Capital Gains tax: buy-to-let investors must tear up retirement plans

chucky

nollag2006 wrote: »

There still is plenty of time. I get a smidgen just under 6% gross yield on my current BTLs but that's because I bought them in Spring of last year. A nice little earner.

and that's without the capital profit you'll probably make... all in all a nice little earner for you...

chucky

Thrugelmir wrote: »

No not at all. My reference to the majority, is not those like Chucky, who have a £100k of capital to invest.

oh yes i forgot to say that if you buy into BTL you're always looking to buy below the market value at the time...

so for that £100k+costs invested only a £25k increase in the re-sale value of that £375k property gives you an extra 25% profit... happy days :T

Entertainer

chucky wrote: »

your interpretation of yield isn't correct IMO.

yield is the return on the money invested - therefore the money invested is the deposit amount placed on the property.

here's a real life example for you.

property price paid £375k - loan amount £275k = £100k investment.

rental £400 per week = £20,800 per year income
gross yield = £100k divided by £20.8k = 20.8% gross yield.

mortgage interest amount at 2% = £5,400 a year
£5,400 - £20,800 (Rental Income) = £15,400 return/ = 15.4% net yield minus repairs, costs, etc

i think out of that 15.4% yield you can make some good capital repayments if you like.

Couple of points to make:

2% isn't available to new investors, hence there is very little yield surplus for them.

Those gains quoted are leveraged gains- leverage can work the other way in amplifying losses. It would be similar to buying a FTSE future at 4x leverage and quoting impressive gains but forgetting the possibility of a Black Swan/ picking pennies up in front of a steamroller event. Property can fall in value and there can also be other unexpected expenses like major structural problems.

If you feel that property prices will be resilient over the long term, of course these risks are lower than other asset classes like shares. But I wonder how many decades all those people who bought city centre flats three years ago, at 3.5% rental yields, are going to have to wait to establish equity? I'm sure they were saying they were in it for the "long term" when they started their property empires.

Entertainer

nollag2006 wrote: »

There still is plenty of time. I get a smidgen just under 6% gross yield on my current BTLs but that's because I bought them in Spring of last year. A nice little earner.

:beer:

But I am strongly considering going back into the market again, over the quiet Summer months. Even after the high prices of the past year, you can still get a 5% return around Ealing, where I have my BTLs:
http://www.londonpropertywatch.co.uk/average_rental_yield.html


I've not had a bit of hassle from tenants over the years. If you treat folk with respect, they (hopefully) will reciprocate.

The trick is not to view it as a short term speculative investment. Cash flow is likely to be weak in years 1 and 2, and you need to be able to ride out the ups and downs of any movements in the housing market.

I bought mine as a college fund for my two daughters - so hopefully the market should be double or treble current levels in 18 years, while the tenants have paid most of the mortgage off !!

:T

I've seen you use that phrase before. I still can't work out how less than 6% is a nice little earner right now unless you are on a ridiculously low SVR/ tracker deal ( although I can't remember many tracker deals being around last year.)

chucky

Entertainer wrote: »

2% isn't available to new investors, hence there is very little yield surplus for them.

no but you could probably get 3% or 3.5% right now without even doing too much research for a new investor.

Entertainer wrote: »

Those gains quoted are leveraged gains- leverage can work the other way in amplifying losses. It would be similar to buying a FTSE future at 4x leverage and quoting impressive gains but forgetting the possibility of a Black Swan/ picking pennies up in front of a steamroller event. Property can fall in value and there can also be other unexpected expenses like major structural problems.

If you feel that property prices will be resilient over the long term, of course these risks are lower than other asset classes like shares. But I wonder how many decades all those people who bought city centre flats three years ago, at 3.5% rental yields, are going to have to wait to establish equity? I'm sure they were saying they were in it for the "long term" when they started their property empires.

don't disagree with any of this as investments go up as well as down.

i wonder how many people thought that investing in BP shares would no provide them with any losses in their share price... any asset call is risky...

property like any other investment vehicle is a risk - for many the profit outweighs the losses otherwise so many people wouldn't have invested in property...

Entertainer

chucky wrote: »

no but you could probably get 3% or 3.5% right now without even doing too much research for a new investor.


don't disagree with any of this as investments go up as well as down.

i wonder how many people thought that investing in BP shares would no provide them with any losses in their share price... any asset call is risky...

property like any other investment vehicle is a risk - for many the profit outweighs the losses otherwise so many people wouldn't have invested in property...

Really? I didn't know that new BTL mortgages were available at that rate. Any idea where? And your point about BP shares is correct. On the surface, up until two months ago a licence to print money. And then there's the banks, people never believed those cash cows could go bust. Basically, no share is safe anymore, which makes property more attractive.

chucky

Entertainer wrote: »

Really? I didn't know that new BTL mortgages were available at that rate. Any idea where? And your point about BP shares is correct. On the surface, up until two months ago a licence to print money. And then there's the banks, people never believed those cash cows could go bust. Basically, no share is safe anymore, which makes property more attractive.

The Mortgage Works - decent rates but fees may be an issue with the wrong LTV. the commercial route is a good option at the moment.

no share is safe and neither is investing in property... all investments have their risks - buying well at the right price is the key whatever the investment.

brit1234

chucky wrote: »

no share is safe and neither is investing in property... all investments have their risks - buying well at the right price is the key whatever the investment.

Surely then it is better to buy an investment property in a few years time rather than now at near peak prices.

Gorgeous_George

Consider BTL over 20 years.

Today... assume costs of £6000 per year and a rent of £500 per month. You make nothing.

In 20 years time... assume costs of £7000 per year and rent of £800 per month. You make £2600.

GG

brit1234

Gorgeous_George wrote: »

Consider BTL over 20 years.

Today... assume costs of £6000 per year and a rent of £500 per month. You make nothing.

In 20 years time... assume costs of £7000 per year and rent of £800 per month. You make £2600.

GG

I think interest rates will be a lot higher in 20 years. So if you buy a property now at near peak you are looking at very little profit on rent with interest only mortgage.

Far better to buy at the bottom of comming crash, you will get a far better rental return.