Small and New landlords

Grumpy_chap

Thrugelmir said:

Grumpy_chap said:

I think we can assume they would have some comfortable level of savings. 

Probably not. I doubt few crunch numbers fully or even factor in what if scenarios. The last thing they'd do is make contingency for a black swan event. Leveraging with debt has always been double edged. Boosts returns but correspondingly magnifies losses. As with any business / investment choice only risk what you can afford to lose. 

So, are you suggesting that a BTL landlord would get involved with a high risk geared investment business but not have sufficient liquid reserves remaining to tide them through a "rainy day" or even a comfortable standard of living without having to worry about food on the plate or being able to afford this year's skiing holiday or beach break?  

Any sensible approach would only risk money in a geared investment that you can afford to loose, so maybe a maximum of 10% of total investment portfolio.  It is also prudent to keep a proportion (again, maybe 10%) of any investment portfolio in easily liquified assets to cater for unexpected events or opportunities.

Tammykitty

Grumpy_chap said:

The one-property BTL landlord may not have £60 in liquid assets (even if that would be sound business planning).

I think we can assume they would have some comfortable level of savings.  Partly because they need some buffer for the BTL: property, say a boiler replacement.  Partly because they need some buffer for their own principal private residence, say another boiler replacement.  Depending on risk appetitie, the BTL may have one property repair buffer to cover both the BTL and the private property, on the basis that they won't both need a new boiler the same day.  Either way £10k would be reasonable.

The BTL landlord is also likely to have a savings buffer for their own comfort and entertainment to fund things such as a new holiday, family days out, celebration meals, and nice TV, car etc.  Another £10k 'slush' fund would not be unreasonable.

So, whether the full £60k or not, the likelihood that the BTL landlord has sufficient liquid assets available that exceed the limit for UC eligibility seems probable even if the equity in the BTL property is assessed as "nil" (which I do not agree with as starting equity will have been at least 25% to secure typical BTL mortgage).

The alternative is that BTL landlords stretch every last penny to get a BTL and cannot then afford a daily coffee but live life as a pauper.  That is not plausible or rational as a plan.

Seriously - you think people have that a lot of people have that amount of money - I don't think I know anyone with even over £10k in the bank or investments (excluding pensions) as a "slush" fund

A lot of one property landlords, don't buy a house with the intention of renting it out, they finish up with a 2nd property, through meeting a partner who also owns a house (this is what has happened in my case), or inheriting their parents house etc, and they then rent this 2nd property out. Or they move away for work, and rent a house, while renting their own out, as they eventually intend to come back,

In some cases a couple may move in together after just months, it would be a very bad decision to sell your home quickly as the relationship might not work out...so they rent it out.
As long as a landlord has the ability to pay the costs should a tenant not pay, and some way of paying for repairs (even if its available low interest credit) - you don't need such large sums of cash in the bank. 

I will become a landlord (or actually landlady) when covid 19 is over (Not renting it out now due to crazy laws, where I can't evict a tenant not paying rent - its empty now, and I use it occasionally as its in my home town)
As this proves, I can quite easily afford to pay the costs of it, without the income from it(and my husband had no income for a few months - and still only has limited income)- so in normal circumstances, it would definitely not be a problem to afford the costs of the BTL, and even in extreme cirumstances, we still just about afforded it.
Do we have savings - well we did, but not really anymore as they have mostly gone on keeping my husbands business afloat when closed, but will hopefully build them up again..

What I do have is the same as I had when I bought the house 8 years ago as my own residential property - and put nearly every penny of savings into the deposit, is a decent car, and if the worst came to it, sell it to pay for any repairs.

I'm an accountant, so as you can expect, i am financially astute, so i know what i am doing and have a very low appetite for risk.
If i had have listened to advice on here, i would never have bought the house in the first place, as supposedly i needed £10k for furniture etc (Never cost anywhere near that - and did it as i could afford it - At the start it was simply a bed, sofa and kitchen table, but instead i put everyhting i had down as the deposit to lower the mortgage repayments and increase my security.

Some people have no idea of how the real world operates - if a couple has a buy to let property, thats essentially 3 incomes they have, in normal circumstances pre covid, it would have been highly improbable for all 3 incomes to dry up at once, very few people in these circumstances will have included a loss of a 3 incomes in their businesses plans. You can make whatever contingecy arrangements you want but these are exceptional circumstances

If it hadn't have been for covid my house would have been rented out around Easter - was getting work done to both it and my now home, but everything got delayed as it never got cleared out due to this and the travel restrictions. Its ready to be rented now everything is in place (even my business plan, and financial risk planning)

Any rent I receive will be going straight into the bank to save for any emergencies or significant repairs, so in 6 months time will have a nice buffer for maintenance
PS - I (Like a lot of one property landlord don't have anywhere near a £60k income)

Now for helpful advice for the OP
Even if you get the house disregarded as an asset for universal credit - what are you personal circumstances - if you are single, you won't get much more than the £75 a week you would get on Contributions (or new style) JSA-  (A quick google suggests £365 a month).
Do you have anything you can sell - a car, other valuables?
Have you contacted the bank about a mortgage holiday? Do you have any other debts? - Contact the lenders and request payment holidays, interest freezes etc.

As said above - look into getting a job - any job - its difficult to survive on £75 a week - I know its hard to get job in this market, but you need to try everything

Could you take in a lodger?


Good luck OP

Thrugelmir

Grumpy_chap said:

Thrugelmir said:

Grumpy_chap said:

I think we can assume they would have some comfortable level of savings. 

Probably not. I doubt few crunch numbers fully or even factor in what if scenarios. The last thing they'd do is make contingency for a black swan event. Leveraging with debt has always been double edged. Boosts returns but correspondingly magnifies losses. As with any business / investment choice only risk what you can afford to lose. 

So, are you suggesting that a BTL landlord would get involved with a high risk geared investment business but not have sufficient liquid reserves remaining to tide them through a "rainy day" or even a comfortable standard of living without having to worry about food on the plate or being able to afford this year's skiing holiday or beach break?  

Any sensible approach would only risk money in a geared investment that you can afford to loose, so maybe a maximum of 10% of total investment portfolio.  It is also prudent to keep a proportion (again, maybe 10%) of any investment portfolio in easily liquified assets to cater for unexpected events or opportunities.

BTL used to be the preserve of the capital rich. The start of cheap accessible funding some 20 years or so ago changed the market.  

Grumpy_chap

Tammykitty said:

Grumpy_chap said:

The one-property BTL landlord may not have £60 in liquid assets (even if that would be sound business planning).

I think we can assume they would have some comfortable level of savings.  Partly because they need some buffer for the BTL: property, say a boiler replacement.  Partly because they need some buffer for their own principal private residence, say another boiler replacement.  Depending on risk appetitie, the BTL may have one property repair buffer to cover both the BTL and the private property, on the basis that they won't both need a new boiler the same day.  Either way £10k would be reasonable.

The BTL landlord is also likely to have a savings buffer for their own comfort and entertainment to fund things such as a new holiday, family days out, celebration meals, and nice TV, car etc.  Another £10k 'slush' fund would not be unreasonable.

So, whether the full £60k or not, the likelihood that the BTL landlord has sufficient liquid assets available that exceed the limit for UC eligibility seems probable even if the equity in the BTL property is assessed as "nil" (which I do not agree with as starting equity will have been at least 25% to secure typical BTL mortgage).

The alternative is that BTL landlords stretch every last penny to get a BTL and cannot then afford a daily coffee but live life as a pauper.  That is not plausible or rational as a plan.

Seriously - you think people have that a lot of people have that amount of money - I don't think I know anyone with even over £10k in the bank or investments (excluding pensions) as a "slush" fund

Looking at on-line guides, Barclays and Hargreaves-Lansdown recommend that a "rainy day" or emergency fund should be 3 - 6 months income and Money Advice Service recommends 3 months.
[Links:
https://www.hl.co.uk/news/articles/savings-accounts-how-big-should-your-rainy-day-fund-be#:~:text=How big should the emergency,if you're in retirement.
https://www.barclays.co.uk/savings/guides/saving-for-the-unexpected/
https://www.moneyadviceservice.org.uk/en/articles/emergency-savings-how-much-is-enough]

Using average (median) salary income, £30k, take home £24k or £2k/month.  That means £6k of rainy day fund.
The average person does not have a BTL.  

In my previous example, I used a BTL landlord assumed to earn £60k, buying a property at £200k with 75% LTV, so deposit £50k plus 'entry' costs £10k to start the BTL business. 

Someone earning £60k is not sensibly going to leave themselves living the life of a pauper and unable to repair the boiler, roof or whatever on their own primary residence in the event of the unexpected storm.  Nor is someone on £60k going to shy away from a nice holiday or a new HD TV etc.  They are going to have savings sufficient to mean that entitlement to UC is unlikely.  Jeremy was suggesting the equity in the BTL could be argued as "nil" in the current circumstances, but I do not think that holds water either, but becomes irrelevant if the BTL is going to have savings above the £16k UC cap.  I do think that is likely.

Jeremy535897

Grumpy_chap said:

Tammykitty said:

Grumpy_chap said:

The one-property BTL landlord may not have £60 in liquid assets (even if that would be sound business planning).

I think we can assume they would have some comfortable level of savings.  Partly because they need some buffer for the BTL: property, say a boiler replacement.  Partly because they need some buffer for their own principal private residence, say another boiler replacement.  Depending on risk appetitie, the BTL may have one property repair buffer to cover both the BTL and the private property, on the basis that they won't both need a new boiler the same day.  Either way £10k would be reasonable.

The BTL landlord is also likely to have a savings buffer for their own comfort and entertainment to fund things such as a new holiday, family days out, celebration meals, and nice TV, car etc.  Another £10k 'slush' fund would not be unreasonable.

So, whether the full £60k or not, the likelihood that the BTL landlord has sufficient liquid assets available that exceed the limit for UC eligibility seems probable even if the equity in the BTL property is assessed as "nil" (which I do not agree with as starting equity will have been at least 25% to secure typical BTL mortgage).

The alternative is that BTL landlords stretch every last penny to get a BTL and cannot then afford a daily coffee but live life as a pauper.  That is not plausible or rational as a plan.

Seriously - you think people have that a lot of people have that amount of money - I don't think I know anyone with even over £10k in the bank or investments (excluding pensions) as a "slush" fund

Looking at on-line guides, Barclays and Hargreaves-Lansdown recommend that a "rainy day" or emergency fund should be 3 - 6 months income and Money Advice Service recommends 3 months.
[Links:
https://www.hl.co.uk/news/articles/savings-accounts-how-big-should-your-rainy-day-fund-be#:~:text=How big should the emergency,if you're in retirement.
https://www.barclays.co.uk/savings/guides/saving-for-the-unexpected/
https://www.moneyadviceservice.org.uk/en/articles/emergency-savings-how-much-is-enough]

Using average (median) salary income, £30k, take home £24k or £2k/month.  That means £6k of rainy day fund.
The average person does not have a BTL.  

In my previous example, I used a BTL landlord assumed to earn £60k, buying a property at £200k with 75% LTV, so deposit £50k plus 'entry' costs £10k to start the BTL business. 

Someone earning £60k is not sensibly going to leave themselves living the life of a pauper and unable to repair the boiler, roof or whatever on their own primary residence in the event of the unexpected storm.  Nor is someone on £60k going to shy away from a nice holiday or a new HD TV etc.  They are going to have savings sufficient to mean that entitlement to UC is unlikely.  Jeremy was suggesting the equity in the BTL could be argued as "nil" in the current circumstances, but I do not think that holds water either, but becomes irrelevant if the BTL is going to have savings above the £16k UC cap.  I do think that is likely.

In earlier threads people reported some success in arguing low or nil values for UC for BTLs based on low equity and sitting tenants. The number of BTL landlords earning £60k plus and still keeping their job in today's environment will be very small.

calcotti

Tammykitty said:.. - if you are single, you won't get much more than the £75 a week you would get on Contributions (or new style) JSA-  (A quick google suggests £365 a month).
..
Could you take in a lodger?

Single person UC allowance (if aged 35 or over) is £409.89/month.
Worth noting also that income from a lodger is ignored for UC purposes.

Grumpy_chap

Jeremy535897 said:

Grumpy_chap said:

Tammykitty said:

Grumpy_chap said:

The one-property BTL landlord may not have £60 in liquid assets (even if that would be sound business planning).

I think we can assume they would have some comfortable level of savings.  Partly because they need some buffer for the BTL: property, say a boiler replacement.  Partly because they need some buffer for their own principal private residence, say another boiler replacement.  Depending on risk appetitie, the BTL may have one property repair buffer to cover both the BTL and the private property, on the basis that they won't both need a new boiler the same day.  Either way £10k would be reasonable.

The BTL landlord is also likely to have a savings buffer for their own comfort and entertainment to fund things such as a new holiday, family days out, celebration meals, and nice TV, car etc.  Another £10k 'slush' fund would not be unreasonable.

So, whether the full £60k or not, the likelihood that the BTL landlord has sufficient liquid assets available that exceed the limit for UC eligibility seems probable even if the equity in the BTL property is assessed as "nil" (which I do not agree with as starting equity will have been at least 25% to secure typical BTL mortgage).

The alternative is that BTL landlords stretch every last penny to get a BTL and cannot then afford a daily coffee but live life as a pauper.  That is not plausible or rational as a plan.

Seriously - you think people have that a lot of people have that amount of money - I don't think I know anyone with even over £10k in the bank or investments (excluding pensions) as a "slush" fund

Looking at on-line guides, Barclays and Hargreaves-Lansdown recommend that a "rainy day" or emergency fund should be 3 - 6 months income and Money Advice Service recommends 3 months.
[Links:
https://www.hl.co.uk/news/articles/savings-accounts-how-big-should-your-rainy-day-fund-be#:~:text=How big should the emergency,if you're in retirement.
https://www.barclays.co.uk/savings/guides/saving-for-the-unexpected/
https://www.moneyadviceservice.org.uk/en/articles/emergency-savings-how-much-is-enough]

Using average (median) salary income, £30k, take home £24k or £2k/month.  That means £6k of rainy day fund.
The average person does not have a BTL.  

In my previous example, I used a BTL landlord assumed to earn £60k, buying a property at £200k with 75% LTV, so deposit £50k plus 'entry' costs £10k to start the BTL business. 

Someone earning £60k is not sensibly going to leave themselves living the life of a pauper and unable to repair the boiler, roof or whatever on their own primary residence in the event of the unexpected storm.  Nor is someone on £60k going to shy away from a nice holiday or a new HD TV etc.  They are going to have savings sufficient to mean that entitlement to UC is unlikely.  Jeremy was suggesting the equity in the BTL could be argued as "nil" in the current circumstances, but I do not think that holds water either, but becomes irrelevant if the BTL is going to have savings above the £16k UC cap.  I do think that is likely.

In earlier threads people reported some success in arguing low or nil values for UC for BTLs based on low equity and sitting tenants. The number of BTL landlords earning £60k plus and still keeping their job in today's environment will be very small.

Irrespective of capital exceeding the limits for UC, how is the income from the BTL assessed for UC?
One approach would be that the income is considered gross.  That seems unfair.  It would likely mean that the rental income rules out UC eligibility.
The other approach would be that the income is considered after expenses and mortgage interest payments (but not capital repayment).  That seems more fair (like a business) and would likely mean that the monthly income form the BTL is close to zero, though presumably not zero as that would defeat the idea of having a BTL.

Galloglass

Welcome to the bizarre world of UC. If you have £300k in cash. No UC. In bonds. No UC. Call yourself a Landlord and you can have UC.

Property market has twisted everything out of balance with reality including prices. The subsidy paid to keep it that way with Housing benefit/element is eye watering.

Tammykitty

Galloglass said:

Welcome to the bizarre world of UC. If you have £300k in cash. No UC. In bonds. No UC. Call yourself a Landlord and you can have UC.

Property market has twisted everything out of balance with reality including prices. The subsidy paid to keep it that way with Housing benefit/element is eye watering.

Only in exceptional times - you can't spend your house deeds in Tesco, and because you can't evict people, you can't sell a property - and you still have to eat!

The same argument could be used about your own residence - have £100k in the bank and rent a house - and boom no UC, spend the £100k to buy a house and boom - UC - yet you still have the same net assets

Grumpy_chap

Galloglass said:

Welcome to the bizarre world of UC. If you have £300k in cash. No UC. In bonds. No UC. Call yourself a Landlord and you can have UC.

Bonkers!

There was another thread where someone suggested (either correctly or not) that a Ltd Co Director of own Ltd Co could qualify for UC based upon the income level of the Ltd Co, but ignoring any retained profits (which could be substantial, i.e. >£16k in UC terms) there may be within the Ltd Co.  That does not seem correct to me.