Small and New landlords

Jeremy535897

calcotti said:

Jeremy535897 said:

calcotti said:

Jeremy535897 said: I was oversimplifying. The assumed income is what determines the rate of reduction in UC from capital of £6,000 (no reduction) to capital of £16,000 (no UC). I do think that the rate at which such meagre savings are expected to contribute is penal, coming from times when 20.88% would be an exceptional yield, but not miles away from reality.

M point was that the tariff income (despite the name) isn't, in my view, assumed income - it is, at least in part, a capital draw down rate.

The limits themselves last changed in 2006.

I take your point, but the government chooses to call it an assumed yield from capital, so I think it is right to point out that the yield is unrealistic. It is also worth pointing out that, in today's money, £16,000 in 2006 is nearly £24,000.

The term used by government for most benefits is "tariff income" rather than assumed yield which I think is open to interpretation whether the income is a yield or a drawdown. You are right that yield from capital as used for Uc does suggest return rather than drawdown.
It is certainly time the capital limits were reviewed. I think when the limits were revised in 2006 that was the first change since 1990 (when the lower limit was £3,000 and the upper limit £8,000)!

Assumed yield from capital is the term used in the advice for decision makers, so it seems they do think of it in this way. I think anyone who could understand all UC's intricacies would almost certainly never need to claim it!

Galloglass

And what about the shed load of equity in a BTL. BTL are just savings in another form. Can’t see the logic in chasing small amounts (£16k) while ignoring large amounts tied to something else.  It’s just a subsidy / twisting of the property market. Impecunious BTL landlords should be forced to liquidate if they need cash - at a loss if need be 

calcotti

Galloglass said:

And what about the shed load of equity in a BTL. BTL are just savings in another form. Can’t see the logic in chasing small amounts (£16k) while ignoring large amounts tied to something else.  It’s just a subsidy / twisting of the property market. Impecunious BTL landlords should be forced to liquidate if they need cash - at a loss if need be 

I would expect a BTL landlord to have equity in their properties taken into account as capital unless they put the property/properties on the market in which case they would benefit from a six month disregard (which acknowledges that property is illiquid). If the BTL is set up as a separate business then they could get the properties disregarded as a business asset.

Grumpy_chap

Except Jeremy says the equity in a BTL is zero at present.  It seems I am not the only one to disagree.

I also think a BTL landlord would likely have savings anyway over the £16k

Jeremy535897

Grumpy_chap said:

Except Jeremy says the equity in a BTL is zero at present.  It seems I am not the only one to disagree.

I also think a BTL landlord would likely have savings anyway over the £16k

No, I didn't say that. What I said was that posters on other threads say they have convinced decision makers that they have no equity in their BTLs, not that every BTL has zero equity. The other problem is that when you do your weekly shop, you can't hand over an interest in a tenanted property subject to a mortgage at the till.

I know the hawks say sell, sell, sell, but there isn't necessarily anyone who wants to buy. Having said that, we shall see at the end of this crisis what always happens in crises. The poor who save nothing and have nothing will still have nothing. The rich will buy up assets cheaply from those in the middle who have to sell at a loss (and wonder why they didn't just blow everything on trinkets and holidays like the poor), and wealth inequality will get even greater.

Thrugelmir

Jeremy535897 said:

Grumpy_chap said:

Except Jeremy says the equity in a BTL is zero at present.  It seems I am not the only one to disagree.

I also think a BTL landlord would likely have savings anyway over the £16k

I know the hawks say sell, sell, sell, but there isn't necessarily anyone who wants to buy. 

That's the downside of putting all ones money in a leveraged illiquid investment. People have to accept the consequences of their own decisions. Going to get a lot tougher yet. 

calcotti

Grumpy_chap said:

Except Jeremy says the equity in a BTL is zero at present.  It seems I am not the only one to disagree.

I also think a BTL landlord would likely have savings anyway over the £16k

No. There is an argument that can be put to that effect. During full lockdown when all property transactions were effectively frozen it was an argument with weight. I don't think that is likely to be the case now. I would expect a landlord to be required to put the house on the market in order to take advantage of the disregard and if unsold after six months they would need to be ale to demonstrate that the effort to sell has been serious in order to get an extension to the disregard. However it is for a DWP Decision Maker to decide in each case.

Grumpy_chap

calcotti said:

Grumpy_chap said:

Except Jeremy says the equity in a BTL is zero at present.  It seems I am not the only one to disagree.

I also think a BTL landlord would likely have savings anyway over the £16k

No. There is an argument that can be put to that effect. During full lockdown when all property transactions were effectively frozen it was an argument with weight. I don't think that is likely to be the case now. I would expect a landlord to be required to put the house on the market in order to take advantage of the disregard and if unsold after six months they would need to be ale to demonstrate that the effort to sell has been serious in order to get an extension to the disregard. However it is for a DWP Decision Maker to decide in each case.

OK, so I understand (but don't agree with) the argument that BTL property has zero equity.

I still stand by the comment that BTL landlord will have sufficient "rainy day" fund that means equity in the property is going to be irrelevant in connection with exceeding the UC cap.  Funds needed for property repairs to the BTL or landlords private residence and also the landlord's luxury holiday and new TV etc.

Or are people suggesting that BTL landlords all go into this high risk geared investment business leaving nothing outside that?  Seems unlikely in my opinion and negligent if that is what happens.

Jeremy535897

OK, so I understand (but don't agree with) the argument that BTL property has zero equity.

As I said, that argument will not always be available (possibly where the BTL mortgage is higher than 75% would be an example).

I still stand by the comment that BTL landlord will have sufficient "rainy day" fund that means equity in the property is going to be irrelevant in connection with exceeding the UC cap.  Funds needed for property repairs to the BTL or landlords private residence and also the landlord's luxury holiday and new TV etc.
Or are people suggesting that BTL landlords all go into this high risk geared investment business leaving nothing outside that?  Seems unlikely in my opinion and negligent if that is what happens.

As has been said before, the majority of BTL landlords are owners of one property only. If rational investment was the sole criterion for the investment, the lack of spread of risk alone would make such an investment unwise. But as others as well as I have pointed out, there are various good reasons why BTL landlords are there:

• job change, can't sell old property so rent it
• relationship change, 2 properties, can't sell one
• historic over-generous BTL mortgage terms (interest and LTV)
• doing up a property to sell, market falls

etc etc.

Grumpy_chap

Jeremy535897 said:

OK, so I understand (but don't agree with) the argument that BTL property has zero equity.

As I said, that argument will not always be available (possibly where the BTL mortgage is higher than 75% would be an example).
.

Thanks Jeremy,
Am I reading that bit back-to-front?
High mortgage means lower equity and makes the "zero equity" argument stronger?

I think if you were my Accountant I could avoid all tax and claim UC.  Same for my wife.  We'll be rolling in it!