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?

My DS has been talking about buying in London to BTL - it was recommended as a surefire winner by another young professional. These are professionals buying an initial property thanks to the bank of mum and dad paying a decent deposit. Prices rise. REmortgaging gives them a lump sum for their next property. This will be interest only btl, the constant rise in rents has allowed them to make a profit, the increased value of property has allowed them to make a good few 10s of thousands, so another property is bought ..... Can't lose.

However obviously the new rules will def affect them. DS kept getting pipped at the post and never managed to buy - prob too late now!

I'm concerned about my mil and housing. She bought her LA property when no one wanted to live there and the area is now desirable. She remortgaged to buy property two and rents property one, whilst living in no 2.

She's now decided that she doesn't like property two and wants to remortgage to live somewhere much bigger, using the income of properties one and two to cover the mortgage.

I've told OH that I'm concerned about her plans as she couldn't afford it if interest rates went up or the tenants couldn't/wouldn't pay their rent. She has recently been rejected for another mortgage but is still looking at properties. I guess these new changes may mean she has to change her plans.

Chanie44 It depends if she is in the higher rate tax bracket. But in any case I would suggest its foolish to rely just on BTLs for income, as you say her income right now is the highest its going to be for some time (mortgage rates will only go up). She also needs to be able to cover the BTL mortgages for at least 6 months incase of tenant/property problems.

anyone who uses the phrase 'surefire winner' when referring to any investment is by definition a fool. There's no such thing!

My tip to anyone young is borrow as much money as you cab to invest into btl. It has done all of my family the world of good. There will always be the haves and have nots, no harm in making sure your in the former.

See a bubble
Borrow as much as you can to invest in it
What could Possibly go wrong eh raranah?

As I understand it the change in deductions allowed means that many btlers will now become higher rate taxpayers, they then also pay higher cut if they sell

As pointed out by a previous poster the implications of the penalties now imposed on landlords appear to have gone over the heads of many who are going to be hit hard in the pocket

capital gains tax, not cut!

As previously stated Rahnah, you would be foolish to o BTL if you cannot buy your property outright! The tax breaks are being removed and the amount of SD is going up...

Fortune may have favoured you in the past, it may not always in the future.

Hi raranah
We've all been enjoying that video of the students walking out on you

I have lived in several rented properties over the years. By far the worst were those owned by private individuals who were just too busy to run it properly. We now live in a flat owned by an agency and it's so much better. They are very quick to respond to things and the rent is very reasonable.

I am glad the government is making it harder for people to get into buy to let inspite of owning two buy to lets. The popularity of buy to let has pushed first time buyer properties out of reach of those who want to get on the housing ladder. I have two children and I want them to be able to own their proprety one day. First time buyers have been forced to have repayment mortgages where as landlords can get interest only mortgages. The market has been wieghted too much in favour of the landlord.

The mortgages on my properties are relatively small and I am not a high rate tax payer. The tax rules have little affect on me. I am paying of the mortgages as fast as I can. I have no plans to sell either of my properties. I know that I could afford the mortgages even if interest rates rose to 10%.

I feel the biggest problem is that lots of people will struggle on their mortgages when interest rates rise to a more normal level. We have had low interest rates for 6 years and this has pushed up house prices. I worry more about tenants whose landlords cannot afford the mortgages when hit with rates of 8% instead of 4%.

There needs to be better rules to protect good tenants whose properties are re pocessed by lenders because the landlord has failed to pay the mortgage. I feel that good tenants whose properties are repocessed should not be evicted. The repossession company should be forced to sell the property with a tenant in situ. In a repocession situation the tenant should have the right to buy.

There are very few BTL properties in the area where I live - prices keep rising due to high demand and lack of supply. Local buyers are priced out of the market by cash buyers from London elbowing everyone else out of the way. I'm sceptical that the new measures will do anything to fix this.

If it was more affordable to buy then there will be fewer renters and less demand for rental properties. I think that the high stamp duty will act as a disincentive to people buying property. They will buy shares or an annuity instead if they want income.

sums it up quite well
www.theguardian.com/money/shortcuts/2015/dec/01/buy-to-let-dream-over-bank-of-england

Name: The buy-to-let dream.

Age: 20 years, give or take.

Appearance: Everywhere, for now.

What do you mean? Well, buy-to-let mortgages have become increasingly popular since the mid-1990s. They account for about 15% of all home loans, and lending on them was up 10% in the first nine months of 2015. But now their golden age might be coming to an end.

Is this where you borrow money to buy a house, then you rent the house to someone else and use the rent to pay back the loan? That’s right. And you pocket the difference as profit.

So it’s like getting free money? Yes.

Why isn’t everybody doing it? Plenty are, but you also need quite a lot of money to start with, for the deposit. Once you’re in, though, buy-to-let mortgages drive house prices up, which in turn means more people can’t afford to buy and have to rent, which drives up rent prices, which makes buying to let even more attractive.

Magic! So they’re dividing Britons back into landed aristocrats and serfs? Basically.

What’s the problem? The serfs don’t like it.

Bloody serfs. But things might even get tricky for the aristocrats if rents fall or interest rates rise because then some won’t be able to keep up the repayments, which means everything gets repossessed by the bank. And if house prices fall too, the bank may not get all its money back, which means it might not be able to pay its debts to other banks, which means they don’t have as much money as they thought either, and all their market values collapse.

This is sounding awfully familiar.Yeah. The Bank of England thinks it looks a bit 2008-y, so they’re going to stop banks lending too much. George Osborne has also announced a three-point rise in stamp duty for buy-to-letters, which comes into effect next April. Plus there will probably be a rise in interest rates quite soon.

Thank goodness someone has the sense to stop this becoming a property bubble. I’d better get a buy-to-let mortgage quickly while they’re still cheap! Um … actually that’s kind of where bubbles come from.

Do say: “Should we maybe, you know, build more houses?”

Don’t say: “Can I apply for a lie-to-bet mortgage instead?”

So very true. I would really like to see more homes built and the huge existing homes broken down into 2-3 family homes. While I do rent out a few places, I also buy homes to renovate and resell. Most of what I buy are homes that are in such a bad state the bank won't lend against them. I had a call from the brewery I have bought off before regarding a pub where the roof collapsed over the weekend. It had the potential to be a lovely family home but its a cash project with limited upside potential. Planning will never allow me to properly expand the place, enabling me to convert the property into a home for 2-3 families. It's just so dumb that this isn't allowed.

a pub where the roof collapsed over the weekend
yikes thats pretty extreme Want2b
had the place fallen seriously into disrepair?

Yes - it hasn't been in use for over a decade. Basically the brewery need to either sell it now or fix it up. It is cheaper for them to sell it now, even if they discount the price because they have no plans to open another pub so close to others they have operating in the area. It will cost about GBP120k to buy and GBP80 to renovate. I expect in todays market I could sell it for about GBP350k as it would be a 5 bed house with a large garden (once I get rid of the huge parking lot!).

A lot of the old pubs which have now closed down on the A roads have the potential to be seriously amazing family homes in great areas where the schools are not oversubscribed and the transportation links are quite good.

The last place I bought from the brewery who called me ended up being rented out instead of sold. A local family approached me and asked if I could build the house out for them to rent. They have one DC in a wheelchair and they have 4 DC in total now so living in a flat doesn't work well for them. As they had a large bathroom with multiple stalls downstairs already it was very easy to convert it into a wheelchair friendly bathroom for now and into the future.

The age of the BTL landlord who is in the position because of equity rises to their principal property is over. That's a good thing, why the hell it was ok to have mortgage relief on interest for second homes and BTL properties and not principals was totally unfair for a start, and second it led to the rise of the highly leveraged landlord, who probably wouldn't be able to take any significant stress in a crisis, causing untold damage to markets and the nations finances.

I am a landlord, but because we outgrew a London property years ago that the mortgage was nearly finished on, and it made sense. Now, the equity in my property is massive, because its a 3 bed mansion block flat that was bought in Maida Vale back when it was cheap. But I maintain it well, rent it below market value for now to help someone out, and have always had a handyman I could call on.

The amatuers who are heavily leveraged are dangerous, and pose a massive threat, good riddance.

www.theguardian.com/housing-network/2015/dec/01/tenant-identity-social-housing-government-scrutiny?utm_source=twitterfeed&utm_medium=twitter

Putting pressure on amateur land lords to sell before interest rates go up drastically is wise. At the moment there are too many people trying their hand at btl.

Anything that slows down the property market has to be good.

Ssarg, it is now not possbile actually as far as I can see to buy a first property as buy to let with a BTL mortgage. My daughter could in 2012 and she lived with friends and at home for 2 years whilst her pay rose and she let the flat and it went up about £100k although of course it could have gone down - the previous owners of her flat found it only went up £5k in 5 years in London (credit crunch time I suppose).

However my son looked at the same deal and the rules have changed and now no lender we can find will lend to any first time buyer on a buy to let. It's very unfair. The change is purely because some (not all) people pretend to be buying to let and then live in the place. Yet a lot played totally by the book like my daughter and didn't live in the buy to let.

(PS if it were possible to buy a first property as buy to let on a loan we need to wait for the new rules to check if people are affected because it is possbile if the buy to let is your only property you may not pay the extra stamp duty on it and secondly if you are a 20% tax payer the interest rate changes will not affect you either).

You cannot get a buy to let mortgage now unless you earn 25k and already own a residential property.

Deo your son could still get a buy a buy to let if he owned it jointly with you and your name is on the mortgage deeds. Lots of SAHM own buy to lets that they own jointly with their husband. Any two people can buy a property as a partnership. (Ie. Mother and son)

These changes will now affect your tax when buying with a child. Married couples are classed as one unit under stamp duty on second property rule - to avoid husband and wife classing second home as "owned" by the other partner.

It will be your primary residence that counts and if you don't live with your son, but with your husband, then you are liable for extra stamp duty. Also if you move home with your husband the fact one of that couple has the btl will mean that the new family home will incur the extra 3% on that new family home - doesn't matter it's not a btl - it's ANY second property.

Wives holding btl in their name will, from 2017, find that the rent is counted as income - so could tip family income "technically "into higher bracket - could affect child benefit and tax credits etc.

Obviously the actual disposable income you have in 2017 won't have increased, but the way it is worked out as income for tax will mean you have higher tax liability as well possibly losing child benefit etc

Too important to take advice from internet boards, which I think has caused a lot of mess we are in- people assuming from hearsay rather than their own research and asking right questions of professionals.

Lurker - wasn't addressing you or suggesting you need advice - just putting my voice out there. With your name, would have thought you'd grasp lots of "lurkers" out there - I'm talking to them as I know from personal experience lots people do not grasp how much this is going to cost them over next few years.

I think important to make motivations known for quick sale of the more informed btl exiting market in the near future. Not interested in trying to change anyone's mind as I know not possible - they will believe what they want to about market.

However I want to make any lurker question and research , not take btl off hands of some canny btl exiting without seeking professional advice - that excludes estate agents and any mortgage product seller !