Buy-to-let investors 'to sell 500,000 properties' as confidence plummets

chucknorris

Pennywise wrote: »

Geared BTLrs won't start to worry about the tax change on interest until they start seeing their tax bills rise. My experience from my clients is that they're just not listening to what I'm telling them. They either don't believe it or they think the govt will change the rules before they come into force. I suspect an awful lot will try to sell in the next couple of years once they start to really believe the tax changes are happening and start to see their rising tax bills.

I'm not 'worried' about paying more taxes, they will be paid from higher profits than alternative assets would provide (but I am not highly geared, and appreciate that is a different ball game) but I have been looking at alternative assets to store my wealth, provide retire income, facilitate a better retirement lifestyle and consider my years left to spend the equity. The outcome of those considerations are that I have concluded it is best to phase my selling more than previously intended, so instead of over the next few years, it will be over the next 12-15 years (we sold 2 properties earlier this year). The upshot is that nothing beats holding property when the CGT is significant (with low or no gearing), but because it is an illiquid asset, and like others prone to market corrections lasting at least a few years, it is necessary to sell early enough to not get stuck holding assets that require more management input than I would like in my later years. By the time I sell the last one, I would have held investment property for over 40 years.

I must say though that your clients don't sound particularly astute, and they certainly lack analytical skills. On the same day that the tax changes were announced I modelled all the finances on a spreadsheet and compared holding property to equities. Property still won (specific to my portfolio), and I knew by how much, and why (because of low gearing and that the CGT still works in my favour prior to selling).

Crashy_Time

chucknorris wrote: »

I'm not 'worried' about paying more taxes, they will be paid from higher profits than alternative assets would provide (but I am not highly geared, and appreciate that is a different ball game) but I have been looking at alternative assets to store my wealth, provide retire income, facilitate a better retirement lifestyle and consider my years left to spend the equity. The outcome of those considerations are that I have concluded it is best to phase my selling more than previously intended, so instead of over the next few years, it will be over the next 12-15 years (we sold 2 properties earlier this year). The upshot is that nothing beats holding property when the CGT is significant (with low or no gearing), but because it is an illiquid asset, and like others prone to market corrections lasting at least a few years, it is necessary to sell early enough to not get stuck holding assets that require more management input than I would like in my later years. By the time I sell the last one, I would have held investment property for over 40 years.

I must say though that your clients don't sound particularly astute, and they certainly lack analytical skills. On the same day that the tax changes were announced I modelled all the finances on a spreadsheet and compared holding property to equities. Property still won (specific to my portfolio), and I knew by how much, and why (because of low gearing and that the CGT still works in my favour prior to selling).

How did you model the future for equities?

chucknorris

Crashy_Time wrote: »

How did you model the future for equities?

I didn't, and I also did not claim that I had. What I did model was my net rental profit after the reduction of mortgage interest (including allowing for interest rate increases), loss of the wear and tear allowance and all the usual costs. Then I compared the net rental profit to the net dividend income profit available, rental profit still come out the winner (for me) up to about a base rate of over 4% (I can't recall). But I used the ftse 100 as a comparison and that is quite risky due to its lack of diversity, which wasn't really appropriate. I should have used a 'safer' low yielding equity example.

Going forward I really don't want to invest much more in equities than i already have, because my situation calls for a bit of de-risking of my portfolio, this is where I want to end up at the start or a few years into my retirement:


35% equities (much lower than originally targeted)
23% fixed pension (DB/SP)
22% investment property (hold 1.5 properties for at least a decade longer)
15% bonds (try and find a bond(s) paying near net inflation)
5% cash (regular savers, NSI cert, savings accounts)

The above is a moving target which is constantly under consideration.

Which means that as I sell properties going forward all of the equity should not go into equities (the extra investment will probably be restricted to my ISA and SIPP), and nearly all the equity should go into bonds/cash.