Buy to let - what do you think?

Amboseli · 28/04/2023 16:47

We've got a BTL. The income is good, £25k pa after tax and expenses etc. Pays for school fees.

It's a bit of a hassle dealing with tenants and regulations etc. But overall not too bad.

We're not selling because we'd have a massive CGT bill as it's gone up a lot in value.

And we don't know what we'd do with the money after selling.

Could invest in shares but they can be volatile and don't think we'd reliably get an equivalent income from them. Even if house prices go up and down the rental income is quite steady.

Also property is good for diversity. We don't want all our investments in the stock market where our pensions are invested.

And the income means we'll be able to retire early if we want to before we can access our pensions.

Hope this helps.

Lindy2 · 28/04/2023 16:51

Are you likely to have more children? The income could help whilst on maternity leave again.

I regard my rental property as a long term thing. It's covered 2 maternity leaves and currently allows me to work part time (which is a huge relief as I have a child with a disability).

I also see it as a future pension income or possibly a home for one of my children.

The income is only part of the equation. The capital value and use of the property is part of the investment too.

howfartospar · 29/04/2023 20:53

Amboseli · 28/04/2023 16:47

We've got a BTL. The income is good, £25k pa after tax and expenses etc. Pays for school fees.

It's a bit of a hassle dealing with tenants and regulations etc. But overall not too bad.

We're not selling because we'd have a massive CGT bill as it's gone up a lot in value.

And we don't know what we'd do with the money after selling.

Could invest in shares but they can be volatile and don't think we'd reliably get an equivalent income from them. Even if house prices go up and down the rental income is quite steady.

Also property is good for diversity. We don't want all our investments in the stock market where our pensions are invested.

And the income means we'll be able to retire early if we want to before we can access our pensions.

Hope this helps.

That's a great income after the section 24 tax aspects.

Amboseli · 30/04/2023 07:22

@howfartospar yes it is. We don't think it could be matched if we sold and invested in equities. It will be closer to £35k once we've paid off the mortgage by the time we retire.

Twiglets1 · 30/04/2023 07:36

serialplanner · 27/04/2023 09:28

We have a one bed BTL in London zone 3.

It was our home, but we had a child and acquired a 2 bedroom.

We were so sleep deprived we couldn't work out what to do so we rented it out.

The income is very helpful for nursery fees and was very useful whilst I was on mat leave and made £0 but the fees will massively reduce in April 2024 and now I am not on mat leave I earn £60k with £6k rental income. My Husband earns £67k with £6k rental income. I'm not sure how beneficial it will be income wise.

On paper our salaries are okay but we have credit card and overdraft debt from trying to maintain a very old house!

If we sell the BTL within 3 years (it's around year two now) we should benefit from PPR.

Why do people keep BTLs? For income? For capital withdrawals later on?

Selling would mean no debt, no managing tenants etc but old school people say to hang on to property.

Can anyone fill me in as to why?

Do we ride out this bad time in the economy and be very grateful we kept it later?

I'm still sleep deprived so all thoughts welcome! Thank you

Couldn't work out what to do....why didn't you do the usual thing and sell your property before buying another so you could have afforded a bigger/better home to be living in now?

howfartospar · 30/04/2023 07:49

Amboseli · 30/04/2023 07:22

@howfartospar yes it is. We don't think it could be matched if we sold and invested in equities. It will be closer to £35k once we've paid off the mortgage by the time we retire.

Good for you. I'm glad it's been a success.

Treacletoots · 30/04/2023 07:56

@Twiglets1 jealousy so isn't a good look. What people do with their assets really isn't anybody else's business to judge.

OP. If you can afford to continue renting it after the s24 tax, can afford to get it to an EPC C by 2028, aren't worried about the pending removal of s21, then keep it long term. Ours has gone from c 50k equity 5 years ago to almost 130k today. We're hoping to hang onto it until we've enough to buy a house in France with the proceeds.

However if our current tenants move on, likely we will sell because the constant shit storm the government is throwing at landlords is just too much. The removal of S21 is my line in the sand and I won't ever be told by the government what I can or cannot do with my property.

Sunnysunbun · 30/04/2023 07:58

I have a few BTL properties. I'm not sure I would make these kinds of investment again. The return isn't good given the worth of the properties. I probably need to put my rents up but I don't want to make life harder for my tenants. If you're struggling then sell.

Twiglets1 · 30/04/2023 08:01

Treacletoots · 30/04/2023 07:56

@Twiglets1 jealousy so isn't a good look. What people do with their assets really isn't anybody else's business to judge.

OP. If you can afford to continue renting it after the s24 tax, can afford to get it to an EPC C by 2028, aren't worried about the pending removal of s21, then keep it long term. Ours has gone from c 50k equity 5 years ago to almost 130k today. We're hoping to hang onto it until we've enough to buy a house in France with the proceeds.

However if our current tenants move on, likely we will sell because the constant shit storm the government is throwing at landlords is just too much. The removal of S21 is my line in the sand and I won't ever be told by the government what I can or cannot do with my property.

I'm genuinely curious as it's so counter to what I would do in the same situation - would appreciate a response from the person I asked the question to @serialplanner if they want to answer

OneCup · 30/04/2023 08:06

I'd personally see it as diversification of assets with a long term view.

Joonio · 30/04/2023 08:07

The flats can be sold when we move to a bigger property in a few years.

Intergalacticcatharsis · 30/04/2023 08:15

You can get 4 plus per cent in the bank on cash at the moment by tying it up for 1, 2 and 3 years. Look at compound interest accounts as an alternative?

What is the rate of return on your BTL?

manontroppo · 30/04/2023 08:17

You can’t really compare income without accounting for the CGT - that bill has to be paid at some point! A large chunk of the gain will come from capital appreciation

I would really like to be able to invest in a professional BTL fund. I can’t be doing with the hassle of managing tenants - one duff tenant can cause a huge amount of pain.

Twiglets1 · 30/04/2023 08:28

manontroppo · 30/04/2023 08:17

You can’t really compare income without accounting for the CGT - that bill has to be paid at some point! A large chunk of the gain will come from capital appreciation

I would really like to be able to invest in a professional BTL fund. I can’t be doing with the hassle of managing tenants - one duff tenant can cause a huge amount of pain.

Exactly - and the CGT is one big reason why in the same situation as OP, I would have put all the money into one bigger property that I lived in. If it's your main residence there is no CGT when you come to sell, when you want to downsize in the future, say.

You're going to get the capital appreciation on one bigger property (without having to pay CGT) but miss out on the rental income I guess. Though lots of people these days seem to be saying that the profit from rental income isn't much when you take into account all the bills they have to pay to maintain the property. So I don't know, I would like to understand the reasons for people to make the choice OP did because I can't see much benefit unless I'm missing something?

Original poster

serialplanner · 30/04/2023 08:33

Thank you everyone for the replies. Incredibly helpful and some good future costs raised like the EPC point. Much appreciated.

I think I was panicking. It will be helpful for another mat leave if that happens. I need to see it as very long term and more for a capital use not day to day income but equally I don't think I would want another BTL. The view I got from the broker was you aim yo pay off your residential mortgage but your BTL works for you to help fund extensions, house moves etc etc. (very geneal and diluted view being shared - lots of chat around it was had)

@Twiglets1 it was a combo really. The market was very rushed so being in a chain didn't make us attractive. There was a stamp duty holiday so it was an opportunity. I'm from humble beginnings but my husband's family could afford to gift him the deposit so it was possible to get another place. Honestly beyond that I couldn't think because I was up every 2 hours a night! I don't even really know how we managed a move!

For anyone following, part of my dilemma was if we sold with 3 years we could get £15k stamp duty back as it wouldn't could as having an additional property. Overall, I think the property value will do better for this maybe because it is in London. It was worth £260k in 2016 and is now worth at least £325k. Currently £800 pcm "profit" but I suspect that will disappear from December 2023 with the remortgage.

I am completely aware this is a privileged dilemma to have.

OP posts:

Twiglets1 · 30/04/2023 08:44

serialplanner · 30/04/2023 08:33

Thank you everyone for the replies. Incredibly helpful and some good future costs raised like the EPC point. Much appreciated.

I think I was panicking. It will be helpful for another mat leave if that happens. I need to see it as very long term and more for a capital use not day to day income but equally I don't think I would want another BTL. The view I got from the broker was you aim yo pay off your residential mortgage but your BTL works for you to help fund extensions, house moves etc etc. (very geneal and diluted view being shared - lots of chat around it was had)

@Twiglets1 it was a combo really. The market was very rushed so being in a chain didn't make us attractive. There was a stamp duty holiday so it was an opportunity. I'm from humble beginnings but my husband's family could afford to gift him the deposit so it was possible to get another place. Honestly beyond that I couldn't think because I was up every 2 hours a night! I don't even really know how we managed a move!

For anyone following, part of my dilemma was if we sold with 3 years we could get £15k stamp duty back as it wouldn't could as having an additional property. Overall, I think the property value will do better for this maybe because it is in London. It was worth £260k in 2016 and is now worth at least £325k. Currently £800 pcm "profit" but I suspect that will disappear from December 2023 with the remortgage.

I am completely aware this is a privileged dilemma to have.

Thank you for your reply @serialplanner and I hope you get the answers you need on this thread to help you decide your next move.

We have always just poured all our money into one main house - that also has advantages & disadvantages and my Dad always lectured me that we should have diversified more rather than puting all our wealth in property. But we've made plenty of money from property over the years so I guess I am equally "privileged" just took a slightly different road.

caringcarer · 30/04/2023 08:57

Btl is a good way of the property not only paying its way but turning a modest profit whilst going up in value over time. Many people keep a btl to help fund their pension pots. Plus if you have a second child and on maternity leave again the income could count as your personal allowance.

manontroppo · 30/04/2023 09:25

Don’t forget you’ll be paying 40% tax on your rental income as you’re both higher rate tax payers. If you do a complete breakdown of the total cost of ownership, the returns on BTL are not as great as you might think.

BTL is pretty much the only consumer- level investment where people can leverage extensively.

The UK Personal Finance Reddit is really helpful for this kind of thing.