Btl is a fools game these days

[DyslexicScientist]

It seems clear that the gov are targeting this, with removing the interest tax relief, charging 3% extra stamp duty on second homes.

Its no surprise as they will care less about someone with 10 btl then 10 people who want to buy.

I know a lot on here have portfolios, are people buying more? Selling? Or keeping steady?

currently they may not 'just be meeting the mortgage payment', but after the tax changes in 2017 their mortgage WILL be costing them a significant amount of money per year (thousands) - before all the usual rental risk factors are considered.

Those mortgaged landlords with one or two properties that have fixed rates and thought they knew what to expect ahead will receive significant tax bills. Significant number of such landlords are risk averse , and this is why they thought property was safe. It was, but it's changed big time and it is a mugs game to get into now.

I've known people I've explained this to to who won't actually believe it will be costing them money - doesn't make sense to them. mortgaged landlords are in for a shock, and this is why I'd urge people to see an accountant as it seems difficult for your average buy to letter to really believe what's going to happen.

Outside of London my places were purchased at discounted prices because they were in terrible condition. I renovated and rent out getting about £800 a month based on £90k investment. Earlier this year I bought 2 places in Liverpool for £45k each and spent £35k to renovate both places. I rent them out for £750 and £800 a month. That is a bloody good return. The houses are worth about £120k. I don't want to sell.

I have zero interest in buying a high end home to rent out. People who can spend £3k a month in rent buy their home.

Supermum- not asking for answer obviously - but did you work how much that will cost you in tax from 2017? It sounds as if it will be significant. Some people I've helped work out their tax, have found the bill is higher than the rent coming in and costing them more than coming in.

People don't believe it because it is such a big change and seems unfair - but it really is happening. I hope your accountant is warning you ahead of time is before 2017. A lot of accountants have over the years heavily encouraged btl, now writing on wall and know to exit quietly.
you'd almost think the people in the know are keen not to pass on too much information currently before passing on their knowledge of full impact. Ask accountant for precise figures of cost would be my advice. Seems so many are in dark

Then you'll pay tax Want2b, fair enough. Or simply make yourself a Ltd company and be exempt.

I've no sympathy with the rank amateurs who are about to get burned without realising it, taking advantage of a very specific and short term set of circumstances ( the level of government intervention) and then claiming free market economics proves how moronic they are!

Or simply make yourself a Ltd company and be exempt.
How?
If the houses are transferred to the company they will instantly incur stamp duty.

Moving current properties to limited company incurs stamp duty on the property being moved into it, expensive. Ok going forward for new ones but people don't seem to realise this I've found. There are other problems as you'd have to get business mortgage - more expensive , that's if you can get one

look at the values of the property, Now I am keen to be corrected but I think she may avoid SD altogether.

Either that or you would have to decide if the short term cost of the SD is worth it.

You incur stamp duty based on the value of the home being transferred. I paid about £10k in stamp duty for everything to be moved over. Very happy I did it. Financially I find it easier to manage.

Mortgages are attainable for me because I have a good history. I might not reside in the UK but the offshore UK banks are happy to lend using the same BTL mortgages available to UK residents. The loan officer knows me at this point.

Just looked it up, Want2b you should only pay SD on anything worth over £125,000. Good for you if you already did this, much better move.

I've no sympathy with the rank amateurs who are about to get burned without realising it, taking advantage of a very specific and short term set of circumstances ( the level of government intervention) and then claiming free market economics proves how moronic they are!

I see your point but I feel you are being unfairly critical.
It seems to me that people have been lured into btl, it looked like a really safe bet and you could get a letting agent to deal with much of it.
Sure people ought to have done their homework but people are lazy and thinking about anything to do with maths, economics, tax, law, well it just hurts your brain doesnt it

Even experts are often caught out, to understand economics you need a good grasp of chaos theory (whatever that is)

I think btl ll's have been handed a poisoned chalice by our evil (lizard) overlords

Well that's assuming she'd be able to get suitable buy to let mortgages in the company structure. The reason a btl mortgage is cheaper outside of a company is they can come after your primary residence too. Inside a company (limited liability) they have higher risk as not secured on your home and will charge higher interest rate.
Re stamp duty-
If a property costs £45,000 then 3% on the entire and whole £45,0000will be charged.
The stamp duty will be free up to £40,000 for landlords, then at a pound over 40,000 will incur entire 3% landlord stamp duty. It was thought initially that the first 40,00 was exempt and the 3% started above that, but is not the case.

There are various other drawbacks to being a company too, and for average investor style btl would not suit. Again people need to ask pertinent questions of an accountant -don't rely on them offering all this info, unfortunately.

I hear btl say converting to a company, as if that solves things - professional advice needed as not generally suitable or cost effective. Suits people that genuinely are running a company preparing accounts, turnover, dividends etc different tax structure, no flipping primary residence, corporation tax- not the nirvana portrayed for this type of investment the average one or two buy to letter is holding

I don't think I'm being overly critcal and I don't think this is a poisoned chalice.

Cash buyer, no mortgage, btl is fine. Mortgaged Ltd firms will be fine.

What really rankles me is that the tax regulations on second homes and rental properties should have been changed years ago, the fact that they have been given similar exceptions as proper capital investment has been massively detrimental to the housing market and the economy as a whole.

Buy to let mortgages will be under fire over next few years. It has been reported lots, but lenders continue to lend to people that aren't fully informed on Basel III heading our way. I wouldn't rely on the fact a mortgage product is currently available to prove its a safe bet. Buyer beware and do homework. Im sure you wouldn't be surprised to have heard of unscrupulous people in charge of lending right up until their hands are physically tied and prevent them from continuing to lend - eg American sub prime .

Lurker - I did it 2 years ago because I rent one house out to a family who have a disabled child in the village I grew up in plus I have 5 acres of land I want to build family homes on for friends who want to live close to family but can't afford to buy or rent.

Here in the U.S. I can't offset losses unless in a limited company and mortgage wise it's easier for the bank to lend against the assets as its a lower LTV. I'm finding now that it's just easier to manage. I don't go out looking to buy. I had Liverpool council call me asking to buy the places because Im easy to work with and treat tenants with respect. I get calls from Chester, Wirral and Manchester councils too because they are fed up of the housing authorities being greedy. As an example, I didn't ask for any discounts on the houses they offered to me and I offered a clause that they get 50% of the capital gain if I sell in the first 10 years. HAs never do this. After closing the council told me the HA said they would only pay the asking price if the council paid for renovations!

Will Basel III have that much of an impact? I thought the recent stress tests showed most British banks were ok on levels of capital. Also the thing is with self regulation is that they can all pay lip service to it, doesn't actually mean that it will happen.

I don't think the market will crash because of this like others. I think it will remove some of the demand pull inflation though.

It's not easy to borrow money for a BTL. While I have an established relationship, the reason I have an easy time getting a mortgage is because DH is a very high income earner. Our marital assets are held jointly so the cash savings we have are greater than the borrowings making me a very attractive customer. I use mortgages to avoid co mingling of assets. I have a pre nup that is active here in the US.

Well I think reading anything Bank of England has to say on buy to let and also that the more stringent rules applying to owner occupiers haven't yet been applied to the buy to let mortgage sector speaks for itself. More stringent rules will be applied to buy to let mortgages over next few years is a certainty.
I will step away from his thread now - I've found it's difficult even for friends to grasp implications -and costs heading their way, so know I'm wasting my time expecting to get any mortgaged btl on this thread to believe all is not as fine as the unmortgaged landlords and the ones in company structures would have you believe.

Do get professional advice, but do your own research and ask questions. So many involved in buy to let are passive and uninformed on politics and government policies.

For those who do it right and do it professionally the exodus of amateur BTL in a panic will leave bargains.

I invest in shares, bonds, commodities and to me property is just another investment. I do my sums. Its about cashflow and after tax return. Its not about how much I can borrow on an interest only loan and hoping for future capital gain.

I wonder if this might eventually lead to the UK having a rental market like Germany? If this move is backed up by laws that make renting better for both tenants and landlords it might become a big positive.

Well I don't need to refinance and I don't need to buy more houses. I'm also a good LL who isn't greedy. Worst case I liquidate and paid capital gains tax. I'm still walking away having made money.

I don't need any advice zebra, I'm not a mortgaged landlord, I'm just the person who thinks that the tax changes won't actually make that much difference to the London market.

It will have zero impact on london. It's a crying shame this is the case because an amazing city is out of reach for the vast majority of Londoners.

Its not out of reach from the vast majority of Londoners, there are loads of people who can afford homes here, just the supply of affordable homes is low.

The median London salary is £34,473, now say we had one part of a couple on the median, and one lower than that on 22k.

They would be able to get a mortgage of 4 or so times their salary, which gives you a mortgage of £224, now with a 10 % deposit that takes you to near enough £250,000. That's easily doable in lots of areas, just not areas that have already gentrified. Too many mumsnetters turn their noses up at anything that isn't like this

The issue is that having a family becomes extremely difficult.

1. The new tax rules on interest do not apply to landlords with no mortgages and there are many including pensioners who have just taken pensions out as lump sums.
2. They don't affect basic rate tax payers either which does including many a London tax driver with his one London house plus his one buy to let.
3. They will not affect thseo with a good few properties as these are already within limited companies.

As someone mentioned above however for new landlords the new tighter lending rules will have a huge affect for orindary people getting buy to let loans. Although if you don';t need a loan then it's the new stamp duty which will hit you. My relative who has cash in a company and was planning to buy a second home in London (not to let) within the company has been put off (not surprisingly) by the new tax rules including ATED (the annual tax on enveloped dwellings on properties £500k+ held within a company) but even more so by the 15% stamp duty rate if he went ahead. He says he will choose other investments.

I have seen London property drop in value a good few times but it's always got back up to what it was and more and sometimes it just stalls.

My advice to everyone young is buy as early as you can and before you breed even if it's a bit of a hovel. Just get on with it. Don't eat out. Sto;p holidays. don't get tyhat expensive newish car or that new dress. Get on with buying somewhere.