Any landlords?

Barnezy

I recently became a landlord in November when we moved out from London for schools. 

Are any of you considering selling up, or putting rents up to cover costs? 

The new tax rules seem to make it extremely unattractive to be a landlord now. With 40% of the rent going to tax, how can you make it work? 

Then there are all the new regulations being enforced... the latest being the electrical cert. I wonder how many electricians will be cashing in on full rewires that don't need doing. 

Then there's second property stamp duty.

It just seems the government is completely against private landlords, but surely the consequence is less rental properties and much higher rents for tenants, making it harder to save to buy their own place (if they want to) and less secure. 

Our place is currently on a permission to let repayment mortgage, and we're making a £600pm loss when tax is considered. Moving to a BTL interest only might get us to a breakeven point, but is it then even worth it, given the hassle of being a landlord? 

guitargeek62

Barnezy said:

It just seems the government is completely against private landlords, but surely the consequence is less rental properties and much higher rents for tenants, making it harder to save to buy their own place (if they want to) and less secure. 

Our place is currently on a permission to let repayment mortgage, and we're making a £600pm loss when tax is considered. Moving to a BTL interest only might get us to a breakeven point, but is it then even worth it, given the hassle of being a landlord? 

Not sure I agree with the former - if less people are buying second/third/nth properties to let out, then more properties will be on the for sale market and therefore there could be a correction in prices that increases affordability for current renters.

On the latter part, no - probably not. An interest-only mortgage doesn’t really help in the long-term. If you want second property as an investment/secondary income then there are better/easier options for you.

Barnezy

guitargeek62 said:

Barnezy said:

It just seems the government is completely against private landlords, but surely the consequence is less rental properties and much higher rents for tenants, making it harder to save to buy their own place (if they want to) and less secure. 

Our place is currently on a permission to let repayment mortgage, and we're making a £600pm loss when tax is considered. Moving to a BTL interest only might get us to a breakeven point, but is it then even worth it, given the hassle of being a landlord? 

Not sure I agree with the former - if less people are buying second/third/nth properties to let out, then more properties will be on the for sale market and therefore there could be a correction in prices that increases affordability for current renters.

Potentially in the long-term, but not significantly. Renters will deffinately have less choice and therefore higher rents, if people are put off/taxed out of being landlords. Remember the majority of renters are young people who don't have the savings yet to buy, even if houses cost half what they do today. They will have even less chance if there are less rentals and rent increases.

The governement tax rules seem to target the private individual landlords. The big ones that setup Ltd companies to buy the properties under to avoid tax etc, will only become more prevalent and controlling of the market. 

octatonic

Barnezy said:

I recently became a landlord in November when we moved out from London for schools. 

Are any of you considering selling up, or putting rents up to cover costs? 

The new tax rules seem to make it extremely unattractive to be a landlord now. With 40% of the rent going to tax, how can you make it work? 

Then there are all the new regulations being enforced... the latest being the electrical cert. I wonder how many electricians will be cashing in on full rewires that don't need doing. 

Then there's second property stamp duty.

It just seems the government is completely against private landlords, but surely the consequence is less rental properties and much higher rents for tenants, making it harder to save to buy their own place (if they want to) and less secure. 

Our place is currently on a permission to let repayment mortgage, and we're making a £600pm loss when tax is considered. Moving to a BTL interest only might get us to a breakeven point, but is it then even worth it, given the hassle of being a landlord? 

I'm a landlord, for more than 15 years now.

Buy through a limited company and you don't pay the same income tax.
The properties we've had the longest are still profitable even though they are held individually, because the mortgage is so low, relative to the value of the property and the rental income.
If I was making a £600pcm loss then I'd get out of that property quick smart- especially if you've been living in it.

The longer you have it rented the more likely you are to incur CGT on the sale.
Speak to an accountant.

spark240

Agree with @octatonic entirely....we have also been LL for over 15years....though all in LTD Co.....we sold a couple last year and were pleasantly surprised by indexation tax relief which saved us paying any CGT ...however had the profits been higher things would be different.

Either way....if the cost you you is anything more than short term such as void months...I’d dump it .

octatonic

Cheers spark.

One more thing- I do my sums based on 75-80% occupancy, even though in London we've never had more than a couple of days of void that wasn't related to a renovation.
Pays to be conservative with expected income- better to have extra you can use rather than have to scramble to pay out of personal finances.

Barnezy

We were acidental landlords really as we wanted to move to a new area. We had lived there for 5 year prior. 

Its a £700k flat, so the £600pm loss is relative. We wanted to hold on to it for the kids. But maybe we sell before the 2 year mark when CGT kicks in and use the money to buy one under a limited company instead. Such a shame as its a lovely flat. My daughter was even born on the bathroom floor so has alot emotional attachment to us. 

Any decent tax advisors anyone can recomend? 

Dominic

Residential rental income has never been especially profitable and historically pre 1986 was subject to many different forms of Rent Control , Sitting tenancy,Rent regulation etc .The advent of Assured Shorthold Tenancy changed this as did relaxation of some of the Tax implications until 3 years ago .There was a honeymoon period in the previous 10 years due to the happy collision of low interest and relatively relaxed taxation .This is not the case anymore although gross rents have risen over the past 20 years .
 BUT......the point has always been Capital growth which is where the pay-off really is ;ie if net rental return was sufficient to do no more than wash it's own face and give you a bit of pocket money you are effectively holding a cost free assets that has appreciated astronomically over the last 20 years just by riding the market .
In a stagnant market or falling market then it's not such a great investment......Property tends to be a bit cyclical and ultimately ,if you are in for the long term ,it always outperforms alternatives.

spark240

Barnezy said:

We were acidental landlords really as we wanted to move to a new area. We had lived there for 5 year prior. 

Its a £700k flat, so the £600pm loss is relative. We wanted to hold on to it for the kids. But maybe we sell before the 2 year mark when CGT kicks in and use the money to buy one under a limited company instead. Such a shame as its a lovely flat. My daughter was even born on the bathroom floor so has alot emotional attachment to us. 

Any decent tax advisors anyone can recomend? 

So we don’t know....and probability shouldn’t know your personal tax situation....but Let’s assume it’s 40% ...which is why it’s costing you an extra £600pm....so you are considering this as an investment in the property long term ?

An option is to transfer the property into a partners name who is maybe 20% tax payer ?

Make sure you keep all expenses spent on the property to claim back.

robgilmo

Barnezy said:

guitargeek62 said:

Barnezy said:

It just seems the government is completely against private landlords, but surely the consequence is less rental properties and much higher rents for tenants, making it harder to save to buy their own place (if they want to) and less secure. 

Our place is currently on a permission to let repayment mortgage, and we're making a £600pm loss when tax is considered. Moving to a BTL interest only might get us to a breakeven point, but is it then even worth it, given the hassle of being a landlord? 

Not sure I agree with the former - if less people are buying second/third/nth properties to let out, then more properties will be on the for sale market and therefore there could be a correction in prices that increases affordability for current renters.

Potentially in the long-term, but not significantly. Renters will deffinately have less choice and therefore higher rents, if people are put off/taxed out of being landlords. Remember the majority of renters are young people who don't have the savings yet to buy, even if houses cost half what they do today. They will have even less chance if there are less rentals and rent increases.

The governement tax rules seem to target the private individual landlords. The big ones that setup Ltd companies to buy the properties under to avoid tax etc, will only become more prevalent and controlling of the market. 

Sorry man, but why do Landlords think they do renters a favour? Its because of Landlords that people are forced to rent, its because of landlords that homes are unaffordable, its because of landlords that people cannot save to buy, its because of landlords that many youngsters around here cannot afford to live in the villages they were born in, not the other way around, not at all.
If all the land lords/second home owners pulled out you honestly think there would be less choice and higher rents? Really? Thats just wishful thinking.

Barnezy

robgilmo said:

Barnezy said:

guitargeek62 said:

Barnezy said:

It just seems the government is completely against private landlords, but surely the consequence is less rental properties and much higher rents for tenants, making it harder to save to buy their own place (if they want to) and less secure. 

Our place is currently on a permission to let repayment mortgage, and we're making a £600pm loss when tax is considered. Moving to a BTL interest only might get us to a breakeven point, but is it then even worth it, given the hassle of being a landlord? 

Not sure I agree with the former - if less people are buying second/third/nth properties to let out, then more properties will be on the for sale market and therefore there could be a correction in prices that increases affordability for current renters.

Potentially in the long-term, but not significantly. Renters will deffinately have less choice and therefore higher rents, if people are put off/taxed out of being landlords. Remember the majority of renters are young people who don't have the savings yet to buy, even if houses cost half what they do today. They will have even less chance if there are less rentals and rent increases.

The governement tax rules seem to target the private individual landlords. The big ones that setup Ltd companies to buy the properties under to avoid tax etc, will only become more prevalent and controlling of the market. 

Sorry man, but why do Landlords think they do renters a favour? Its because of Landlords that people are forced to rent, its because of landlords that homes are unaffordable, its because of landlords that people cannot save to buy, its because of landlords that many youngsters around here cannot afford to live in the villages they were born in, not the other way around, not at all.
If all the land lords/second home owners pulled out you honestly think there would be less choice and higher rents? Really? Thats just wishful thinking.

I dont know many people straight out of uni that have £50k minimum in savings, to buy a flat in London. I do know a lot of people straight out of uni that want to get job and live in London though. 

Even if properties were 50% their current value, how could a 22 year old with uni debts, get £25k together to buy a house, so they can accept that job in London? 

I've been both a renter and now a landlord. People are niave if they don't see any benefits to renting. 

Firstly for my flat I had to fork out £120k in savings, all from my own earnings that took years to save and alot of sacrifices made for. This covered the deposit, fees etc to buy, and £22k in stamp duty which I will never get back. I then spent £25k doing it up and about £3k in general maintenance over the 5 years we lived there. So I'm £150k in. The mortgage costs £1,600pm of which £900 is interest that doesn't go towards paying down the debt. The service charge is £300pm, so £1,900 in monthly cost total, of which £1200 are unrecoverable costs. 

My tenants get to live in that same flat for £1,800pm, thats it. If anything breaks, its my problem. If they decide they want to move to another area, they just move. No need to worry about the current market value, whether they can find a buyer, estate agent fees, people looking around, redecorating to sell etc... oh yeah and they haven't had to layout £150k, which could have been earning them money somewhwre else, or maybe they just get to live an extravagant lifestyle and don't save. 

Are you're trying to say renters don't get a good deal? 

There is a need for private renting and the fewer there are the more rent will be, it's just supply and demand. Being a renter and hoping there are less landlord owned properties is like turkeys voting for Christmas. 

RaymondLin

Question, just this point... why single out a specific age of 22/out of uni age?  I know he said youngsters but we all know he meant people younger than him, anyone up to mid 30’s not just 22 year olds. 

Fishboy7

Sometimes I wish we all rented.

We quite often get the urge to move someplace else but are put off by all the hassle and expense.

I know people who let and sub let and don't pay any tax on it. 

(edit: I agree, if the market isn't rising you're better off selling) 

Barnezy

RaymondLin said:

Question, just this point... why single out a specific age of 22/out of uni age?  I know he said youngsters but we all know he meant people younger than him, anyone up to mid 30’s not just 22 year olds. 

OK, my brother is 27, earns £130k a year. He has no interest in buying a property yet. He's lived in Clapham, Wimbledon and now Putney. Just moved in with his girlfriend who makes simular money. Either see the benefit in buying yet, despite being able to afford to if they want. Also they are not serious enough yet to buy together. So for him renting is great. Lives in an £800K flat overlooking the Thames fot £2100pm. 

Opposite side of the spectrum I have a friend who is a barman in a top London hotel. Him and his Mrs earn maybe £80k pa combined. They are both 34. They rent in Angel because they want to live in zone 1. They get to live in a flat they could never afford, even at half its value. If they couldnt rent or they were competing with bankers to rent the same property, they'd need to live outside London and the commute would consume 35% of their earnings. 

Let's say for arguments sake landlords were made to sell their properties... that is only c20% of homes in the UK. Do people really think that is going to make homes more affordable? What are all the renters with no savings going to do? What are people with terrible control over finances and poor credit ratings going to do? 

Home ownership is at an all time high at the moment  c74%. Private landlords are at a 7yr low.

It's not landlords that are the cause of the high cost of ownership, its the number of people in the UK and therefore demand and low interest rates. 

BTW I'm renting our current place so we could get my son in to the school we wanted and decided exactly where we want to buy our family home. I pay less in rent than the mortgage on this place would be, can move whenever we want and haven't had to layout anymore savings. Washing machine broke this morning, WhatsApp the landlord to fix, not my problem. Its great! 

RaymondLin

Barnezy said:

RaymondLin said:

Question, just this point... why single out a specific age of 22/out of uni age?  I know he said youngsters but we all know he meant people younger than him, anyone up to mid 30’s not just 22 year olds. 

OK, my brother is 27, earns £130k a year. He has no interest in buying a property yet. He's lived in Clapham, Wimbledon and now Putney. Just moved in with his girlfriend who makes simular money. Either see the benefit in buying yet, despite being able to afford to if they want. Also they are not serious enough yet to buy together. So for him renting is great. Lives in an £800K flat overlooking the Thames fot £2100pm. 

Opposite side of the spectrum I have a friend who is a barman in a top London hotel. Him and his Mrs earn maybe £80k pa combined. They are both 34. They rent in Angel because they want to live in zone 1. They get to live in a flat they could never afford, even at half its value. If they couldnt rent or they were competing with bankers to rent the same property, they'd need to live outside London and the commute would consume 35% of their earnings. 

Let's say for arguments sake landlords were made to sell their properties... that is only c20% of homes in the UK. Do people really think that is going to make homes more affordable? What are all the renters with no savings going to do? What are people with terrible control over finances and poor credit ratings going to do? 

Home ownership is at an all time high at the moment  c74%. Private landlords are at a 7yr low.

It's not landlords that are the cause of the high cost of ownership, its the number of people in the UK and therefore demand and low interest rates. 

BTW I'm renting our current place so we could get my son in to the school we wanted and decided exactly where we want to buy our family home. I pay less in rent than the mortgage on this place would be, can move whenever we want and haven't had to layout anymore savings. Washing machine broke this morning, WhatsApp the landlord to fix, not my problem. Its great! 

Btw, I know all that but i just wanted to know why in the first instance you picked an age that skewed it as far as you could go pretty much. 

I’m not saying that there is no place for renting at all, clearly there is, I’m just curious how your mind went to extreme age in the first reply that’s all.

because the flip side of the argument is that other people in your brother’s age and circumstances might want to buy but the prices are higher due to less (than it would have) on the market.  I think more property on the market will mean the prices will be lower, yes, at least it won’t go up as quick.  If supply and demand is still a thing.

Barnezy

I only said 22, because that is a clear argument as to why private landlords need to exist, even if properties were 50% what they are now.

I agree there are 27 year olds that would like to buy. There are also 27 years olds that go out and buy BMW's on finance, spend all their money on nights out and expensive clothes, and then complain property is too expensive. 

Anyway, all this to say landlords offer a needed services. Renting is good in a lot of situations. Landlords aren't the reason you can't afford a property. 

And lastly, pushing landlords to seek alternative investments, will harm renters more than homeowners. If you dont believe me, read what happening due to making property a less attractive investment. https://www.forbes.com/sites/garybarker/2019/11/28/supply-and-demand-the-leaking-ship-of-landlords-and-tenants/

ToneControl

Barnezy said:

I recently became a landlord in November when we moved out from London for schools. 

Are any of you considering selling up, or putting rents up to cover costs? 

The new tax rules seem to make it extremely unattractive to be a landlord now. With 40% of the rent going to tax, how can you make it work? 

Then there are all the new regulations being enforced... the latest being the electrical cert. I wonder how many electricians will be cashing in on full rewires that don't need doing. 

Then there's second property stamp duty.

It just seems the government is completely against private landlords, but surely the consequence is less rental properties and much higher rents for tenants, making it harder to save to buy their own place (if they want to) and less secure. 

Our place is currently on a permission to let repayment mortgage, and we're making a £600pm loss when tax is considered. Moving to a BTL interest only might get us to a breakeven point, but is it then even worth it, given the hassle of being a landlord? 

other options:
move the house into a LTD company. frankly unlikely to be worth it when you already own it, because you have to sell it to the company, pay stamp duty, and then mortgages are usually 1% higher

probably the best: some mortgages now have a low interest rate but a very high arrangement fee. AFAIK the fee is tax fully deductible, unlike the mortgage interest

BTL rates are higher. You would find it easier to make ends meet with an interest-only mortgage of course. LTV rates are lower too, 75% is about the max

best bet is to do the maths to see if it is a viable option long term: allow 10% of rent a year voids, 10% refurb, etc.
Here are the most common deductions in business models:

lost tax rebate

monthly service charge

annual mortgage cost

annual lost tax rebate

annual service charge

tenant finding £235

Letting  10.8%

Council Tax void

6% maintenance

Licence

Insurance

days empty

ToneControl

octatonic said:

Barnezy said:

I recently became a landlord in November when we moved out from London for schools. 

Are any of you considering selling up, or putting rents up to cover costs? 

The new tax rules seem to make it extremely unattractive to be a landlord now. With 40% of the rent going to tax, how can you make it work? 

Then there are all the new regulations being enforced... the latest being the electrical cert. I wonder how many electricians will be cashing in on full rewires that don't need doing. 

Then there's second property stamp duty.

It just seems the government is completely against private landlords, but surely the consequence is less rental properties and much higher rents for tenants, making it harder to save to buy their own place (if they want to) and less secure. 

Our place is currently on a permission to let repayment mortgage, and we're making a £600pm loss when tax is considered. Moving to a BTL interest only might get us to a breakeven point, but is it then even worth it, given the hassle of being a landlord? 

I'm a landlord, for more than 15 years now.

Buy through a limited company and you don't pay the same income tax.
The properties we've had the longest are still profitable even though they are held individually, because the mortgage is so low, relative to the value of the property and the rental income.
If I was making a £600pcm loss then I'd get out of that property quick smart- especially if you've been living in it.

The longer you have it rented the more likely you are to incur CGT on the sale.
Speak to an accountant.

good point - if you've made large capital gains since purchase, probably wise to sell ASAP and re-invest elsewhere

Octa: I assume the £600 loss is because it's a repayment mortgage

ToneControl

Barnezy said:

We were acidental landlords really as we wanted to move to a new area. We had lived there for 5 year prior. 

Its a £700k flat, so the £600pm loss is relative. We wanted to hold on to it for the kids. But maybe we sell before the 2 year mark when CGT kicks in and use the money to buy one under a limited company instead. Such a shame as its a lovely flat. My daughter was even born on the bathroom floor so has alot emotional attachment to us. 

Any decent tax advisors anyone can recomend? 

https://www.teeslaw.com/insights/changes-capital-gains-tax-landlords-second-homes/

Sorry, it's now 9 months from moving after which you lose the CGT exemption

ToneControl

Barnezy said:

I recently became a landlord in November when we moved out from London for schools. 

Are any of you considering selling up, or putting rents up to cover costs? 

The new tax rules seem to make it extremely unattractive to be a landlord now. With 40% of the rent going to tax, how can you make it work? 

Then there are all the new regulations being enforced... the latest being the electrical cert. I wonder how many electricians will be cashing in on full rewires that don't need doing. 

Then there's second property stamp duty.

It just seems the government is completely against private landlords, but surely the consequence is less rental properties and much higher rents for tenants, making it harder to save to buy their own place (if they want to) and less secure. 

Our place is currently on a permission to let repayment mortgage, and we're making a £600pm loss when tax is considered. Moving to a BTL interest only might get us to a breakeven point, but is it then even worth it, given the hassle of being a landlord? 

btw, I'm assuming you know about mortgage payments no longer being fully offset against rent before calculating tax ?

Barnezy

Thanks for the suggestions @ToneControl . I think I'm going to put it up for sale when the tenants 1yr clause comes up. Bad news for my tenants and sad to sell somewhere we loved so much and hoped to give the kids, but I shouldn't be subsidising someone else's living expenses, just because the government have decided to tax landlords out of existence. 

Good luck to renters... that's all I can say.