To ask for your experience as a buy-to-let landlord?

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I'm thinking of buying a house or two and renting them out to hopefully fund my retirement in 15 years or so.

Would appreciate any advice or sharing of experience - good and bad!

That example assumes the individual has no other income and is a lower rate tax payer.

"ReallyTired you've mentioned twice up thread that loans to buy shares with are not tax free. This is untrue if you are a professional share dealer; such borrowing is a business expense. "

How do you define a professional share dealer? How do you define a business? The average Joe who buys shares does not get any tax relief if he choose to use a loan to buy shares. Most landlords are small fry. The income from their properties would not be enough to support an adult.

"For large portfolios, this could mean a net trading loss and bankruptcy. Good news for tenants living those properties, eh?"

Its up to people to decide how close to the wind they fly. Tax relief is not being complete removed, just phased out. There is sense in what the govement are doing because to completely scrap tax relief in one foul swoop would cause a lot of distressed sellers. There has been plenty of notice of the changes.

A 40% tax payer will get 20% tax relief on interest payments. An interest only mortgage where a buyer has borrowed 160K at 4% is roughly 6.4K. Tax relief will be cut from 2.56K to 1.28K. The extra tax is a little over a grand. If a slightly larger tax bill makes a landlord bankcrupt then surely he/she is better to sale before interest rises kick in.

"I do not agree with the tax changes; you are being asked to pay tax on money you haven't earned. Which other business is asked to do this? And it will affect 20% tax payers. If your mortgage makes up the bulk of your income, you currently pay tax on a tiny amount. In future, you will pay full tax on the whole amount with a small 20% rebate on the interest portion. A real life example: rental income 30k, interest accounts for 15k. Under current rules, you pay tax on 15k, I.e. The amount you have physically in the bank. Under new rules, you'll get a 20% credit on £15k =3k, and then you pay tax on the remainder = 27k, and you still have to pay 15k in interest. "

To earn 30K by working you would have to pay a load of national insurance. You would also have costs in going to work. I would love to be in a situation of having 30K rental income, even if I had to pay 15K interest. In my area you would have own 5 buy to lets to make that achievable. (Ie. allowing for expenses like service charges, maintaince) Its still a very easy way to earn 15K. Looking after 5 sets of tenants would be work, but nowhere as much work as a proper job.

I doult you would find a non landlord opposed to the tax changes. The average tenant is losing far more in tax credits.

It is a ridiculous change but only affects higher rate tax payers or those with no mortgages on their buy to lets. It means you pay tax on profits you don't make so you have to form a limited company instead and then the rules don't apply. As ever we change tax law and make masses of complexity. Landlords as much as any other business are constantly involve in running the business from replacing boilers to painting walls. When i was one it was harder work than the day job.

All the landlord bashing threads always make me feel crap. We bought a property back in 2006, just before the crash. Eight years and two kids later, with property prices here barely having increased at all and very little selling, we got permission to let and bought a bigger place. Our aim wasn't to make money, but to reduce the amount of negative equity before selling.
It's not a moneymaker for us by any means. Although we do have people talk to us like they imagine the whole rent cheque is our pocket money . The rent covers the mortgage, tax and some left over for maintenance. I'd hoped that we could sell next year because it does feel like a millstone round our necks. But we got the loveliest tenants (who are very settled there and have asked us if they could have first refusal when we were selling), and they are now expecting a baby which they explain have put a spanner in the works with regards to saving a deposit. So it might be something we can't consider until 2017 or 2018 now, unless we want to be the baby-evicting scumbags that some MN posters seem to think comes with the territory.
To answer the OP, in short, it's not difficult to be a BTLer, provided you get yourself up to date with the legislation and prepare yourself to spend money maintaining the house to a good standard. But depending on where you live, it mightn't be the best or easiest way to earn money either.

Yes, it's a very interesting stance on MN from the many who hate landlords. I think it is just that people like things to be black or white - good or bad and latch on to something as an idea. If there were no landlords they could afford to buy properties locally as they would be very cheap.

Plenty of couples marry and both have a flat so they move into one and let out the other. it is not that they have decided to become some kind of evil exploitative Rachman figure. Others move for work an rent and let out the property or move abroad to work but keep the London flat in case they move back to London later for work.

"Landlords as much as any other business are constantly involve in running the business from replacing boilers to painting walls. When i was one it was harder work than the day job."

Really... Other than being a footballer's throphy wife what job is easier than being a landlord?

" As ever we change tax law and make masses of complexity. Landlords as much as any other business are constantly involve in running the business from replacing boilers to painting walls. When i was one it was harder work than the day job."

Tax relief will still exist for maintaince. How hard is it to replace a boiler. Its not as most landlords are corgi registered engineers. The most difficult thing about replacing a boiler is that it costs 2K or roughly 3 months rent. Its one of those job that needs doing every 15 or so years. A sensible landlord has a maintaince fund and just like the council you plan for replacement.

Not exactly buy to let, but I rent out my parent's property and the rent goes directly to pay care home fees. There's no profit in it for us, but at least it pays the majority for the care home that otherwise would not be possible. I try to be completely reasonable and helpful/understanding with tenants, but so far have been unlucky. Always deal with any issue immediately and so on.

I have had two sets of tenants who both would constantly be in arrears with their rent. Usually at Christmas and/or holiday times. Although one set of tenants did eventually pay up, although late, the others were almost always one or two months behind. This would not be so bad except for the fact we CANNOT be late with the care home fees. Therefore the care home fees have had to be paid using my savings and/or credit cards.

Yet despite this it always seems to be the landlord that is in the wrong. Of course there are awful landlords but there are awful tenants too. There just seems to be little help and no sympathy for a landlord, who are often seen to be a nuisance by merely asking for their due rent. I felt with both tenants that as a landlord I would be expected to accept the fact the tenants were having a difficult month financially, and I should be perfectly happy that they were a few weeks or few months behind with their rent. It has been hard for me to understand this, as when I go to a shop/pay for a service if I don't pay, or ask to pay late, then I don't get the item. Why is a landlord unreasonable for asking for their rent on time>

Anyway, it hasn't worked out so have decided to sell the property and use the money to build a "granny annex" and have carers coming in. It isn't really what any of us would like, and is less than satisfactory but as I say care homes accept no excuses for late payments so we have no choice.

So I shall be an evil landlord no more. Never again.

ah, the old 'sparkly tat v boring bills' problem. Lot of it about.

you may have players who know the system and work just how late their rent is. If not, get on with that eviction. I hope you have legal expenses and malicious damage insurance - you'll need one of those, hopefully not the other.

the Rachmann thing always amuses; he died in 1962!! Many laws have come in since, and his methods of removing tenants have long since been illegal. The last gap has now been closed with the removal of the possibility of 'revenge evictions', although as I always say, if you don't rent a dump from a crook you starve the crooks of business.

JanetBlyton I completely agree. Interest rates can not and won't stay low indefinitely. It's not sustainable. I think one of the major problems Mark Carney has is we have a generation that has grown through very low rates. Without meaning to sound condescending at all. There is a generation that knows nothing else. A generation that spends all their income month on month and would struggle to find an additional £200/£300 a month to pay the mortgage if BoE increased rates overnight. It's frightening really. That's why I think increases will be gradual to help people adjust their monthly outgoings.

I can't remember who mentioned it but I also agree the new tax changes only really impact HR earners. I also think anyone at that level with be able to afford advisors to help mitigate against any potential impact on their business. After all they have nearly 2 years to work through it. Personally I don't think the changes will make a blind bit of difference to the rental market. Large property owners will just reserve at a higher level and ensure they have the cashflow to manage their portfolio better. Alternatively they will simply start flipping properties for a profit.

Or wait in till property owners that have overstretched themselves go bust then buy their properties.

The buy to let owners tend not to be allowed to over stretch themselves. The lenders are not keep to lend to those who operate through a company and plenty now limit buy to let numbers to 5 properties and just about all require 25% deposit so unless prices dropped below 25% they would not go bust. They might have to sell if they are a 40% tax payer after the changes if they do not incorporate and if interest rates rise to nearer 8%. I was paying £90k interest and mortgage costs a year on an interest only basis on my house after the divorce when rates were about 6% not that long ago (never marry a man who earns less......)

It is never an easy issue and house prices fall. They tend over time to rise again.

I know one example where his got 15 properties (in the same area, imagine if that area goes don hill). His bought every property (we are in the north and the properties are worth £80 to £100K) as a cash buyer then dragged the equity out on a 60% Bank share. That's were I heard about HSBCs 3% rate. So Banks are still allowing people to overstretch. His completely relying on the rental income to pay the mortgages. If the rates increase and he loses 2/3 tenants he will be stretched.

ReallyTired your example upthread of how the tax relief will change is wrong. It is being cut from 100% tax relief to 20% tax relief, meaning tax is due at the prevailing rate on the remaining 80%. And this is on money that hasn't even been earned. Give me an example of any other business which is taxed on what are effectively losses?

Also, ReallyTired your comment about NI suggests that landlords don't have to pay it? Of course they do, just as any self-employed person pays it on their self assessment. Plus they pay income tax like everyone else. The rhetoric from some people on MN seems to be that rental income is exempt from normal income tax rules.

GymBunny as my example upthread showed, it won't just affect high income earners. If you are an accidental landlord (with one property in addition to the one you live in) and that property has a significant mortgage on it, your tax bill will increase. It's a complete fallacy that it will only affect rich landlords. And the options for mitigating losses for those rich landlords will for many be to accept the CGT payable on incorporation or sell up. As I said earlier, what about the tenants who will then be evicted? And don't think some landlords won't put rents up. It will happen.

specialsubject yes I have one of 'those' tenants at the minute. Two months rent paid no problem, then she has ducked and dived ever since. She has been served notice but the agent has made a series of mistakes. So, I will not only be getting rid of the tenant but probably the agent too. You live and learn.

My tenant is a single mum with three small children. I cannot claim to understand what is going through her mind; if I were in her shoes I would pay the rent before anything else. According to the neighbours she enjoys hitting the clothes shops on a Saturday. Sparkly tat before boring bills indeed But of course according to MN law, I the LL will be the devil when she's evicted because what kind of bastard evicts a family? Even when the tenant is a thief, liar and all round idiot.

mrsjorah ouch. And of course you will then think twice and three times before renting in future to someone in a similar position, so she kicks everyone else in the teeth too.

I fear you may be in for a long battle and I hope you have the appropriate insurances to cover the costs.

Luckily it was only a 6 month tenancy so if the worst comes to the worst her tenancy will expire and a fast eviction follow. But yes, if I'm honest, it has put me off another tenant in her situation. I have two friends who also had problems with similar tenants so I'm thinking it's a third strike, rightly or wrongly.

um...never had to do it but I think you need to issue her section 21 to end on the last day of the tenancy. If you do nothing she moves to a rolling tenancy, then your 2 months begins again.

assuming she goes at the end of the section 21, which of course she may not.

To answer the OP question, if you can afford to get into BTL, I recommend you do so.
Don't listen to anyone telling you otherwise, especilly to those citing "immoral nature of capitalism", as they simply can't afford it themselves and are jealous. Or they read Guardian too much.
All this leftist propaganda is tedious and completely fake.
I should know, having grown up in a communist state, all about that propaganda and about the reality of living in such a state...

In my personal experience, whilst BTL is not always hassle-free, it's worth the effort and it's worth the risk, in the end.

Generally, people do well in BTL, as long as they choose their tenants carefully, treat their tenants well, and are prepared to invest time and effort into maintenance.
From experience, it really helps enormously if you or your partner are good at DIY so that simple jobs can be done yourself. This saves a fortune in labour / contractor costs.
(obviously gas, electrics can only be done by registered professionals, but there is nothing stopping you from doing anything else yourself).

With regards to the latest tax changes, unless you AND your partner are BOTH higher rate taxpayers, I wouldn't worry too much.
Just buy the BTL property in the name of the person who is NOT a higher rate taxpayer (or who is not expected to be the higher rate taxpayer from 2017 onwards).
If something changes in your family circumstances by 2017, you could always move property between spouses, without any capital gains tax liability. (note that it only works for spouses and civil partners, not unmarried partners)

I would also recommend to NOT furnish your newly purchased BTL property.
The "wear and tear allowance" is being removed as of the next tax year. It makes sense / works out cheaper to let the property unfurnished.
Less hassle also, and it gives tenants a chance to make property "theirs".

Also, if you decide to change the kitchen after you buy, make sure any new appliances (washer, dryer, dishwasher etc) you install are built-in, NOT free-standing.
I am not going to go into details here (it's to do with certain extra-statutory concessions being removed by the inland revenue). Suffices to say that the tax treatment is more beneficial for something that is "part of the kitchen" as opposed to free-standing white goods.
Please consult any tax accountant if in doubt.

And couple more practical points:

• if you are not very good with taxes, probably best to find a competent tax accountant to deal with your tax returns;
• remember once you own a BTL you have to complete the tax return each year, even if you didn't have to do so in the past; same goes for your partner if you decide to buy in joint names;
• if using an estate agent, best to find one specializing in rentals only (rather than a big firm mostly making money from sales, they often treat their rentals as "poor sister"), aim to find an agent who will take on the full management for appx 6% charge, negotiate if they want to charge more - they would rather have your business for 6% fee than no business at all;
• register on various landlord websites (almost always free to register); propertyhawk is particularly good in my opinion, they offer free rental agreement templates and masses of useful advice in every area of BTL.

Good luck to you!
This investment area is not risk free, but neither is any other investment.
If in doubt, always seek professional advice.

Legal Disclaimer: all above stated is personal opinion and does not constitute professional advice in any way or form.

wow - would love to know where the agents that charge 6% for full management are, and what kind of service you get for that!

special she has been given notice for non-payment AND told that her tenancy will not be extended / renewed.

To specialsubject
In certain suburban areas (zone 4-6 Greater London) there are agents who offer full management service for around 6% fee.
When I say full management it is exactly the same service as others offer for usually around 12%-13%.
Some high street names would match that if you negotiate nicely, some won't, but it's possible to pay less than 12% fee which, in my view, is too much for the amount of work involved.

I don't advertise anyone's services by the way, and won't be giving any names etc, before anyone starts.

Also, I always look at allagents website reviews (it is an independent website), it's a useful tool when choosing an agent.

Or, better still, self-manage, if you have spare time and energy. It's not that difficult but inevitably, someone, at some point, will dial you telling of a massive plumbing issue.
Usually happens during your summer holiday, in the middle of the night, while you are on a remote Greek island with poor internet connection and bad signal...
So it's imperative to have someone (a family member, a friend) who can take over while you are away.

In expensive areas like London 6% of the rent is probably more than 12% of the rent would be. A property with a low rental value is just as much work to manage well. It is the size of property and number of people that affect the amount of work.

In my area a landlord typically pays 10 to 12% for fully managed.