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How does Buy to Let END!


macca

What happens when generation rent retire with tiny pensions and massive rent bills!  

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6 hours ago, stop_the_craziness said:

As they rose in value he kept on upping the mortgages and taking the equity out of them and using it,

What's the betting he also claimed full tax relief on the increased mortgage interest?

Big trouble coming ...

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32 minutes ago, Hancock said:

He could sell them in different tax years, surely if he has mortgaged them up to the max then this amount over a long period will be far more than the CGT.

CGT is payable on the difference between purchase and selling prices, remortgaging wouldn't impact this.

If the properties had tripled in value since purchase and the gain was taxable at 28%, then at 85% LTV there would be a CGT liability equal to ~18% of the selling price to pay out of the <15% left after redeeming the mortgage and paying selling costs. Selling at even a wafer thin discount could take the mortgage redemption cost past 90% of the selling price.

Edit to add:

Unlike shares 2 flats can't be sold off in ladders to spread the gain over more than two tax years

Edited by Axeman123
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11 hours ago, stop_the_craziness said:

If I can offer an anecdote to explain this from a different perspective where both the landlord and the tenant gets screwed?  I have an acquaintance who is exactly the sort of lunatic IO BTL landlord that @spygirlis always on about.  In the early 2000s he bought two cheap, nasty flats with liar-loan self-cert mortgages which he has been renting out ever since.  As they rose in value he kept on upping the mortgages and taking the equity out of them and using it, along with the rental money to supplement a lifestyle beyond the true means of his actual employment.  He really does tick all the boxes.

Fast forward to 2021.  He can't sell them now because he can't afford the Capital Gains Tax.  S24 means they are no longer profitable.  Covid etc has made him wary of bad tenants.  So they are empty.  Costing him money and also meaning there are now two flats that can't be bought or rented by anyone else at the moment because he is sitting on them.   He hates them, they are the albatross around his neck that will never be gone until he dies.  If he does rent them out again then he's just the classic unpaid rent collector for the banks.

What an absolute shit show.  He's an arse for being lazy, greedy and sucked in by an evil that is greater than him.  He's suffering now and we are all suffering with him and because of him.

 

10 hours ago, Axeman123 said:

Surely, if his employment income alone wasn't enough for his lifestyle ambitions before it definitely won't be after deducting two mortgage payments every month for empty flats?

Sooner or later this scenario will come to a head, either through bankruptcy or repossesion. Failing that he sounds like a candidate for jingle mail to me, probably based on someone in a pub falsely telling him that it is non-recourse!.

What's prob missing from tge above anecdote is equity withdraw.

If the lunatic LL just leverage up in tgemid 00s, ran a btl til s24 kicked tgen, providing they are nit in

North (prices are still stick st 2004 levels) then, even with captial gains at 4p% they out to walk away with some cash.

However...

Nine if tgem gave done that. All the loon io btl were buying a place, withdrawing equity to waterfall into another, then repeating.

Even before s24 this causes s large tax liability - you cannot claim or relief against rents when you've extract cash out.

I'd guess idiot io btler , even if he bought in mid 00s has a house wheres hes extracted large chunks of equity, which, if the place was sold, would give a tax bill much larger than than tge equity extracted.

This is not uncommon.

 

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5 hours ago, Wight Flight said:

What's the betting he also claimed full tax relief on the increased mortgage interest?

Big trouble coming ...

This is the killer.

After 6 years a very dim s24 light bulb gas gone on.

Trying to explain the expensive, tax complexity of extracting equity and continue discounting the rent against it causes waaasy too brain strain.

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15 hours ago, spygirl said:

 

What's prob missing from tge above anecdote is equity withdraw.

If the lunatic LL just leverage up in tgemid 00s, ran a btl til s24 kicked tgen, providing they are nit in

North (prices are still stick st 2004 levels) then, even with captial gains at 4p% they out to walk away with some cash.

However...

Nine if tgem gave done that. All the loon io btl were buying a place, withdrawing equity to waterfall into another, then repeating.

Even before s24 this causes s large tax liability - you cannot claim or relief against rents when you've extract cash out.

I'd guess idiot io btler , even if he bought in mid 00s has a house wheres hes extracted large chunks of equity, which, if the place was sold, would give a tax bill much larger than than tge equity extracted.

This is not uncommon.

 

If HMRC are following their rule book - any equity withdrawal is never been eligible for tax relief unless its:-

1) for maintenance / improvement to the property

2) to purchase another BTL property (at which case the deductions is attached to ownership of that new property not the original one).

So the size of the bill could be a whole lot bigger than the lunatic LL would expect. 

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8 minutes ago, eek said:

If HMRC are following their rule book - any equity withdrawal is never been eligible for tax relief unless its:-

1) for maintenance / improvement to the property

2) to purchase another BTL property (at which case the deductions is attached to ownership of that new property not the original one).

So the size of the bill could be a whole lot bigger than the lunatic LL would expect. 

Indeed.

And it need normally an expensive accontant to wade thru the fuckwittery to work out whats owed.

Or they could just use the HMRC which will be very high.

 

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1 hour ago, spygirl said:

Indeed.

And it need normally an expensive accontant to wade thru the fuckwittery to work out whats owed.

Or they could just use the HMRC which will be very high.

 

With 100% - 200% fines for not reporting the tax on time I don't think any accountant will reduce the bill that much.

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Berlin but maybe relevant - referrendum (non binding) about private LLs passed by a majority, now gov't has to decide to ignore the rerults or take (possibly illegal) action.

TLDR: property purchase prices & rental costs are rising everywhere.

 

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31 minutes ago, Andersen said:

Berlin but maybe relevant - referrendum (non binding) about private LLs passed by a majority, now gov't has to decide to ignore the rerults or take (possibly illegal) action.

TLDR: property purchase prices & rental costs are rising everywhere.

 

The issue is the same, whether its Fat cunt Fergus buy 500+ houses in Ashiforf. Or BlackRock buying estates in the Sapin or Verlin.

Fergus - 1 vote.

Tenants- 1000

When ll are using girmless leverage from a girmless banking system rather than dropping all tge money down then the plebs are right to kick off.

 

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  • 2 weeks later...

Never...Buy to let is your pension.

From Telegraph today.

Rise of the retirement mortgage: banks overhaul buy-to-let rules to lure pensioners

Pensioners will benefit from property investing rule change

ByWill Kirkman25 November 2021 • 11:09am

Mortgage lenders have eased rules which had prevented many retirees from investing in buy-to-let properties.

Accord Mortgages, part of Yorkshire Building Society, has dropped its minimum income requirement for buy-to-let customers. 

https://www.telegraph.co.uk/personal-banking/mortgages/banks-make-easier-pensioners-become-landlords/

 

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On 16/11/2021 at 21:24, Andersen said:

Berlin but maybe relevant - referrendum (non binding) about private LLs passed by a majority, now gov't has to decide to ignore the rerults or take (possibly illegal) action.

TLDR: property purchase prices & rental costs are rising everywhere.

 

didnt they take in 2 million migrants? funny that..

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Buy to let has pretty much ended down here.

Unsurprisingly, those ex BTL properties don't seem to have been bought by their tenants.

As a consequence, rents are up 30% and homelessness rates have soared.

Be careful what you wish for.

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^ @Wight FlightIt's no surprise, when I was renting it suited my lifestyle, if my LL had decided to sell up I wouldn't have wanted to or been able to buy it.

A lot of folk (including in here) nhave been predicting that tennants will buy the home they have been renting if/when LL puts it on the market. This might happen but it will be a minority of cases.

 

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4 minutes ago, Andersen said:

^ @Wight FlightIt's no surprise, when I was renting it suited my lifestyle, if my LL had decided to sell up I wouldn't have wanted to or been able to buy it.

A lot of folk (including in here) nhave been predicting that tennants will buy the home they have been renting if/when LL puts it on the market. This might happen but it will be a minority of cases.

 

It will be a very small minority, most tenants just cannot afford the deposit and even fewer will meet a bank's lending criteria.

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Isn't the cure for high rents, high rents?

If rents go up to unaffordable rates and nobody can afford to pay it, how is that remedied apart from a drop in rents?

Where I am in London the rent for the generic new build flat has been pretty static for some time (at least since 2016). The brand new places often have some price premium attached but this goes away after the place has been lived in. The reason to me seems obvious, people cannot afford more.

I did read a thread on MSE (now deleted maybe out of embarassment) about people complaining about build-to-rent, signed a 3-year deal which allows for an inflationary rise every year. 

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55 minutes ago, Boon said:

Isn't the cure for high rents, high rents?

If rents go up to unaffordable rates and nobody can afford to pay it, how is that remedied apart from a drop in rents?

Where I am in London the rent for the generic new build flat has been pretty static for some time (at least since 2016). The brand new places often have some price premium attached but this goes away after the place has been lived in. The reason to me seems obvious, people cannot afford more.

I did read a thread on MSE (now deleted maybe out of embarassment) about people complaining about build-to-rent, signed a 3-year deal which allows for an inflationary rise every year. 

Rent seems to be set at just over the interest a LL will pay on his loan.

Given that the average tenant won't be able to get those rates without a massive deposit, and also will need to repay the capital, rent seems to be significantly cheaper than buying for most - who can't access an interest only mortgage.

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On 24/10/2021 at 11:20, Frank Hovis said:

I decided way back - thirty years back! - that that was the stock markets. Since refined to low fee trackers of big companies in developed economies.

I haven't changed that view though sold some nearly ten years ago to buy a house.

Was thinking about this the other day.

Lets say someone who is still working full time earning say £50K has (wisely!) done a Hovis and has their savings in index trackers.

Lets say they then see a house they like, and decide to sell say £250K of their savings to buy that house. As someone who, if they earn any more that yeat on their wage will get hit with 40% tax.

Do they not get stung for an absolute fortune of capital gains tax or other taxes? Does the government just let them 'earn' basically an extra £250K that year?

Edited by JoeDavola
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7 minutes ago, JoeDavola said:

Was thinking about this the other day.

Lets say someone who is still working full time earning say £50K has (wisely!) done a Hovis and has their savings in index trackers.

Lets say they then see a house they like, and decide to sell say £250K of their savings to buy that house. As someone who, if they earn any more that yeat on their wage will get hit with 40% tax.

Do they not get stung for an absolute fortune of capital gains tax or other taxes? Does the government just let them 'earn' basically an extra £250K that year?

Savings is a hilarious concept in this environment.

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18 minutes ago, JoeDavola said:

Was thinking about this the other day.

Lets say someone who is still working full time earning say £50K has (wisely!) done a Hovis and has their savings in index trackers.

Lets say they then see a house they like, and decide to sell say £250K of their savings to buy that house. As someone who, if they earn any more that yeat on their wage will get hit with 40% tax.

Do they not get stung for an absolute fortune of capital gains tax or other taxes? Does the government just let them 'earn' basically an extra £250K that year?

 

You can put £20k cash into a S&S ISA each tax year.

After fifteen years this will be £300k invested but over the last few decades the likelihood is, if invested in global stock markets, it will have at least doubled to £600k.

There is no income tax or capital gains tax whilst it remains in the ISA and nor is there any taxation upon withdrawal.

You can simply, without needing to pay out for an IFA as you would with a SIPP, have that whole £600k paid into your bank account to spend as you will. Including upon a house.

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1 minute ago, Frank Hovis said:

You can put £20k cash into a S&S ISA each tax year.

After fifteen years this will be £300k invested but over the last few decades the likelihood is, if invested in global stock markets, it will have at least doubled to £600k.

There is no income tax or capital gains tax whilst it remains in the ISA and nor is there any taxation upon withdrawal.

You can simply, without needing to pay out for an IFA as you would with a SIPP, have that whole £600k paid into your bank account to spend as you will. Including upon a house.

Thanks.

So basically once money or shares is ringfenced like that it's completely protected from capital gains tax.

Which means that basically everyone who can, should be maxxing out that £20K ISA every year unless they enjoy funding this corrupt government.

Why the hell do they not teach this stuff in schools. Oh wait I can guess why.

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Just now, JoeDavola said:

Thanks.

So basically once money or shares is ringfenced like that it's completely protected from capital gains tax.

Which means that basically everyone who can, should be maxxing out that £20K ISA every year unless they enjoy funding this corrupt government.

Why the hell do they not teach this stuff in schools. Oh wait I can guess why.

 

Yes, that is the case.

I suppose that I have the advantage of having been around when such vehicles were first initiated by the government so I could track what changed each year.

The original IIRC was John Major as chancellor bringing in the TESSA (tax exempt special savings account) which was a £3k annual limit and cash only.

Though interest rates were decent then so I did put money into them.

 

Tbh I would absolutely love to give tax avoidance lessons in schools as my way of fighting back! B|

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10 minutes ago, Frank Hovis said:

Tbh I would absolutely love to give tax avoidance lessons in schools as my way of fighting back! B|

As I have said before the working (and to a lesser extent middle) classes are either completely ignorant of all this or are too scared of it.

My parents have every single 'asset' bought that they'll ever need to buy; a house too big for them, a new-ish car, and 4 pensions between them. They have just over £100K in the bank in cash that they have no use for, but they would never in a million years put it into the stock market. So that money is definatley getting destroyed over the next decade as they're not going to use it to buy a house or anything.

They should really actually, and I'm not joking here, be giving it to me and my brother to max out our ISA's every year, with us just keeping tabs on what they've given us with the understanding that we will give it all back to them if they ever need it. Basically inflation protection combined with tax avoidence - both income and inheritence.

Even my brother with his further maths A level and his engineering degree sees the stock market as too risky.

And this I think it at the core of the UK obsession with houses. It's the only appreciating asset people know of.

Edited by JoeDavola
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30 minutes ago, JoeDavola said:

Was thinking about this the other day.

Lets say someone who is still working full time earning say £50K has (wisely!) done a Hovis and has their savings in index trackers.

For a lot of people, if you have kids, £50K is effectively the upper limit of earnings. That is unless you really, really like paying tax. Child benefit clawback between £50-£60K means that your marginal rate can up be up to around 70%. For the moment dumping anything over £50K into a pension is the way to go.

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