buy to let investment

pjcox2005

Sorry, adding to the negative but it's not been mentioned.


I'm assuming you already own a home if you're now looking to buy a BTL. If so, then you now have an additional 3% stamp duty. [Edit to state this will definitely apply as you state you're a homeowner].


So if you buying a property for £500k, you'll be paying £30k in stamp duty land tax up front. Plus legals, costs of bringing up to scratch etc.


You may still want to and find a place where the rewards make it worthwhile, but it's worth keeping in mind that you may "lose" up to 10% straight off. Even at £1.5k a month rent, you're talking three years before you've earnt enough money to pay that (ignoring void periods etc).

Mrs_Z

Hi,
We took the plunge of getting a BTL some years ago and although we've been fortunate of not having had any bad tenants - it's certainly not an easy way to make money. My advice would be the following:
- make sure you familiarise yourself thoroughly with all aspects of the rental legislation and landlords' obligations. You may intend to hand the management to an Agency, but even so, you will need to be aware if anything, so that you can at least choose a good and reputable agent. And don't forget, they will charge you a management fee...
- run your sums carefully - the rental yield might be 4% on paper but the question to ask is - is it the NET yield?
- bad tenants - yes, the management agent might deal with the 'hassle' of going to court, eviction, getting in tradesmen to repair and refurbish the property but remember, it's YOU who will pay for all of that in the end (+ then some for the managing agent for their work for organising it)
- have you considered the tax implications? Not very favorable at present for a 2nd property
- do you have all other types of investments all full (ISAs, pensions etc)
- with that amount of money to invest, it maybe worth getting an appointment with an independent financial advice to see what they would suggest
- google 'Landlord forums' and find one to follow. There is valuable advice and experiences shared about all aspects of letting there.

And one final piece of advice, take your time to make the decision as well as consider alternatives. At the end of the day - a nice problem to have (ie. how to spend it)

Wish you good luck whatever you decide!

Johnnyboy11

There's a very definite Government trend against BTL. As a second home owner you have an illiquid asset and are a sitting duck for future tax changes. For example, Labour have announced their plans for a 3% annual Land Value (Garden) Tax. There are also big hikes in Council Tax happening.

As previously mentioned, the up-front costs in buying a second property are punitive. Stamp duty, extra stamp duty, legal fees, survey costs, compliance costs, furnishing etc. It will be several years before you even turn a profit, and all that time inflation is eroding the value of your investment.

If you want investment exposure to the UK property market, why not invest a portion of your money in a fund that specialises in that sector? There are plenty of them. Or if you fancy more risk, have a look at the big UK housebuilders.

Lungboy

Johnnyboy11 wrote: »

Labour have announced their plans for a 3% annual Land Value (Garden) Tax.

They've done nothing of the sort.

Johnnyboy11

Lungboy wrote: »

They've done nothing of the sort.

From their manifesto, Page 86:


"A Labour government will give local government extra funding next year. We will initiate a review into reforming council tax and business rates and consider new options such as a land value tax, to ensure local government has sustainable funding for the long term."

Lungboy

Precisely. "Initiate a review". That's all.

coyrls

Lungboy wrote: »

Precisely. "Initiate a review". That's all.

And no mention of 3%.

Johnnyboy11

coyrls wrote: »

And no mention of 3%.

Getting a bit off-topic, so I leave you with some reading...


https://www.dailymail.co.uk/news/article-4553476/Labour-s-secret-plans-4-000-garden-tax.html

coyrls

Have you read the article?

A Labour spokesman last night dismissed the criticism, saying: 'This is desperate nonsense from the Tories. Labour has no such plans.'

and:

Since publication of this article, the Labour Land Campaign has asked us to clarify that it believes the Conservative Party analysis referred to misrepresents a document on their campaign’s website over land value tax. The LLC has clarified that contrary to the analysis, the document envisaged that land value tax bills for owner-occupiers would not greatly exceed their council tax bills. The LLC says that in any event the document is one of several proposals of how to implement a land value tax and also points out that LLC is not affiliated to the Labour Party nor does its research inform Labour Party policy.

Malthusian

The LLC has clarified that contrary to the analysis, the document envisaged that land value tax bills for owner-occupiers would not greatly exceed their council tax bills.

So in other words their tax bill will more than double. That's alright then.

I have my finger hovering over the rofl smiley in case you are going to tell me that the Corbynists are going to abolish council tax. Labour don't abolish taxes.

"Initiative a review" means you are planning to do it. You don't initiate reviews into things you don't want to do.