Buying Cheaper Than Renting Everywhere except London

MiserlyMartin

phil_b wrote: »

Lets also consider that many FTB's buy a house with a chunk (if not all) of their deposit coming from the bank of mum and dad and wouldn't actually be getting any interest on that if it was left in the bank.

I should imagine that the much taken for granted, Bank of Mum & Dad must be getting very thin on deposits by now after all these years of handouts. Particularly after a house price crash, no more 'equity withdrawal' now.

chucknorris

mewbie wrote: »

They'll do almost anything for 5k. But you knew what I meant.

Of course 25k into pension might be the easiest way to avoid tax, etc.

No I won't do that, I won't buy an annuity and after looking extensively at income drawdown I don't like that option either. I hasten to add though I will have a very healthy income without a pension anyway. I only looked at pensions from a tax 'avoidance' investment point of view NOT as a necessary retirement income (so I do appreciate some people do need pensions, it just happens that I do not thats all)

Thrugelmir

julieq wrote: »

BTL isn't intrinsically risky compared with most other forms of investment, for example stocks and shares. The underlying asset is basically on an upwards ramp, despite short term falls, and there is a reliable income stream. There's a relatively low risk of slight negative cashflow, but the risk of ruin is negligibly small.

Unfortunately very few BTL investors have the capital to acquire property outright.

So your comparison is not meaningful in the context of the boom in BTL.

In terms of a reliable income stream consider investing in commercial property. Besides which commercial property can be held in a SIPP, which has considerable tax advantages.

Until there is clarification as to the direction of taxation, which will be revealed in the budget after next year election. Advisable to sit on ones hands. As any decision now could be extremely costly.

chucknorris

seraphina wrote: »

Bzzzt! Wrong answer. BTL investors are usually leveraged to "invest" in BTL - don't know many investors at that level that would borrow to invest in stocks and shares. That's why BTL can go badly wrong compared to stocks and shares.

Bzzzt! Wrong answer because the tenants pay the interest on the loan for the BTL, please explain how you can borrow to buy shares and get someone else to pay the interest on the loan?

Thrugelmir

chucknorris wrote: »

Chucky (and others) changing the subject what do you think of this:

I was about to put some more money from a maturing bond (about 25k) into a 5.15% fixed rate bond but the problem is that as a 40% tax payer it only nets me a paltry 3.09% pa. Instead I am thinking of buying a (non isa as I am fully subscribed) FTSE tracker because it is tax free (because the profit will not reach the CGT allowance when I cash it in). Obvioulsly there is a risk but as the FTSE is so low it hasn't got to rise much to outperform that 3.09% pa and of course you can choose your selling point to exit when (if) the ftse is doing ok.

I thought I would canvas opinions as it just ocurred to me today to do this today when I realised that this is a way of utilising my annual CGT allowance to get tax free income.

You could consider using investment trust shares. Some funds offer the choice of income or growth shares.

The growth shares transfer income to the income shares. In return the income shares transfer the equivalent capital back to the growth shares.

So in your case. Buy growth shares as there is no distribution for income tax purposes. Any gain would be treated as a capital gain on disposable of the shares.

Thrugelmir

chucknorris wrote: »

Bzzzt! Wrong answer because the tenants pay the interest on the loan for the BTL, please explain how you can borrow to buy shares and get someone else to pay the interest on the loan?

Providing the rental income is sufficent to pay the interest.

Rising interest rates and falling rents ( or the ability to pay the required rent), means that highly leveraged BTL are at risk. Of which there are many.

I would hedge my bets and say that interest relief will be restricted in next years budget and capital gains tax wil increase. Both will reduce the attractiveness of BTL particularly for leveraged investors.

chucknorris

Thrugelmir wrote: »

You could consider using investment trust shares. Some funds offer the choice of income or growth shares.

The growth shares transfer income to the income shares. In return the income shares transfer the equivalent capital back to the growth shares.

So in your case. Buy growth shares as there is no distribution for income tax purposes. Any gain would be treated as a capital gain on disposable of the shares.

Thanks, I'll look at it but generally speaking I have an aversion to 'funds' as I tend to think I am paying for guys to drive around in porches in the city. But I know I can be too cynical at times, so like I say I will have a look at it thanks.

I know some IFA is likley to pop up and say funds can outperform trackers and easily pay for the additional commission but I really like Fidelity's transparent 0.5% total annual fee for their 'all share FTSE tracker' as it's easy to understand and see exactly what I am buying into. However I will genuinely look at your suggestion tomorrow, thanks.

chucknorris

Thrugelmir wrote: »

Providing the rental income is sufficent to pay the interest.

Rising interest rates and falling rents ( or the ability to pay the required rent), means that highly leveraged BTL are at risk. Of which there are many.

I would hedge my bets and say that interest relief will be restricted in next years budget and capital gains tax wil increase. Both will reduce the attractiveness of BTL particularly for leveraged investors.

With gearing at only about 33% my rental income easily pays the interest. IMO there is no chance at all of interest relief being restricted, in fact that report (which I forget the name of) recommended that relief be extended to improvements in addition to maintenance.

Also I believe that rents won't fall much longer, and interest rates are only going to SLOWLY go back to approx where they were. If you are talking about new rather than existing BTL business (where good tracker mortgages are not available, then maybe so but then I have no interest in investing further)

carolt

chucknorris wrote: »

Bzzzt! Wrong answer because the tenants pay the interest on the loan for the BTL, please explain how you can borrow to buy shares and get someone else to pay the interest on the loan?

Bzzt to you too.

Wrong answer again, as the profit from BTL is based on the yield from rental, not - as you appear to assume - the capital appreciation.

In many cases, the BTL landlord is actually subsidizing the tenant, thus not only is the tenant not covering the interest, the landlord isn't making any profit either. They are simply putting all money earned back into paying off the interest on money they borrowed. Nt even paying back the mortgage.

Exactly as that numbskull nollag claimed in 2007 was his preferred method of 'making money' from BTL.

One born every minute. :rotfl::rotfl::rotfl:

chucknorris

carolt wrote: »

Bzzt to you too.

Wrong answer again, as the profit from BTL is based on the yield from rental, not - as you appear to assume - the capital appreciation.

In many cases, the BTL landlord is actually subsidizing the tenant, thus not only is the tenant not covering the interest, the landlord isn't making any profit either. They are simply putting all money earned back into paying off the interest on money they borrowed. Nt even paying back the mortgage.

Exactly as that numbskull nollag claimed in 2007 was his preferred method of 'making money' from BTL.

One born every minute. :rotfl::rotfl::rotfl:

No, you are he one making the assumptions only yesterday I posted:

post 41 in this thread http://forums.moneysavingexpert.com/showthread.html?p=25794993&highlight=#post25794993

"Well first of all I will emphasize that you should not invest in property purely for capital growth, that should be only be considered as a secondary benefit, the investment decision should be based upon an ongoing income profitability"

Which I think makes it quite clear that you are wrong in your assumption.

Furthermore to answer your reply I would add that whether the rent covers the interest or not depends upon the individual case, in my case interest payments are approx 10% of my rental income. I am not responsible for any moron property speculator that makes a bad investment. I am only responsible for my own investment decisions, personally at the moment my interst payments are only 10% of the rental income and when the base rates increase to about 5% they will still only be less than 50% of my rental income.