For all the BTL fans

chucknorris

Crashy_Time wrote: »

chucknorris wrote: »

Says the guy who sold to rent decades ago :rotfl:

Our rental income has risen about 10% in the last 3-4 years.[/QUOTE]


Your tax bill is about to rise to compensate :rotfl:

Actually funnily enough, it isn't that far from compensating for that particular 10%, but I have already calculated the changes (did you really think that I wouldn't have already done this) to our April 2017 tax returns and our taxable rental profits will exceed £100k, the changes aren't that great because I am not highly geared (my wife's properties are all mortgage free, apart from a half share in one house with me) and also interest rates are low.

lisyloo

Annual rent of £27k Is too high, more like £18k.

chewmylegoff

cells wrote: »

More typical in inner London

Purchase £500,000
Deposit £125,000
Mortgage £375,000
Stamp duty £15,000
Solicitors and valuation £1,000
Mortgage fees £1,000

Annual Rent ~£27,000
Interest on mortgage £15,000
1 months rent as void and agent fee £2,250
Maintenance £750

= ~£9,000 before tax
= ~£5,400 post tax (@40%)

With the new tax rules coming into effect the same would drop to £2,400 post tax return

The same equity of ~£150k put into fixed savings at 3% would return £2,700 post tax (£4,500 in an ISA)


so if there was no HPI or rent price inflation its probably not worthwhile. However most BTLers probably expect HPI/RPI

5.4% gross yield on a flat in inner london. Good luck with that. More like 3.5%.

lisyloo

I would expect to pay £18-£20k and I'm a real renter actually renting those places. I've had no trouble at all on the supply side at that price.

My experience is anecdotal but real, what are you basing your £27k on?

Graham_Devon

cells wrote: »

For a £500k house I would expect in the region of £27k annual rent

So you are expecting a yield of 9% from month 1?

In London?

Double, and in some cases, 3x the average yield?

Good luck.

cells

lisyloo wrote: »

I would expect to pay £18-£20k and I'm a real renter actually renting those places. I've had no trouble at all on the supply side at that price.

My experience is anecdotal but real, what are you basing your £27k on?

Where do you rent?

In south mid and south hackney the going rate is for a 3 bed flat is now £2k a month. 3 bed homes / 4 bed flats are closer to the £2.2k-£2.6k a month mark

furnished to a decent standard. but these will be the lower end of the market in council estates. TBH about half of hackney is council estates and they are the ones available to rent. A few private estate homes come on but they tend to be 3k+ a month for similar size

Generali

The article is wrong when it says that you can't take a leveraged position in the stock market.

chewmylegoff

cells wrote: »

The average rent in May 2015 in London may be £1,500 but i suspect that the average house getting £1,500 costs less than £500k

For a £500k house I would expect in the region of £27k annual rent

yes the maintenance may well be an underestimate

You might expect that. I expect that if you priced your theoretical property at that level it would theoretically remain on foxton's theoretical website, unlet, for about five years, by which time you would (theoretically) have defaulted on the mortgage and been repossessed.

Graham_Devon

cells wrote: »

27 / 500 = 5.4% gross not sure where you got the 9% from

Used a yield calculator as it happens using the figures you had given. Your 5.4% is still higher than any average yield in any borough in London though.

Loan to Value75%

Annual Rental Income£27,000

Annual Pre-Tax Profit£12,000


Annual Estimated Yield9.23%

Annual Mortgage Payments£15,000

Initial Investment£130,000



Estimated annual yield figures are pre-tax

https://www.yourwealth.co.uk/tools/buy-to-let-yield-calculator/

chewmylegoff

Generali wrote: »

The article is wrong when it says that you can't take a leveraged position in the stock market.

The best example of this I ever saw was a guy drawing down cash advances on his credit card and using the money as margin on CFD trading in an AIM oil exploration company. He lost his shirt but at least he had the sense to buy CFDs rather than spread bets so his losses were tax deductible...