Is buy to let still worth it?

Lloyd90

With the changes to buy to let, mostly S24 and the changes to tax relief etc, is buy to let still worth it?

chucknorris

Lloyd90 wrote: »

With the changes to buy to let, mostly S24 and the changes to tax relief etc, is buy to let still worth it?

Worth it to who?

Established landlords: Who haven't mewed, with little or no mortgage, I would say absolutely yes.

Recent entry landlords: Difficult to say, depends on individual circumstances.

Incoming landlords: I wouldn't enter the market now.

always_sunny

like any other business, it really depends!
I doubt established and successful landlords are rushing to sell and get out.

MyOnlyPost

It depends entirely on your personal tax circumstances.

If you are a 20% tax payer and your gross rent will not push you into the 40% tax bracket then nothing has changed. If it does push you into the 40% tax bracket then you should be able to put part of your salary into a pension to bring you back down to the 20% bracket but this could result in a lower net income now for a higher income in retirement.

If you are already a 40% tax payer then BTL is a far less attractive prospect unless you can put down big deposits or have no mortgage at all.

economic

MyOnlyPost wrote: »

It depends entirely on your personal tax circumstances.

If you are a 20% tax payer and your gross rent will not push you into the 40% tax bracket then nothing has changed. If it does push you into the 40% tax bracket then you should be able to put part of your salary into a pension to bring you back down to the 20% bracket but this could result in a lower net income now for a higher income in retirement.

If you are already a 40% tax payer then BTL is a far less attractive prospect unless you can put down big deposits or have no mortgage at all.

even then it wont be an efficient use of your capital.

chucknorris

economic wrote: »

even then it wont be an efficient use of your capital.

Exactly, if shares provide you with an equivalent or even better return then why invest in property? I can't remember the last time my etf's rang me to say that they had a plumbing leak.

MyOnlyPost

economic wrote: »

even then it wont be an efficient use of your capital.

Really?

10-12% gross annual return coupled with long term capital growth and far less volatility. Show me an investment fund that outperforms house price growth over 30 years and pays a 10% annual dividend



The House price index and the FTSE have both increased by very similar amounts over the period but the house prices are a far smoother upward curve with few drops and no steep cliffs. You could have got in at any time and be in profit today, whereas the FTSE took 15 years to recover from the dotcom bubble.

movilogo

If your calculation shows that you are getting a good return on investment and net positive cash flow every month (after interest payment, tax and other expenses and factoring for big expenses like new boiler etc.) then yes it is worth it.

Of course this means you need to consider where you buy, rental yield, mortgage rate you get, whether you can invest same money elsewhere for better return etc.

If you can't figure out answers of above questions yourself, then for you it is not worth it.

chucknorris

MyOnlyPost wrote: »

Really?

10-12% gross annual return coupled with long term capital growth and far less volatility. Show me an investment fund that outperforms house price growth over 30 years and pays a 10% annual dividend



The House price index and the FTSE have both increased by very similar amounts over the period but the house prices are a far smoother upward curve with few drops and no steep cliffs. You could have got in at any time and be in profit today, whereas the FTSE took 15 years to recover from the dotcom bubble.

My initial reaction to your graph is that it demonstrates the point that shares are a better investment, over the long run they performed similarly for gross returns (ignoring gearing of course), but the tax system massively favours shares:

1. It is easy to avoid CGT with shares
2. CGT is lower with shares
3. Income tax is significantly lower for dividend income versus rental income
4. Shares are eligible for both ISA and pension tax wrappers
5. Property is much more hassle than shares to hold
6. The expenses that come with property are substantial
7. There are political risks with property

Speaking from a London landlord's and someone who is approaching their 60's perspective, it is time for me to move into other investments.

Conrad

Well I'm still buying with no intention of stopping.


I only buy if there is a very healthy monthly profit after mortgage and other costs such as service charge. Aside from investing in ISA's you're going to pay tax on income (pension income is taxable), so whilst the tax increases on property are a concern, rents will rise to allow for them. Stamp duty is a pain, but hey ho, any business investment involves costs, so nothing new there.


In terms of capital growth you cant really beat it unless you are buying in a location not conducive to it.


Many Landlords I know do not focus particularly on monthly profit maximisation, they are more interested in capital growth but others like myself are focused in on yield, with an eye to decent capital growth potential.




My long term plan is to build a portfolio until such time as I can sell say halve of them in order to repay the entire debt on the remaining halve. There will be CGT to pay but we will sell gradually to minimise this. I'd sooner have for example 6 properties debt free in retirement than 12 with debt and all the hassle associated with managing 12. I've known too many grumpy Landlords in my time bemoaning all the problems - because they essentially have too many properties.


I never visit mine - everything I do is about keeping as stress free as possible. If one day there's a problem I'll worry about it then. Some miserable old s)ds I know are forever fretting due to their regular contact with their properties.

chucknorris

Conrad wrote: »

I never visit mine - everything I do is about keeping as stress free as possible. If one day there's a problem I'll worry about it then. Some miserable old s)ds I know are forever fretting due to their regular contact with their properties.

That's your choice, and I can understand it (they are hassle), but we manage our own properties, and at today's prices we have saved approx £350k in management fees. By the time I sell up over the next few years, and my wife much later, that will not be far short of £500k.