Thousands hit by buy-to-let fraud

Gorgeous_George

That's not a 'tax benefit'.

CGT is a tax on capital gains. There are legal ways to reduce liabilities but remember, a capital loss does NOT result in a tax rebate. The taxman takes his cut when their is profit. The investor takes all of any loss (other than offsetting against any other in-year losses).

So, where are these tax benefits?

GG

alared

A lot of the BTL brigade bought property without even looking at them and relied on "agents" to see to matters.
Talk about the blind lead

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fatpig_2

baby_boomer wrote: »

The disreputable & the ignorant will always flock towards any inflatable asset bubble. It's a pity that the taxpayer will have to pick up some of the pieces .

The Times front page - Buy-to-let fraud hits thousands

.."

Hard luck chuckey et al. Buy to let slummers shouldn't have let selfish greed cloud their judgement.

dopester

fatpig wrote: »

Hard luck chuckey et al. Buy to let slummers shouldn't have let selfish greed cloud their judgement.

They were happy to pay the asking price.

Obviously these investors don't think renting is such a bad choice, else they wouldn't have bought places to rent to others.

If they now lose their own homes as a result of poor value of their investments, and those homes are bought by FTBs at a big discount from 2007 levels, then that seems fine to me.

Let the investors try the life of renting, which was what they wanted for others. Now they can be on the other side of the market and have other landlords providing a "much needed" service for them without means to buy.

MissMoneypenny

These people took a gamble and lost.

MissMoneypenny

Some interesting comments from the link

"Property prices are determined by how much people are prepared to pay, so where's the fraud? If the buyers were over paying, does it mean that they in turn were going to defraud their renters by overcharging for rent? The buyers must have thought it was the correct price at the time of purchase."

http://www.timesonline.co.uk/tol/money/property_and_mortgages/article5375652.ece

Gorgeous_George

Flats were built by crooked developers to provide properties for stupid investors. These flats had a real value of, let's say, £80K.

An investor could get a mortgage for 80% of the value. But they had no money for the 20% deposit. Along comes the crooked valuer and values the flat at £150K. The investor takes an 80% mortgage of £120K and pays £100K to the crooked developer. Hey presto! The investor has £20K, the crooked developer has £20K (minus brown envelope money - no tax, for the crooked valuer). A crooked mortgage salesperson makes their percentage and ensures their bonuses based on meeting lending targets, as does the crooked Estate Agent and the crooked solicitor.

Anybody spotted the problem yet? Not enough stupid tenants.

House of cards - all fall down.

GG

dopester

Gorgeous_George wrote: »

These flats had a real value of, let's say, £80K.

The real value, as proven, was what the investor decided to pay for them.

You can't get any more real than that.

Asset prices rise not because of "buying" per se, because indeed for every buyer, there is a seller. They rise because those transacting agree that their prices should be higher. All that everyone else - including those who own some of that asset and those who do not - need do is nothing.

Conversely, for prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high. If no other bids are competing with that buyer's, then the value of the asset falls, and it falls for everyone who owns it. If a million other people own it, then their net worth goes down even though they did nothing.

Two investors made it happen by transacting, and the rest of the investors made it happen by choosing not to disagree with their price. Financial values can disappear through a decrease in prices for any type of investment asset, including bonds, stocks and land.

baby_boomer

The "sob story" from the second Times article is an incredible tale of greed, from a salesman and his wife who wanted to take the easy route to a luxurious and early retirement.

"With almost £2m of rental properties in their portfolio, Geoff and Jane Morris were looking forward to a comfortable retirement. It was the beginning of the golden age of the buy-to-let property boom and, like more than 1m other British investors, the couple thought they could build a nest egg on the profits of their investments in tenanted properties.

In 2004, however, they had the misfortune to come across Morris Properties in Leeds. The encounter would cost them their happy family life and their friends and leave them £500,000 in debt...."

Yes - they not only owe £500K but they've got their family and friends in debt as well - to the extent that they haven't spoken to them for a year.

And he gave up his job to run their "empire".

How responsible was that?

I can't be that sympathetic to a couple who let their naked greed take over their lives. They need to learn their lesson, pick themselves up and make a living like everyone else has to.

Gorgeous_George

dopester wrote: »

The real value, as proven, was what the investor decided to pay for them.

You can't get any more real than that.

That's not how fraud works. If you use your logic then anything that is sold fraudulently wasn't sold fraudulently and that can't be.

GG