To think rent is so bloody unfair

[Tar19891]

My rent is 800 per month. A mortgage on the same value flat would be 450 per month. Not in London obviously. It’s not fair is it?

Pretty much every residential property ‘investor’ I’ve ever met is of below average intelligence. Their mantra is ‘don’t trust pensions’.

I don’t trust anyone who says that because it shows how financially inept they are.

I rented my 1 bed flat out for 18 months at the market rent. When I did my year end calculations for tax purposes, I made a grand total of £500. By the time you factor in the costs of maintenance, agency fees etc, there wasn’t that much money to be made. I wasn’t in it for the money.

When I look at the ongoing maintenance costs for my property now, I wouldn’t be much worse off if I was renting. Sure, there is an asset at the end of it but surely that’s a choice people make.

I agree with you.

@lisAAlis

That is £160 tax on rental income, so £640 to your landlord, who already put a deposit down on the mortgage and has some other running costs, so it is less than £200 to them, really, if you can afford to buy then do it by all means.

The landlord gets tax relief on those other running costs. They pay tax after those costs.

[quote SwanBuster]@Theo1756

Ok let's do the maths.

ONS site had 2018 data saying this.

The number of households in the private rented sector in the UK increased from 2.8 million in 2007 to 4.5 million in 2017, an increase of 1.7 million (63%) households.

The latest rental data says average rents are around £1000 p/m in the Uk.

Let's say that on average, a landlord owns 1.5 houses. There will be plenty of portfolio landlords with many, but this seems like a reasonable average. So 4.5m households and dividing that by 1.5 Gives 3 million landlords.

So that means the average landlord makes 12000 X 1.5 = 18000 in revenue per year. Let's say their costs, on average because some landlords will own outright are half that for mortgages etc.

So that's £9000 per year profit. That's generous but let's use it.

Let's assume everyone pays 40% tax. Complete hogwash because many will be avoiding legally (put house in lower earners name etc, or incorporating but let's use it).

9000 3m 40% = £7.2 billion in tax receipts. I reckon this is a gross over estimate.

And yet ...

The ifs says housing welfare payments are 22 billion. So there's a 15 billion shortfall there. Paid out of printed money or other revenue.[/quote]
I know you said the figure was generous. I’d just like to say it’s more than generous. This is the profit tax evading, illegal slum landlords will be making. The on costs decent, law abiding landlords, who want their tenants to live in comfortable, modern homes have spiralled a lot in recent years.

Agent’s fees 10-15% plus vat
Changes in tenancies fees
Quick lick of paint and basic maintenance between tenancies
Buildings insurance
Gas safety checks
Electrical checks and electrical upgrades
Repairs
Periodic upgrades

• New windows
• New kitchens
• New bathrooms
• New flooring

Cleaning Losses made through non-payment of rent (or landlord insurance payments) Court and solicitor fees EPC certificate legionella check Mortgage interest payments (no longer fully tax deductible)

Cant think of any other costs. However, our profit is nothing like that figure.

The landlords really making the money are those, who own have enough houses to run them through a business. Tax is a flat rate of 20%.

Hello @SwanBuster

Sigh.

I was helping you by inflating the tax take by using that 40% figure - which - as you well know - I said was of course total rubbish - just to make the point that even if we charitably overestimate the revenue taken from taxing landlords - it’s still nothing in the grand scheme of things.

At this point - I’m baffled - you seem to be arguing with yourself. What do you want - high revenues or low revenues?

Why not just think of it as a range that shows that landlords are parasites no matter how you skew the numbers? Does that work?

Thank you for your patience, and I have explained that I am a little bit dim on these points.

I really don't mind how much tax they pay so long as the system is fair, which I'm inclined from my capitalist perception to think it is. (In fact I think taxing unincorpoated landlords on turnover rather than profit is highly unfair, but to switch that back would move things in the wrong direction, so let's ignore).

But as far as I can see you have provided no figure at all, other than a made-up one. And I'm interested to know what reform you would like to see.

@Blossomtoes it would depend on why the property is being rented, obviously not all are btl investments.
Yield percentage and long term capital investment are both factors-but we don't know any of this information.

@BambinaJAS and where did i say that I was a Landlord?
I am not.
Your comment it's obviously the tone deaf one as you don't understand what I even wrote.

@BoredZelda

I rented my 1 bed flat out for 18 months at the market rent. When I did my year end calculations for tax purposes, I made a grand total of £500. By the time you factor in the costs of maintenance, agency fees etc, there wasn’t that much money to be made. I wasn’t in it for the money.

When I look at the ongoing maintenance costs for my property now, I wouldn’t be much worse off if I was renting. Sure, there is an asset at the end of it but surely that’s a choice people make.

You are dismissing the value of a house at the end of it as "a choice people make". But it's a huge part of investing as a landlord. You make a small revenue for a few years, but that revenue grows, normally faster than the expenses and the investment is still sat there, growing in one of the safest forms you can find. You might not have been in it for the money, but it's what most landlords are in it for.

On average, housing has appreciated at 4.3% pa over the last 10 years. Your biggest return on letting your flat out was almost certainly in it's appreciation. And were you taking not just the mortgage interest but the payments to principal inthe "costs" you took off before you calculated your profit? If so, your return also includes the direct increased equity from lowering the amount you were borrowing - not much in the first few years of a mortgage, but significant later on.

This won’t be a popular opinion but a lot of people don’t help themselves by renting having kids before they’re financially stable then they get caught up in the whole cost of childcare nightmare, often struggling to make ends meet, never mind having anything left over to save.
If a lot of people were a lot more financially savvy and didn’t dive out of the family home into a rental at a very young age, but did it the “old fashioned way” and worked and saved while living with parents it’s do-able.

And before anyone jumps on me with their whatabouttery and “ I was thrown out at 16”, yes I’m well aware that happens in SOME families, but they are very much in the minority. People generally have more choices in life than they’ll admit on here

There is something badly wrong with the UK housing market, when a young couple can't buy a home. But they can pay to buy somebody ELSE a home.

@lachimolala, your accomodation sounds horiffic. You can report anything unsafe to local council. Can't you find anything nicer with a better LL. The stupid thing is any essential repairs LL does they can right off against their tax bill, including gas and electricity certificates too. I own 7 btl properties. Each year one gets new carpets or laminate, repainting internally or externally, most years one gets a new boiler and new kitchen every 10 years and double glazing every 12 years. It is madness not to do repairs to keep your property in good maintenance.

@MrsTerryPratchett - all resources are scarce. That’s the basics of economics. The issue with housing though is that where you can build new housing is regulated. Also high costs to enter market.

We need more housing to buy and rent. But ultimately it’s not unfair to pay more to rent than to buy. It’s just different. There are benefits to renting too - eg universal credit will cover much of the rent if you lose your job, you don’t have to worry about maintenance, you can more more cheaply and quickly, etc. it can suit lots of people to rent (including me when younger).

We need more housing but of all types imo.

@PigletJohn

There is something badly wrong with the UK housing market, when a young couple can't buy a home. But they can pay to buy somebody ELSE a home.

Best post on the thread. Exactly this.

@ohfook

I agree with you.

Thanks @ohfook

@JudgeRindersMinder

This won’t be a popular opinion but a lot of people don’t help themselves by renting having kids before they’re financially stable then they get caught up in the whole cost of childcare nightmare, often struggling to make ends meet, never mind having anything left over to save. If a lot of people were a lot more financially savvy and didn’t dive out of the family home into a rental at a very young age, but did it the “old fashioned way” and worked and saved while living with parents it’s do-able.

And before anyone jumps on me with their whatabouttery and “ I was thrown out at 16”, yes I’m well aware that happens in SOME families, but they are very much in the minority. People generally have more choices in life than they’ll admit on here

I am desperately trying to instill this in my 23 year old ds ! I keep telling him there will never be a better time to save than now whilst living at home.

@PigletJohn

There is something badly wrong with the UK housing market, when a young couple can't buy a home. But they can pay to buy somebody ELSE a home.

This does cut through a lot of complexity.

I don’t get what’s ‘unfair’ at all, please enlighten me.

@LardyDee

Hello *@SwanBuster*

Sigh.

I was helping you by inflating the tax take by using that 40% figure - which - as you well know - I said was of course total rubbish - just to make the point that even if we charitably overestimate the revenue taken from taxing landlords - it’s still nothing in the grand scheme of things.

At this point - I’m baffled - you seem to be arguing with yourself. What do you want - high revenues or low revenues?

Why not just think of it as a range that shows that landlords are parasites no matter how you skew the numbers? Does that work?

Thank you for your patience, and I have explained that I am a little bit dim on these points.

I really don't mind how much tax they pay so long as the system is fair, which I'm inclined from my capitalist perception to think it is. (In fact I think taxing unincorpoated landlords on turnover rather than profit is highly unfair, but to switch that back would move things in the wrong direction, so let's ignore).

But as far as I can see you have provided no figure at all, other than a made-up one. And I'm interested to know what reform you would like to see.

The figure I ‘made up’ was comprised of two official data points - the number of residential households privately renting, and the average rent.

Do you or do you not agree that a very educated guess on, at the very least, the range of revenue raised can be gauged from those figures?

Anyway - I digress. You asked me what reform I would like to see.

Number 1) your assertion that we live in a capitalist society is fundamentally flawed - in my humble opinion. We live in a highly rigged version of a capitalist society - with a big state who works for the corporate sector and doles out just enough to stop rioting to society at large. To change this - that’s a global change - and number one the way money works would have to be reformed.

Number 2) I think we are way past the point where reform is possible. At this juncture - we are going to need to accept that the vast majority of the world population are in effect either wage slaves or slaves to the state. Unless you are earning really big money - your ability to build a genuine stake - private property ownership, substantial holdings in listed companies etc - is going to be absolutely demolished in the coming years.

So forget it - my reform is personal. Live simply, enjoy the free stuff and the important stuff and minimise my consumption. Give away what I don’t need to people who do genuinely need it directly.

@JudgeRindersMinder I do agree that many people could make different choices which would have meant they could have bought property. Having kids at a young age before buying a property is an obvious one.

That being said, there isn’t anything wrong with renting. We should improve things for tenants to normalize living in rented housing

@Lentil63

I don’t get what’s ‘unfair’ at all, please enlighten me.

Try RTFT. Or if that’s too much trouble, Pigletjohn’s post.

It is not about
Fair/unfair
Right/wrong
People have a choice, they can rent or buy
Both have positives & negatives

I rented for 10 years, moving once or twice a year
Saved up & bought
Yes, I made sacrifices, but I had a goal at the end

If you want to buy, make the choice to do that

@Lentil63

I don’t get what’s ‘unfair’ at all, please enlighten me.

Try thinking a bit harder then or put yourselves in the shoes of others?

@PigletJohn

There is something badly wrong with the UK housing market, when a young couple can't buy a home. But they can pay to buy somebody ELSE a home.

We can end the thread with this. Bravo.

[quote Villagewaspbyke]@JudgeRindersMinder I do agree that many people could make different choices which would have meant they could have bought property. Having kids at a young age before buying a property is an obvious one.

That being said, there isn’t anything wrong with renting. We should improve things for tenants to normalize living in rented housing[/quote]
I absolutely agree that there’s nothing wrong with renting, the whole problem started when Thatcher’s government started to sell off council housing, THAT’S what’s at the root of the current housing problem