Banks and the HMRC

fox_warrior

jonesMUFCforever wrote: »

So you have factored in repairs, non payment of rent and the possibility that if you get a bad tenant your house could be trashed?
There are plenty of programmes on channel 4 and 5 which would put me off.

Yes we've considered all those points and it is of some concern, however, we will be using a local estate agent in the beginning to advertise and get our tenants. The agents carry out credit / financial checks on possible tenants to ensure they are good. The tenants will be obliged to have "Tenants Liability Insurance". The tenants have to give a deposit that is held by a "Tenancy Deposit Scheme", at the end of the tenancy it is only refunded if we are happy with the condition of the property. The agents will guarantee the rent. I will carry out the vast majority of any maintenance that's needed myself.

These programmes only show the worst cases for obvious reasons, it makes, "Good ?" viewing depending on your standpoint. "Can't pay? we'll take it away" is another crowd pleaser. I feel sure we can avoid such tenants. There are plenty of good tenants out there. In my local area there are a lot of properties that are rented out and all of them have good tenants.

I do take your point but we're confidant that we will be able to get good tenants.

fox_warrior

bigadaj wrote: »

Unfortunately that probably shows you have little understanding of what a 'safe' option is.

You quote an equivalent interest rate, this is presumably the rent, though it's the same thing, as the yield would be from an equity investment. How have you calculated this, have you factored in all costs in purchase, maintenance, charges, insurance, many councils are now imposing additional costs in terms of maintenance and upgrades to property.

Even if that is a net yield it's very poor for an at risk investment. What happens when your tend at defaults, and potentially damages the property; this happened to my wife last year, luckily she was covered by insurance but this ran into several thousand pounds all in.

Tax treatment for landlords is intentionally getting more harsh, as opposed to the reliefs open to people for investments whether within a pension, isa or unwrapped as I've stated above.

House prices generally rise but given the extended prices currently over much of the country, with income multiples double those of average and the fact that the near zero interest rates won't continue for ever, my opinion is that prices will stagnate or possibly fall over the coming years.

Obviously your wife thinks being a Landlady is a good idea and not what you are proposing so that makes me wonder, if your wife doesn't take your advice ??????? It sounds a bit like you're not practicing what you preach.

agrinnall

fox_warrior wrote: »

I do take your point but we're confidant that we will be able to get good tenants.

That just illustrates your niaivity in considering property as an investment. It might all go according to plan, but the number of things that can go wrong[STRIKE] that you can do little about when you're not in the same country[/STRIKE] mean that there is a [STRIKE]high[/STRIKE] higher chance of it ending in tears.

fox_warrior

agrinnall wrote: »

That just illustrates your niaivity in considering property as an investment. It might all go according to plan, but the number of things that can go wrong that you can do little about when you're not in the same country mean that there is a high chance of it ending in tears.

What makes you think we aren't in the same country?

agrinnall

fox_warrior wrote: »

What makes you think we aren't in the same country?

Sorry, got you confused with someone else who wants to buy while living in Dubai, I'll amend my previous post.

fox_warrior

agrinnall wrote: »

Sorry, got you confused with someone else who wants to buy while living in Dubai, I'll amend my previous post.

Ok, thanks for clearing that up. I'm interested in your take on what can go wrong apart from what has already been covered.

bigadaj

fox_warrior wrote: »

Obviously your wife thinks being a Landlady is a good idea and not what you are proposing so that makes me wonder, if your wife doesn't take your advice ??????? It sounds a bit like you're not practicing what you preach.

No, she has decided to keep teh house she owned previously. She will be selling it in the near future. Would you prefer a story of someone with no direct knowledge?

The obvious question to answer is why you think starting a new business in your sixties is a good idea, in a area you have little experience or specialist knowledge.

The key to the large gains made by people historically is that rents have basically covered costs, and increase in capital values, massively increased by teh gearing from mortgages and the associated tax relief on interest. That situation has changed.

Totally up to you what you do with your money, but at least acknowledge the risks and give to some thought though.

badger09

fox_warrior wrote: »

Yes we've considered all those points and it is of some concern, however, we will be using a local estate agent in the beginning to advertise and get our tenants. The agents carry out credit / financial checks on possible tenants to ensure they are good. The tenants will be obliged to have "Tenants Liability Insurance". The tenants have to give a deposit that is held by a "Tenancy Deposit Scheme", at the end of the tenancy it is only refunded if we are happy with the condition of the property. The agents will guarantee the rent. I will carry out the vast majority of any maintenance that's needed myself.

These programmes only show the worst cases for obvious reasons, it makes, "Good ?" viewing depending on your standpoint. "Can't pay? we'll take it away" is another crowd pleaser. I feel sure we can avoid such tenants. There are plenty of good tenants out there. In my local area there are a lot of properties that are rented out and all of them have good tenants.

I do take your point but we're confidant that we will be able to get good tenants.

Could you please elaborate on the bit I have put in bold.

I would be very interested to hear more detail on this 'guarantee'.

fox_warrior

bigadaj wrote: »

No, she has decided to keep teh house she owned previously. She will be selling it in the near future. Would you prefer a story of someone with no direct knowledge?

The obvious question to answer is why you think starting a new business in your sixties is a good idea, in a area you have little experience or specialist knowledge.

The key to the large gains made by people historically is that rents have basically covered costs, and increase in capital values, massively increased by teh gearing from mortgages and the associated tax relief on interest. That situation has changed.

Totally up to you what you do with your money, but at least acknowledge the risks and give to some thought though.

I'm happy to read a story from someone with direct knowledge. I'm sorry that things went wrong for your wife. I'm not looking to make large gains just a regular monthly income that will be more than I'm currently getting in interest. It's not ideal by a long way but at the moment I feel comfortable that the risks aren't too great. It's a big thing to do and not easy to factor in all the maintenance costs etc. All these costs will bring down the 3.75% I quoted earlier. I'm not happy that it will take about 18 months to get back the stamp duty, solicitors fees etc. Then there are the ongoing agents and accountant's fees. Once I'm happy with the tenants I wouldn't bother with the agents any more. I believe I can do this after 6 months. I might have a go at doing the tax returns myself and if I get stuck then get an accountant. I do acknowledge there are risks and that's something I'm still considering. At the moment I think the risks may be worth it. If I use an agents full management option I don't think I'll need any specialist knowledge, although this is the most expensive option. I'm still looking into whether or not it's a good idea at my / our time of life but I need to give it some serious consideration. I can't get comfortable with anything to do with stock markets and the like and at the moment I've no understanding of "Unwrapped". I've Googled it but will need spend some time on the subject to learn more. If I don't go down the Landlord route I'll probably put our money in the best bond I can find in my wife's name.

fox_warrior

badger09 wrote: »

Could you please elaborate on the bit I have put in bold.

I would be very interested to hear more detail on this 'guarantee'.

I've made a mistake with that. They don't guarantee the income. Depending on the level of management they will collect the rent on your behalf and pay it via BACs less their fees. They will monitor payments, issue statements, inform you if the payments fall behind and hold the tenants security deposit in a government approved scheme. Some agents offer "Rent Arrears Management". Not sure what that is. Good point, thanks.