impact

my heart bleeds.

Good. Buy to let has decimated the market for first time buyers.

Cheuk / chewkw?

jam bo – Member

Read how Connie Cheuk (pictured above), a landlord with five properties, will see her tax bill rise by almost 40pc. She is even contemplating giving up her 18-year career as a teacher as a means of reducing the tax impact

my heart bleeds. [/quote]

Several years ago while searching for room to rent for a friend I met a landlady with 40 houses all buy-to-let … 😯

scotroutes – Member
Cheuk / chewkw?

Is that’s Jimmy, the chin, Hill? Me mates called him that … 😛

loddrik – Member
Good. Buy to let has decimated the market for first time buyers.

I don’t mind buy-to-let for one house but if you have more than one then that might put pressure on the property market – rent or buy. If everyone does that …

Good. Sick of buy to flip/buy to let driving up prices etc.

I wonder how this will affect rental price? 😛

Any of you PhD in Rent care to explain?

In both Chester and Liverpool huge student appartment complexes are being built by both the unis and private developers, and the existing shared houses or HMOs Houses of multiple occupancy,are becoming empty, they need a lot of work doing to make them proper family homes again, due to landlords not investing in them, so are going on the market, also lots of small starter flats where built and got snapped up by the buy to let rabble, infalting the prices, these are now for sale wholesle its not unusual to see 6 or more for sale board outside each complex, as landlords suddenly cant get tennants to pay the mortgage they flood the market with sometimes poorly maintained low cost flats to try and recoup some money before theyre repoed.

Fantastic news, buy to let has decimated communities and warped the housing market.

In that scenario above the landlord may not be making profit but they are paying off their mortgage, therefore gaining a nice capital asset to cash in in the future.

good news in principle..but how will affect house prices of home owners who are mortgaged up to the hilt. Lots in negative equuaty i imagine?

In that scenario above the landlord may not be making profit but they are paying off their mortgage, therefore gaining a nice capital asset to cash in in the future.

you missed the bit about an interest only mortgage.

I wonder what will happen to those foreign inward investors that buy up all the houses before they were even build? They can stay here but have some sort of representative buying for them … 😛

This could be good, but it could push rents up…. And if it results in lots of properties going on the market, the people in those houses will be turfed out and not necessarily able to buy…

I don’t know where the figures quoted came from – I suspect a property that was bought some time ago.

For a recent buy, the interest payments + overheads would probably balance the income as things stand. With the new tax regime, the landlord will be making a loss.

[Ballpark thoughts, £200k property, interest payments £8k, rental income £12k, overheads & void periods probably £3k. So current profit, excluding tax, £1k. Future losses – considerable)

rents are already high, so it will be hard to put them up. Results – fewer landlords wanting to buy, therefore lower house prices

molgrips – Member
This could be good, but it could push rents up….

Ya, that could be a possibility but I can foresee more intervention from the govt when people start to scream high rent.

😛

Moses – Member
For a recent buy, the interest payments + overheads would probably balance the income as things stand. With the new tax regime, the landlord will be making a loss.

😯 Which means there will be extra houses to deal with the housing shortage, yes? … I guess some will have to sell off quick.

Good news, nice to see the balance tipping slightly away from the baby boomers for once.

However – surely setting up some nice deflation if people rush to drop houses now?

No bother. Wonder where all the people who cant afford/dont want to /need to be easily mobile people will go to rent houses.

Interesting plan – not a long term solution imo though.

I also wonder what will happen to the rental market.
Fewer properties to rent.
More difficult and costly to be in rental for landlords, that cost will go onto rents.
Still as difficult to get a mortgage – especially if you are young or low income.

I am a landlord. All but two of my tenants in the last decade have been first time away from home crowd – students or young adults. The other two – she was 55 year old in midst of separation. None of these had a deposit to buy, or would have one within a few years, or indeed could afford to buy even the modest flat we have.
The last lot a family who could not hold down a job or keep up regular payments – rent, bills, anything. They cost me £4.5k in unpaid rent, damage and court costs.
Lots of landlords selling up means prices drop – for ours and everyone’s houses, let or occupied. Could be good, but could be difficult for many that would be in negative equity, and really difficult for banks who would not lend enough to those who want to buy, and would have landlords like me handing back the keys to the bank to try and then sell on.

This could be a bumpy ride.

trail_rat – Member
Interesting plan – not a long term solution imo though.

Ya, I think it’s better to cool down the property market to avoid unnecessary bubble for at least one generation …

Hopefully, I shall have the ability to build my palace soon.

Which means there will be extra houses to deal with the housing shortage, yes? …

No.
They are lived in already.
And lower prices mean fewer new houses are built.

Tipping the balance away from baby boomers, into the hands of the super rich, who don’t need mortgages to buy all these houses at a reduced rate to bulk out their already huge portfolios.

So all Gideons mates then…

A genuine question to those who went prices to fall. How far would they need to fall for you to buy? (Percentage/current value)

and would have landlords like me handing back the keys to them to y and sell on.

By handing back the keys your debt doesnt stop,the house will be sold and any amount below the value and amount sold for wioll be your debt, the bank has up to 6 years to chase you for intrest and 12 years to chase a debtand they do , a huge amount after a few years of all being quiet from the bank and you think its all over with.

Got to agree with the sentiment in this thread. It’s a national disgrace that the cheapest housing (the most needed) that the private sector will never ever build has become a pension fund for one generation at the expense of the next.

Terrible vicious circle with those that benefit in typical snide English style keeping their mouths shut deflecting blame, while watching the chaos and acting all innocent/indifferent.

Has the government thought this through? Without private landlords, banks unwilling to lend and no ‘council housing’ being built where will everyone live? Governments have been relying on private landlords for years to do their job for them.

So the options for landlords will be to sell up or raise rent…

If you sell up who will buy? When I was a renter it was because I either could not afford to buy or because I was mobile. If the rents were higher due to supply and demand I would not have been able to afford to get a job anywhere where I couldn’t live with my parents.
I would imagine many people could end up in the same situation which is a bad situation for social mobility.

If you have enough money to buy up these places mortgage free then you are not impacted by these rules. I guess they are planning on creating a bunch of new people like Nicholas van Hoogstraten to control the slums….

If it goes wrong then there could be a lot of misery for the most vulnerable people at the bottom of the rent ladder.

The whole housing issue in the country is a farce IMO.

Due to market forces, there is no incentive for the big housing developers to increase output, which is so desperately needed, because if they do start building more houses, supply increases and even with my basic understanding of economics, the affect on pricing means they will turn a lower profit. Unless of course, they reduce their cost to build, which is often in terms of lower material costs and quality of product.

Result being, it is in the developers and lenders interests to ensure that demand remains higher than availability. The lenders especially as they can lend more money per applicant and increase their interest income. Which is where the ‘right to buy’ is fundamentally floored and was/is one of the biggest cons to the masses in recent times. The only winners in this sorry scam are the lenders.

Indeed, there is always the predictable answer of: ‘ah! But when you pay off your loan, you have a capital asset!’ Which of course is true, however, because it has been in the lenders interests to push up purchase prices, to increase their yields, the actual amount paid by the many home owners far exceeds what the true cost of putting a roof over ones head really is. There are a few, very few in the great scheme of things, who have been savvy enough to pay off their house debt early and these are the few who stand to make the small gain in the ‘right to buy’ scam.

Well, given that the problem is that we don’t have sufficient affordable housing in this country, crapping on those who were greedy enough to jump on the dangled carrot of buy to let, isn’t really the answer to reducing prices, as demand still outstrips supply, even if all the BTL’s suddenly came onto the open market. The lenders wouldn’t be too keen anyway, as their potential interest income would also be hit.

Solution? Relatively easy as we have masses of empty commercial office blocks all round the country that will never be filled, despite our economy being driven by the new service style economy of everyone charging 10% for shuffling bits of paper about. These buildings already have services laid into them. So, here’s a plan. With the recent reports of there being not enough people in the trades ( because they all left in 2008 following the big hoo-ha where we realised that all the lenders were borrowing from each other and the money never existed anyway), how about we start to train up the youngsters and redevelop these empty office blocks into residential units that they can then live in?

They get training, sets of relevant skills, a place to live and more importantly, ownership of the community that they have been part of to create. And by ownership, I’m talking in the ‘we made this’ as being much more important than the ‘I bought this’ which is a far stronger version.

We’ve been taken for a ride in this whole sorry saga, where the only winners have been and will continue to be, the lenders.
QED

Do we actually need more houses or do we really need to create jobs and industry in places that have spare capacity? I suspect that other than the job creation dude of things this might be a big con.

1/3 rd of of MPs are buy to let landlords

I strongly suspect the sector will be protected

I would’ve thought that folk would convert their private BTL into a ‘business’, or the like. And when they want/need the cash close it taking advantage of the closing-business rules.

Also where are all these people who currently rent going to get a mortgage from, the eligibility is seriously tight now for anyone not in a perm salary job. We recently looked for finance for a granny annex and despite us netting nearly 6 figures haven’t yet got a mortgage ‘cos we’re not either perm or have a full 3 years books.

I ask again for those who want house prices to fall – how much do they need to fall by for you to buy the place you rent? (% / current value)

I’m a landlord, but only because I couldn’t sell my flat when I needed to move. First lease I put it up for about a fiver more than the mortgage and. I had tenants in within 36 hours. Thought I might have let it go a bit cheap so added £50 when it next came up and this time it went within 24 hours. So I’ve got a little bit of a buffer if/when rates rise, which is good because I know what my tenants earn and I wouldn’t like to charge any more. As long as the mortgage is being paid off, or even close to it, I’m happy.

Looks like the housing market might cool down after that and time to invest in something else …

My heart bleeds…

Thanks to buy to let, I’m forty one and a home of my own is “just” out of reach, unless I quit my job and move north. I’m on a decent salary too.

Actually, I can’t lay the blame solely at buy to let. There’s a lack of affordable housing everywhere, ever since the government confused the price of a home with a valid measure of the health of our economy.

Thanks to buy to let, I’m forty one and a home of my own is “just” out of reach, unless I quit my job and move north. I’m on a decent salary too.

This is an issue.
We continue to support the focus of business and employment on the South East. At what point can we help lots of the housing shortages, affordability etc by providing more jobs around the country?

may well be classic “nudge” economics much loved in government circles

the change in the tax rules “nudges” out some buy to let owners with high mortgage costs – they make a decision to exit now (nudged by the tax rule) rather than a sudden exit when interest rates force them to and a potential property crash – win win win for government – no property crash, more property available to purchase for those with capital and less chance that it will plummet in value plus a steady economy

zero impact for those wanting to buy a home – maybe there will be a “trickle down effect”

Due to market forces, there is no incentive for the big housing developers to increase output, which is so desperately needed, because if they do start building more houses, supply increases and even with my basic understanding of economics, the affect on pricing means they will turn a lower profit. Unless of course, they reduce their cost to build, which is often in terms of lower material costs and quality of product.

you’re ignoring the fact that developers are individual actors, not as a cartel.

equally, it would have to be a GIGANTIC construction project from a single developer to depress housing prices in the market. you don’t chill an ocean by dumping a bucket of ice in it.

Moving jobs out of the SE appears to be a stayed aim of every government with no GENUINE effort to do so, including the civil service.
Property prices should have been controlled in the 90s but too many people were in the I’m alright Jack bracket. Thatcher selling council houses at ie discounts always seemed a highly questionable long term strategy.
In short build more and close the North South divide.