BTL Strategy

MoneySaverMick

Deleted_User wrote: »

How is the tax situation going to hit you? Are you doing them in a LTD company but not withdrawing the money until used for new purchase?

Do you know which lenders are happy to do BTL on a refurb? Most require it to be rentable on day1
Of those which do it in a LTD company?
And then what happens when you become a portfolio landlord? Your lenders reduce again


You sound like you have done your research on the costs, just curious what barriers you forsee for the mortgage side of things?


Good luck though, its a risk for sure but sounds like a risk you have calculated and thats better than most who get in to this business

Great points! Thank you. You've definitely pointed out some key barriers I need to be aware of.

Yeah will be buying through a LTD company and also been looking into the taxes but also how they can be avoided. Commercial property definitely has the better tax benefits but not something I'm ready for right now.

In terms of leverage, I will have access to other funds but also lucky enough to have quite a bit of disposable income each month so that could also cover any unforeseen circumstances.

MoneySaverMick

sal_III wrote: »

How could he, when all the promoters/lecturers are raking it in from doing seminars how easy and lucrative it is and keep hyping it. Same for book writers etc. They are not going to kill their golden goose, by admitting the ship has sailed on the DIY BTL empires.

And all the experienced LLs should be grateful that there will be enough gullible hyped up newbies to offload their portfolios to if/when the manure hits the fan.

haha guys thank you for the well wishes!

It's pretty clear the way the 'wind is blowing' - BTL is obviously not as lucrative as it has been and there is always a risk as with any investment. I'm happy with all the risks and barriers posed, end of the day if the figures work, I'll be taking action but if not I'll be staying clear.
There's no rush, if a good opportunity comes along then great but if not I'll not lose any sleep about it. If landlords are selling up next year, I look at that as opportunities rather than something I'd turn my nose up at, especially if the potential recession hits next year.

The landlord I have been speaking to bought a 3 bed house outside of Newcastle in June for £77k (extra costs with fees and tax) and now rents that out for £495 a month to a young family. Obviously again there is risks there as with anything but looking like a great investment so the ship has definitely not sailed.

SouthLondonUser

Many sensible comments already.

The one thing I would add is this: you need to learn your way around a spreadsheet and learn how to do basic calculations in order to compare different strategies.

For example, have you run the numbers on renting as a ltd company vs as an individual? In general renting via a ltdco tends to produce higher income from rental, especially if you are a higher rate taxpayer, because you can deduct more from your tax bill, but less from capital gains (if you plan to extract the money straight away and not leave it in the company), because ltds don't benefit from the capital gain allowance like individuals do.

If you have a capital gain of £40k and you are a higher rate taxpayer, you'd pay 28% of (£40k - £12k) and be left with £32.16k.

If your ltd makes £40k, that's profit, not capital gain. It will soon be taxed at 17%, leaving you with £33.2k. BUT if you want to take that money out as dividends, you will end up with less than the £32.16k you'd get as an individual.

These are the kind of things you need to take into account.

It's not complicated, it doesn't require any advanced legal mathematical or IT skills, but you SHOULD run the numbers before committing to such important decisions.

MoneySaverMick

SouthLondonUser wrote: »

Many sensible comments already.

The one thing I would add is this: you need to learn your way around a spreadsheet and learn how to do basic calculations in order to compare different strategies.

For example, have you run the numbers on renting as a ltd company vs as an individual? In general renting via a ltdco tends to produce higher income from rental, especially if you are a higher rate taxpayer, because you can deduct more from your tax bill, but less from capital gains (if you plan to extract the money straight away and not leave it in the company), because ltds don't benefit from the capital gain allowance like individuals do.

If you have a capital gain of £40k and you are a higher rate taxpayer, you'd pay 28% of (£40k - £12k) and be left with £32.16k.

If your ltd makes £40k, that's profit, not capital gain. It will soon be taxed at 17%, leaving you with £33.2k. BUT if you want to take that money out as dividends, you will end up with less than the £32.16k you'd get as an individual.

These are the kind of things you need to take into account.

It's not complicated, it doesn't require any advanced legal mathematical or IT skills, but you SHOULD run the numbers before committing to such important decisions.

Thank you - great info as I am a higher rate tax payer. I'm actually looking at ways to reduce my tax bill and the obvious being chucking more into my pension.

As I'd still be working I'd not be taking any money out of the Ltd Company.

Mutton_Geoff

MoneySaverMick wrote: »

The landlord I have been speaking to bought a 3 bed house outside of Newcastle in June for £77k (extra costs with fees and tax) and now rents that out for £495 a month to a young family. Obviously again there is risks there as with anything but looking like a great investment so the ship has definitely not sailed.

Human nature is to always share the upside of their own decision making. I assume your landlord mate hasn't shared ongoing costs with you (agents fees) or had to replace the boiler yet nor the tenant fallen on hard times and started to miss rent payments. Or any of the other risks involved in letting a fairly illiquid and volatile asset.

MoneySaverMick

Mutton_Geoff wrote: »

Human nature is to always share the upside of their own decision making. I assume your landlord mate hasn't shared ongoing costs with you (agents fees) or had to replace the boiler yet nor the tenant fallen on hard times and started to miss rent payments. Or any of the other risks involved in letting a fairly illiquid and volatile asset.

Paid an agent a fee to find the tenant, he puts away 15% of the rent for maintenance/repairs, manages the property himself rather than using the agent and the mortgage payments. First week they moved in the flooded the kitchen floor when using washing machine, him and his father went round to resolve it themselves and cost them £120 for materials to repair so that 15% was eaten up right away.


He also has 2 other properties which he's had for longer, 15% comfortably covers the repairs over the long term.

Crashy_Time

MoneySaverMick wrote: »

haha guys thank you for the well wishes!

It's pretty clear the way the 'wind is blowing' - BTL is obviously not as lucrative as it has been and there is always a risk as with any investment. I'm happy with all the risks and barriers posed, end of the day if the figures work, I'll be taking action but if not I'll be staying clear.
There's no rush, if a good opportunity comes along then great but if not I'll not lose any sleep about it. If landlords are selling up next year, I look at that as opportunities rather than something I'd turn my nose up at, especially if the potential recession hits next year.

The landlord I have been speaking to bought a 3 bed house outside of Newcastle in June for £77k (extra costs with fees and tax) and now rents that out for £495 a month to a young family. Obviously again there is risks there as with anything but looking like a great investment so the ship has definitely not sailed.

Yes, there are still plenty of opportunities but the big sea change is that instead of banks/government actively encouraging people into BTL to get lending going the banks went bust and government and potential governments sees taxing BTL as a vote winner, tread carefully IMO.