Buy to let advice please ?

sconieroany

Thanks to all who posted. there is no right or wrong answers, but a question of what you are looking for as an investment or return, I am not a property investor, only an individual looking for a btl as a longterm foothold on the property ladder for my kids, my village 20 min's from Glasgow is not as overheated as other parts of the Uk and not a huge investment, but I do not want to throw money down the drain, I will research further and Bank the cash for now.

Thanks again for your time and effort.

musey

sconieroany wrote:

Hi folks, I am looking to buy my first buy to let properties and would be grateful for a bit of advice, the property will have a re-payment of £450 pm over 20yrs with a mortgage from the "Morgage Express" peolple starting at a 5.49% 3yr fix, does this sound like a good deal to start with ?, the property will rent for £410 Pm, leaving me £40 out of my own pocket, I understand the rent is classed as taxable income on the capital part of the re-payment, so if £250 pm was towards this I would pay 20% tax on this = £50 pm, due by self assesment at the end of the financial year, is this correct ?

I had planned to take out a joint mortgage on the btl, but on reading articles online they advice putting the property in my wifes name as she has a small salary, incase my earnings take me into the 40% bracket ?

I will have to seek some accountant advice but I am unsure on costs for this service, any ideas on how much I will pay an accountant to sort out my tax bill ?

Thanks.

Like the some other posters I would not consider taking on a BTL that would not cover it's own motgage payments. You have nothing left for void periods, repairs, maintenance, management costs, insurance, gas service check to quote a few standard expenses.

You can complete a tax return yourself quite simpley, contact your tax office and ask for the advice leaflets on "land & property"

itsakidsworld

Property investing is providing for your pension in the future. No other reason. You pay into a pension in this Country and what are your guarantees? None. How much do you pay into the contribution? £50, £100, £200 a month, then sit back and worry like hell as you listen and actually see all the doom and gloom.

Property prices have increased to the point where you now cannot purchase and make profit ( or yield) in the first few years, even on interest only. So what do we do? We forget about it and continue to pay into our pension fund which supports the fat cats life style.

Imagine if you purchased a property and the monthly payments leave you short by £100? This is your pension contribution. Allowing for other cost, you end up each month with a shortfall of £200. So for £200 a month, you are reducing a debt and increasing your pension fund. With each passing year, the rent increases only slightly, again reducing your pension imput ( not increasing it as you have to do with a pension to maintain its possible final worth).

Property prices will once again go up but when is another matter. Are we heading back down? Who knows. Are we going to stay stable? Who knows. One thing is for certain though. By investing into your property you are investing and looking after your own pension fund. You decide how much you contribute and you decide when you want out. You watch market moves and make the decisions for your own future. It is easier than you think.

But if you think you can just buy a property and make stacks of cash straight away, then sorry, think again.

I know which pension road I prefer.

musey

itsakidsworld wrote:

Property investing is providing for your pension in the future. No other reason. You pay into a pension in this Country and what are your guarantees? None. How much do you pay into the contribution? £50, £100, £200 a month, then sit back and worry like hell as you listen and actually see all the doom and gloom.

Property prices have increased to the point where you now cannot purchase and make profit ( or yield) in the first few years, even on interest only. So what do we do? We forget about it and continue to pay into our pension fund which supports the fat cats life style.

Imagine if you purchased a property and the monthly payments leave you short by £100? This is your pension contribution. Allowing for other cost, you end up each month with a shortfall of £200. So for £200 a month, you are reducing a debt and increasing your pension fund. With each passing year, the rent increases only slightly, again reducing your pension imput ( not increasing it as you have to do with a pension to maintain its possible final worth).

Property prices will once again go up but when is another matter. Are we heading back down? Who knows. Are we going to stay stable? Who knows. One thing is for certain though. By investing into your property you are investing and looking after your own pension fund. You decide how much you contribute and you decide when you want out. You watch market moves and make the decisions for your own future. It is easier than you think.

But if you think you can just buy a property and make stacks of cash straight away, then sorry, think again.

I know which pension road I prefer.

Very good points made there, I guess for me I've turned mean as I was lucky enough to buy all my BTLs mid/late 90s. I don't think I'll buy again until/if we have a crash.

dunstonh

Talk about doom and gloom merchants! Who is going to risk their own home for a BTL. Short of cash, which mortgage do you pay first the BTL or your home? Need to sell, which do you sell the BTL or your home?

Basic common sense says your first priority is the mortgage payments on your home. Always take your BTL mortgage with a different company to your main mortgage. Always make sure that the bills on your own home are paid up.

As an IFA I am acutely aware of people that havent been told about risk in the past when they have done transactions. I often see people who are invested above their risk profile. Often done without realising because someone said that was where they should invest.

Buy to Let with mortgage is a high risk transaction. It shouldnt be presented any other way.

If you wanted to list the possible risks then losing your main home would be on there. Lets say property prices drop 30% and interest rates have gone up. You no longer equity in the buy to let and you cannot afford both mortgages. In the event this happens, you may not be able to sell as no-one is buying and the buy to let could get repossessed. With insufficient equity to pay the BTL mortgage, if you dont have the funds to pay the difference, which you probably wouldnt at that stage, then they will come after you for the rest and that means you now are at risk on your main residence.

It would take a cycle of events to get into the position but it is a cycle of events that has happened before and will happen again.

To not take the risks into consideration is like investing on the stockmarket and thinking it will never crash. If knowing all the potential risks and you then still choose to do it then that is a choice you can make. However, no-one should go into these discounting the risks involved.

Conrad

itsakidsworld wrote:

Property investing is providing for your pension in the future. No other reason. You pay into a pension in this Country and what are your guarantees? None. How much do you pay into the contribution? £50, £100, £200 a month, then sit back and worry like hell as you listen and actually see all the doom and gloom.

Property prices have increased to the point where you now cannot purchase and make profit ( or yield) in the first few years, even on interest only. So what do we do? We forget about it and continue to pay into our pension fund which supports the fat cats life style.

With respect, I had a portfolio of property and have sold.

The point is this: 'Which investments will make the best return in the next 5 - 10 years'?
Certainly not UK property.

This means you are better off elsewhere (not a Pension probably). Once the time is right to return to UK property then you buy - in with a much greater sum of money than you otherwise would have had.

Think about it. If it was as simple as this poster suggests do you not think every Bank, financial institution and Insurer in the world would be piling in?
They arent - for good reason!

Many of them are piling inot foriegn property - thats where the money will be made (not Spain, France, USA or anywhere else that has already had a boom by the way).
Why not invest in funds or shares of companies that are buying foreign property? Much bigger return prospects.

I personally dont use Pensions.

itsakidsworld

Conrad,

if it is my post which you refer to as "if it was that simple", then yes it is that simple.

Well done to you for selling your property and moving into the overseas market. However, what you have done is actually change direction as far as what your business is.

When you had property in the UK as you say you did and you rented them out, then that is "property Investing".

When you move into the market, overseas or in the UK, to buy property off-plan and sell on prior to completion, then that is "property speculation".

Two absolutely different business concepts in the eye of the Inland Revenue. If someone in the UK had say five investment BTL properties and they decided to sell, they would be taxed on this profit before they could do anything with the profit. They could not sell and buy off-plan either here or abroad and think that they can avoid tax by doing this. If you sold everything including your main residence and left the Country for five years or more, then you would avoid the tax penalties. However, if you sold your BTL and invested the cash left into off-plan before paying the tax man, yet still reside in this Country, then you will be landed with a very hefty tax liability

Many people who come onto these boards are looking at long term investing for their future pension. They have jobs but can see that by putting funds into private pensions, the returns are not good. For this reason and this reason alone, my post stacks up on all counts and is a surefire way for these people to secure some kind of financial future.

As a company, I also invest abroad and I am fully aware of how the system works and what we are trying to achieve. But this is a totally different angle and one which alot of people are afraid to take. That includes investing in your banks and other institutions ( pension fund related and supplying the fat cats as I posted) who purchase abroad.

sconieroany

Conrad, could you give me some idea of the kind of investment required in overseas propery speculation and the potential returns, also an idea of the tax benifits (if any) of investing overseas, I did consider Florida some years ago, but the oversupply of rental homes and heavy running costs ruled that out, I have seen some ad's in the press claiming large returns on reselling buy off plan, but have thought it was all froth.

As I have stated earlier, I have decided to hold off until I have looked at all options, but as itsakidsworld say's I feel brick's and mortar is a more comfortable route to go down for the longterm, there is risk in all investment, but I want to keep it to a minimum.

Thanks again all.