How does Buy to Let END!

[Noallegiance]

2 hours ago, Frank Hovis said:

 

I certainly agree about rising daily costs.

I either don't agree with or don't fully understand the rationale for asset deflation. Not sure.

 

Though I am expecting a mini-crash in Cornwall seaside house prices, which includes mine, because the reason for their recent boom was Covid / Lockdown (wfh, staycation) and when that goes away then so do the rises.

For me it ties into the inflation cycle thread.

We've had 40 years of money flowing to unproductive financialised assets with disinflation. Borrowing has had a low cost.

We're moving to a higher rate cycle and money will be flowing to productive assets.

Stuff that can only be bought with borrowing will have a falling price ceiling because that ceiling has only risen due to out of control credit creation being funnelled to them.

[Frank Hovis]

2 minutes ago, Noallegiance said:

For me it ties into the inflation cycle thread.

We've had 40 years of money flowing to unproductive financialised assets with disinflation. Borrowing has had a low cost.

We're moving to a higher rate cycle and money will be flowing to productive assets.

Stuff that can only be bought with borrowing will have a falling price ceiling because that ceiling has only risen due to out of control credit creation being funnelled to them.

 

I like the logic however so much UK residential property has been bought from previous equity gains that there is an upper market of "equity swapping" where nobody is borrowing to buy.

Plus you have landlords, and now corporations, buying properties outright and renting them out.

The effect of rising interest rates might be to force people who might have previously bought into renting whilst these landlords keep buying for cash.

I know that's only talking about houses but that's the only game in town in the UK.

The only thing that I can see crashing this market is a swingeing land value tax on the owners as that will crash it from the top down.

I'm not expecting such a tax any time soon.

[Bilbo]

As l noted on other thread EPC must be at least a C before it can be rented in 2025.

Landlords already must know this won't be cheap on all those old terraced homes. £7600 average per dwelling.

https://www.landlordzone.co.uk/news/private-rented-properties-cost-on-average-7600-to-upgrade-to-epc-band-c-official/

 

[Wight Flight]

6 hours ago, Bilbo said:

As l noted on other thread EPC must be at least a C before it can be rented in 2025.

Landlords already must know this won't be cheap on all those old terraced homes. £7600 average per dwelling.

https://www.landlordzone.co.uk/news/private-rented-properties-cost-on-average-7600-to-upgrade-to-epc-band-c-official/

 

Yet another stupid intervention with unintended consequences.

Twats.

[Boon]

One funny thing to watch will be landlords trying to exit, but cannot.

Something like this I have in mind:

https://www.rightmove.co.uk/properties/113109797#/?channel=RES_BUY

This kind of flat is the absolute pits. In fact at some stage in the next generation it will most likely be demolished and replaced with something better.

But let's pretend that won't happen and look at it from an investment perspective. I think regular tenants would not consider this, as you could most likely rent a 2 bed flat in what used to be a house for £1k. Thus the discount would have to be significant to get them in. Maybe £700-800.

So you are probably looking at housing benefit, max is £1k a month.

£12k a year gross returns, but for that there is a risk these will be the tenants who have the least reliable payment profiles, also may incur higher than average repair costs.

I don't even think this is a good investment at £120k (which would be 10% gross). 

[spygirl]

9 minutes ago, Boon said:

One funny thing to watch will be landlords trying to exit, but cannot.

Something like this I have in mind:

https://www.rightmove.co.uk/properties/113109797#/?channel=RES_BUY

This kind of flat is the absolute pits. In fact at some stage in the next generation it will most likely be demolished and replaced with something better.

But let's pretend that won't happen and look at it from an investment perspective. I think regular tenants would not consider this, as you could most likely rent a 2 bed flat in what used to be a house for £1k. Thus the discount would have to be significant to get them in. Maybe £700-800.

So you are probably looking at housing benefit, max is £1k a month.

£12k a year gross returns, but for that there is a risk these will be the tenants who have the least reliable payment profiles, also may incur higher than average repair costs.

I don't even think this is a good investment at £120k (which would be 10% gross). 

I dont think its sellable.

Its definitely not mortgageable - hence cash buyer.

50k tops - to live in for a few years then walk away.

 

[Wight Flight]

1 hour ago, Boon said:

One funny thing to watch will be landlords trying to exit, but cannot.

Something like this I have in mind:

https://www.rightmove.co.uk/properties/113109797#/?channel=RES_BUY

This kind of flat is the absolute pits. In fact at some stage in the next generation it will most likely be demolished and replaced with something better.

But let's pretend that won't happen and look at it from an investment perspective. I think regular tenants would not consider this, as you could most likely rent a 2 bed flat in what used to be a house for £1k. Thus the discount would have to be significant to get them in. Maybe £700-800.

So you are probably looking at housing benefit, max is £1k a month.

£12k a year gross returns, but for that there is a risk these will be the tenants who have the least reliable payment profiles, also may incur higher than average repair costs.

I don't even think this is a good investment at £120k (which would be 10% gross). 

That is a 1 bed flat. They have nicked the dining room to make a second bedroom.

not for me.

[HousePriceMania]

How does BTL end...

 

Have a look at the "ashington fire sale" on TOS...looks like it's just ended!!!

 

Edited November 9, 2021 by HousePriceMania

[Axeman123]

23 minutes ago, HousePriceMania said:

How does BTL end...

Slowly at first, and then suddenly all at once it would appear!

Hopefully just the first crack in the dam.

[HousePriceMania]

6 minutes ago, Axeman123 said:

Slowly at first, and then suddenly all at once it would appear!

Hopefully just the first crack in the dam.

 

[Axeman123]

2 minutes ago, HousePriceMania said:

 

The Italian Job ending is a good metaphore for portfolio BTLers trying to deleverage or exit. We have all heard the film-buff theories of how to rescue the gold (eg lean out of the front to pile soil/rocks in as a counter weight, then the lightest person goes carefully to the rear to fetch gold bars to the front one at a time, next start hijacking vehicles as they come along etc).

The difference for BTL is that for them they are one of thousands of buses hanging off the same cliff and, by selling at a loss first, others can throw weight from their own bus into a neighbouring one!

[spygirl]

5 hours ago, Axeman123 said:

The Italian Job ending is a good metaphore for portfolio BTLers trying to deleverage or exit. We have all heard the film-buff theories of how to rescue the gold (eg lean out of the front to pile soil/rocks in as a counter weight, then the lightest person goes carefully to the rear to fetch gold bars to the front one at a time, next start hijacking vehicles as they come along etc).

The difference for BTL is that for them they are one of thousands of buses hanging off the same cliff and, by selling at a loss first, others can throw weight from their own bus into a neighbouring one!

Not really.

High leveraged io btl is more -

 

https://www.housepricecrash.co.uk/forum/index.php?/topic/205887-a-goodbye-to-all-that-buy-to-let/#comment-1102766544

Nails it.

Soon as s24 came out, io btl is fucked.

Theyve had 6 years to close their position.

[steppensheep]

11 hours ago, HousePriceMania said:

How does BTL end...

 

Have a look at the "ashington fire sale" on TOS...looks like it's just ended!!!

 

They look like they're going to auction. Auctioneers always put fantasy low guide prices on, to suck in the punters.

Edited November 10, 2021 by steppensheep

[AlfredTheLittle]

13 hours ago, spygirl said:

Not really.

High leveraged io btl is more -

 

https://www.housepricecrash.co.uk/forum/index.php?/topic/205887-a-goodbye-to-all-that-buy-to-let/#comment-1102766544

Nails it.

Soon as s24 came out, io btl is fucked.

Theyve had 6 years to close their position.

Hasn't quite worked out that way unfortunately, instead we have landlords owning through companies, or properties people used to be able to live in turned into holiday homes. Both those solutions get round the rules.

Record house prices and rental shortages. Certainly when I was looking for a rental this summer it didn't seem like, 6 years on, the policy has had any positive affect.

[spygirl]

14 minutes ago, AlfredTheLittle said:

Hasn't quite worked out that way unfortunately, instead we have landlords owning through companies, or properties people used to be able to live in turned into holiday homes. Both those solutions get round the rules.

Record house prices and rental shortages. Certainly when I was looking for a rental this summer it didn't seem like, 6 years on, the policy has had any positive affect.

No, not the IO BTL crew.

LtdCo mortgages are much more expensive and harder to get.

To move a house owned as an individual to a LtdCo would require it to be sold, generating capital gain - or loss.

Show me any IO BTLer whos manged to move their portfolio to a LtdCo.

And HMRC can just rightly say - This was a n attempt to escape taxes- and charge the LL anyhow.

IO BTL mortgages are nothing more than commercial bridging loans, and should be charged as such - 2%/m compounding.

 

 

 

[AlfredTheLittle]

17 minutes ago, spygirl said:

No, not the IO BTL crew.

LtdCo mortgages are much more expensive and harder to get.

To move a house owned as an individual to a LtdCo would require it to be sold, generating capital gain - or loss.

Show me any IO BTLer whos manged to move their portfolio to a LtdCo.

And HMRC can just rightly say - This was a n attempt to escape taxes- and charge the LL anyhow.

IO BTL mortgages are nothing more than commercial bridging loans, and should be charged as such - 2%/m compounding.

 

 

 

My main point is that nothings changed, so if s24 was supposed to help people own property by lowering prices, it hasn't worked. I doubt that was the aim in any case, given that Cameron very clearly wanted to pump house prices as high as possible. 

What you're saying about HMRC charging tax on the interest even if the property is in a company is clearly complete nonsense. Apart from that I don't disagree with what you're saying, but it's what you wish was happening rather than what's actually happening and it's clear now that s24 hasn't crashed the housing market at all, nor has it improved the situation for renters.

 

Edit: I think I get what you're talking about, you're saying leveraged landlords will be toast in future. We all hope that's true, s24 hasn't achieved it though

Edited November 10, 2021 by AlfredTheLittle

[stop_the_craziness]

51 minutes ago, AlfredTheLittle said:

Record house prices and rental shortages. Certainly when I was looking for a rental this summer it didn't seem like, 6 years on, the policy has had any positive affect.

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.

Edited November 10, 2021 by stop_the_craziness

[spygirl]

27 minutes ago, AlfredTheLittle said:

My main point is that nothings changed, so if s24 was supposed to help people own property by lowering prices, it hasn't worked. I doubt that was the aim in any case, given that Cameron very clearly wanted to pump house prices as high as possible. 

What you're saying about HMRC charging tax on the interest even if the property is in a company is clearly complete nonsense. Apart from that I don't disagree with what you're saying, but it's what you wish was happening rather than what's actually happening and it's clear now that s24 hasn't crashed the housing market at all, nor has it improved the situation for renters.

 

Edit: I think I get what you're talking about, you're saying leveraged landlords will be toast in future. We all hope that's true, s24 hasn't achieved it though

No, everything has changed. Rad the HPC link.

The maths behind S24 are frog boiling.

Cant dfind the link but the FT did some blurb when S24 came into full force - 2020 - where HMRC expressed their disappointment that 95%+ of LL had registered to pay tax.

Then covid happened and LL tax issues were puished to the back of the queue.

Now UKGOV is chasing revenue.

 

 

 

 

[Wheeler]

20 minutes ago, stop_the_craziness said:

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.

If the banks repossess then does that count as a disposal for CGT? I'd assume it does.

[Axeman123]

1 hour ago, stop_the_craziness said:

II 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 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...they are the albatross around his neck that will never be gone until he dies. 

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!.

[spygirl]

2 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!.

Each 100k of IO BTL is probably costing  him 300/m for each 100k of IO mortgage.

The problem with IO BTL is always - How do you close your position.

You need to empty the house before you can sell it. But most BTL dont have enough profits to cover voids for properties, some of which may take years to sell.

Then youve the CGT to sell.

Selling a BTL can also trigger the bank to pursue a consolidation/leverage reduction process too.

 

[Wight Flight]

4 hours ago, stop_the_craziness said:

Fast forward to 2021.  He can't sell them now because he can't afford the Capital Gains Tax

I always though Capital Gains tax should be triggered on remortgage - after all, you have a professional valuation, and have clearly made a gain - and have the spare money.

I can see this being something HMRC go for, as it brings the wonga into their coffers rather than some other party 10 years hence.

[Axeman123]

49 minutes ago, Wight Flight said:

I always though Capital Gains tax should be triggered on remortgage - after all, you have a professional valuation, and have clearly made a gain - and have the spare money.

I can see this being something HMRC go for, as it brings the wonga into their coffers rather than some other party 10 years hence.

I suspect this is the kind of thinking behind governments wanting to tax unrealised gains, plus of course desperation for any source of tax revenue.

You already have withholding taxes on cashflows that might be tax avoidant which can be offset against those taxes when paid, so I don't see any moral issue with something similar when borrowing against unrealised gains.

[Axeman123]

1 hour ago, spygirl said:

The problem with IO BTL is always - How do you close your position.

Hence the manic chanting of their mantra:

"house prices only go up, you can't go wrong with bricks and mortar"

This is essential to drown out the voice in the back of their head saying:

"someday you will have to pay this borrowing back"

[Hancock]

2 hours ago, Wight Flight said:

I always though Capital Gains tax should be triggered on remortgage - after all, you have a professional valuation, and have clearly made a gain - and have the spare money.

I can see this being something HMRC go for, as it brings the wonga into their coffers rather than some other party 10 years hence.

 

6 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.

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.