Is a buy to let a status symbol in the UK?

[socialmedia23]

I can't quite understand why everyone I know who has a little spare cash on the side (I am 30 so people I know are generally in that age group) talks about buying a buy to let. Even in today's economic circumstances (high mortgage rates) and unfavourable tax conditions. I live in London so most people in my age group would be paying 40% tax if they got a BTL though I guess they would be buying it under a corporation. However, they don't have years and years of savings or equity so would presumably not be buying in cash..

It doesn't make any sense to me but I realized that fairly flashy people I know always talk about their BTLs so it got me thinking, is it a status symbol in the UK? I am not originally from the UK so I really didn't know. I understand it made sense for a lot of older people in the past to supplement their pension. I am from a country which prizes home ownership (89% home ownership) and own my flat too so I understand this drive to 'own' property and of course your own home. But in my country, I hardly hear perfectly ordinary and average people 'aspire' to be landlords. And from a financial perspective, it doesn't really make sense these days with all the regulation so the only way to explain the public's obsession with it is that it is emotional

My dad was always a landlord but he does it as a full time thing and mainly invests in commercial property and is more into the 'development' aspect. And he certainly doesn't think of it as a status symbol more like his career, and he has had a life long interest in property. He would not do it as a side hustle and certainly not if it was as regulated/taxed as it is here.

Some landlords don't mind making a minimal amount of annual income so long as costs are covered because they do see it as a long term investment and look at the current paper gain in equity and what they will realise as a capital gain on sale. Or they pay off the 10% each year on their mortgage so that when they retire a larger amount of the rental income supplements their pension with the capital still gaining potentially more than a pension plan or stocks and shares. Its a long term plan and not supposed to be liquid.

@Zipps definitely. One of the many reasons btl is not for me.

There good investments, not a status. Buy a property, rent it out, have someone's else pay your mortgage off for 25 years, house price massively increased since purchase as an added bonus.
Sell once no mortgage left, extra funds for retirement.

It's something that can go horribly wrong, and is a significant responsibility, so they'd be much better off putting their money in equities or bonds, or just finding a good fund.

But it's not "their' money as a landlord. It's the tenants money that private landlords use to clear the mortgage.

No private LL can be a "good decent landlord" because almost all, one day, will take possession of the house and kick someone out of their "home" totally understandable that they will want to realise their asset but what for the poor tenant?

It is happening to me after 20 years, its happening to other friends of mine and others too, meanwhile alternative rented properties are like gold dust and rents have shot up, i am going through hell atm.

Rented housing, in the main, should be provided by the state, as it used to be.

What the Tories and so will Labour, is restrict private LL's (especially with the move to a EPC of C) but not provide an alternative for all the people who cannot and never will be able to afford a property of their own.

Exactly, get some poor sod to buy you a house and a lifestyle and then make them homeless with just 2 months notice.

You sound lovely.

I don't, and I say that as a landlord. That's the risk you take with this type of investment.

And that's exactly the issue, too many people in the UK think if BTLs as a more or less guaranteed way to top up their pension, but don't properly consider the risks, especially short term ones. Sure over the space of 10/20/30 years your BTL will probably prove to be a good investment. But if your first set of tenants stop paying rent after 4 months and move out months later, having trashed the place in retaliation for their eviction, you need to have a financial buffer to absorb those costs.

@socialmedia23 I guess most people you know are professionals working in London and most likely became landlord when they moved up the property ladder and were fortunate enough to be still in well paying (increasingly) jobs, so the previously record low interest rates made it possible to move without the hassle of selling and maintaining their old place as BTL.

It's no longer a trend now as interest rates have gone up so much and landlords are taxed severely. Plus income tax bands have not grown in line with inflation so I'm sure many of them are in the 100k bracket and have had to think hard about whether to keep the BTL.

Of course there are good landlords.

I rent out a house that used to be my home. No I'm not a professional landlord but I am a good one and I'm sure I'm not the only one.

I have had the same tenants there for a number of years now and they pay way below the going rate for a really nice 4 bedroom house.

They have had one rent increase since they've been there.

I don't raise their rent and any problems are fixed immediately. The reason I don't increase their rent is because what they pay is sufficient for my needs and they are really good tenants.

I have absolutely no intention of 'kicking them out of their home' ever. I sincerely hope that they stay there for many years. Hopefully, for the rest of my life.

If they do leave I'll probably sell the house as I'm getting older and frankly don't really want the responsibility for much longer.

After paying off the mortgage and capital gains tax there'd be very little money left from the sale though. So realising my 'assets' really isn't going to make me rich.

I've had some appalling tenants. One who paid no rent beyond their deposit and the first month's rent, which was paid late. It took six months to get them out and bailiffs were involved.

They left the place in a terrible mess, which required the house to be painted and re-carpeted throughout. But that's something you factor in when you rent out a property.

I don't doubt that they then went on to do the same thing to another landlord.

Another one, who didn't pay their rent, left the place in a mess and for some reason, stole all the locks on the loos and bathrooms.

I have a btl mortgage on the house. If I keep it on for the rest of my life the house will need to be sold to settle the mortgage when I die.

After all taxes and death duties are paid there won't be much in the way of assets left for my children from the sale.

Not really, they are talking about buying new properties. And probably not in London but in cheaper areas.

What do you mean by 40% tax are you talking capital gains? That's only when you sell eventually.

I think you have to look at the bigger picture here. There has been a lot of pension scandals in the UK, plus crashes on the stock market affecting big funds etc, low interest rates for savers. So property is seen as a safe bet in the UK for finances. Not necessarily about status just people choosing where to put their money.

If you are a higher rate taxpayer you would pay 40% tax on the rental income unless you own through a corporation you set up. But most people's FTB flats are owned in their personal names..

It's why my ex neighbour is barely breaking even renting out her flat and that was before the mortgage rates shot up.

BTL is not a money making scheme in the short term, I think it used to be possible to make something from it as in an income, but not anymore, not if the property is mortgaged. It was better when there was tax relief but that has all been petered out now to virtually nothing, that's why a lot of people are selling their BTL properties, as they can't afford to keep up with everything it entails.

I wouldn't call it a status thing personally, but people will always brag about how well off they are if you mix in certain circles.

BTL is a fantastic long term investment, but you've got to see it as that, not a temporary money making opportunity. I'm an accidental landlord as I bought the house and lived in it originally before meeting my partner.

I put in a £5000 down payment when I purchased of my own money.
The house is expected to be worth around £200,000/£250,000+ by the time the mortgage is paid, which should coincide with the time I want to semi retire. In that time I most likely won't have made a penny on it, but it won't have cost me anything either. I plan to use the incoming rent payments instead of a pension, until such time when the house is sold.

It sounds great on paper, but it is fraught with problems, there's a lot to take care of, and you're completely at the whim of tenants, the housing market isn't guaranteed so you can't say for sure what the future holds so like all investment there's risk. The key is when you get a good tenant who looks after the property is to look after them! I could get a lot more rent on mine and the estate agents that manage it are constantly pestering me but I refuse to budge from the rent as it is, which is a lot lower then market rate. There's too many unscrupulous landlords out there that only care about the money, not the person taking care of your property.

If you've got a little pot of money to shelve for 15/20 years, it's well worth the investment.

No it's anything but. People apologize.

Sounds like your situation is very much like mine.

It's certainly not going to make either of us rich.

There's no need to get a buy to let now, the interes rates the way they are.

Put the money away, no hassle.

@pigsDOfly

If they do leave I'll probably sell the house as I'm getting older and frankly don't really want the responsibility for much longer

So one day, you may sell regardless - as you don't want the responsibility?

I have a btl mortgage on the house. If I keep it on for the rest of my life the house will need to be sold to settle the mortgage when I die

Yes sold and another family kicked out of their home.

Yes of course some LL are better than others but the bottom line is the vast majority will sell the house as they age, thats the whole idea of a BTL property.

With a mainly state run rented sector, this can be avoided and bad tenants dealt with by the full weight of the law not an individual bearing all the costs.

Lack of security in housing is a huge issue in the UK and needs addressing but so far, neither Lab or the Cons seem to care.

@Doagooddeed

Good grief you really are looking for something to pick holes in.

Firstly, I said I would probably sell the house if my current tenant leaves, so no one would be 'kicked out' of their home at that point as the house would be without a tenant - are you suggesting I have no right to ever sell the house because I owe it to potential tenants to keep it for rent.

Secondly, yes, the responsibility. Nothing wrong with my not wanting the responsibility as I get older, I'm 74 now, how long do you think I owe it to these, yet to appear, tenants to keep on having to make sure the house is kept up to a good standard, making sure all documentation is in place and so on and so on.

The fact that I am a responsible landlord is the very reason I don't want to keep the house on if the current tenant leaves. If I didn't care about the tenants then I would just keep the house for rent and not bother about the standard of it.

My BTL mortgage is interest only. It dies when I die and a big chunk of the selling price will be used to pay off the mortgage.

What do you suggest I do to avoid the possibility of the tenant having to leave their home in those circumstances. Other than becoming immortal that's something that I have absolutely no control over as I'll be dead. But I will certainly do my best to stay alive until they decide to leave.

Anyway, the current tenant has, in the past, mentioned that at some point in the future they might like to buy the house if I were willing to sell it because they like it so much. So it's very possible they won't be leaving it even when I die.

That didn't take long 🙄

I'd love to know what would happen to all the people who want or need to rent if all landlords were marched to the gallows, which according to MN is what they all deserve.

The way to avoid paying 40% tax is to earn less money. I've never understood the whole concept of complaining about the higher tax bracket as one needs to earn sufficient to pay it.

There is, of course, the other side of the coin about whether the government effectively deploy the money they gain in tax, but that is a different conversation.

Well pensions are shit and we’re all going to be working well into old age now.

People are trying to do something to help themselves. Not sure they’re a status symbol - they’re not very lucrative at all; they’re a long term investment hope.

Yes, I agree with this and I have bought the last three houses under a Ltd company so I can claim back interest payments. I can't put older purchased properties into the Ltd company because I'd be hammered on CGT. I've just sold a house I bought in 2006 and got about 70 percent increase in its value at sale. Recent changes in CGT means I probably won't sell another for the time being.

And this.

We have a buy to let, which started off as a let to buy - it was the most sensible solution when we had to move due to circumstances. 10 years on we still have it, and we've not earnt anything substantial from it. It is a smaller not very fancy property and we are both higher rate tax payers, so once tax, mortgage, repairs etc come out there's not much left each year. We would have sold it years ago but won't kick out the family that live there (at substantially below market rate rent - because I am too soft to raise it and she is a good tenant but struggles financially). I have a nagging fear about something major going wrong as we will then have to dip into our personal savings rather than use the proceeds from the house (which we keep separate to our "normal" finances).

Of course the above it due to the choices we've made on how we deal with the property, and we could earn more. But that's where we have ended up feeling happy.

Actually most btl LL pay interest only so it's not tenants money buying the house. Very few LL I know, and I know over 50 are paying repayment mortgages. Possibly 3.