Do landlords not get to keep their properties after the mortgage is paid off by tenants?

FTB_Help

Also if you do take out a mortage for the property you intend on renting out do you have the upfront cost for deposit and also what are you going to do about your own living arrangements?

Are you going to take out another mortgage for a place of your own or rent? There might be times where you'll struggle to find tennants so how are you going to cover mortgage (inclu mortgage for your own place). Plus what makes you think the rent you charge will cover the mortgage payments, it might be more than the going rate in the area so no tenants will want to rent.

AdrianC

moneysavinghero said:

But to invest 200k in equities you would need 200k to start with. No one is going to lend you 200k to dabble in the stock market with. I think the point the OP is making is that with buy to lets you only need the deposit not the full 200k.

The main difference is that a £200k loan for investing would be unsecured, while a BtL mortgage is secured on the property.
And, yes, people have long borrowed to invest - especially in the days of 0% APR credit cards being thrown around. It even had a name - "stoozing".
MSE still has a page on how to do it, updated less than two months ago... https://www.moneysavingexpert.com/credit-cards/stooze-cash-credit-cards/

Some people even BtL'd off 0% credit cards.

But, of course, somebody could remortgage their home and release £200k of equity, then invest that. Everybody would think they were mad... even though the potential return is actually far higher, and the medium-term risk is lower.

ProDave

Thrugelmir said:

theoldmiser said:

Or am I missing something?

The little matter of income tax. Factor that in and you'll find paying down the capital balance owed a sizable challenge. 

But when you DO sell it, there is the the matter of capital gains tax, which rather peversely is treated as if you have made all the capital gain in the tax hear the sale takes place, rather than having that capital gain spread over say 20 years of ownership (and letting you use each years capital gain allowance)

There are no free rides.  A BTL is one form of business that like just about every business has expenses, costs and tax to pay.  It is not all hoovering up profit for no effort.

moneysavinghero

AdrianC said:

moneysavinghero said:

But to invest 200k in equities you would need 200k to start with. No one is going to lend you 200k to dabble in the stock market with. I think the point the OP is making is that with buy to lets you only need the deposit not the full 200k.

The main difference is that a £200k loan for investing would be unsecured, while a BtL mortgage is secured on the property.
And, yes, people have long borrowed to invest - especially in the days of 0% APR credit cards being thrown around. It even had a name - "stoozing".
MSE still has a page on how to do it, updated less than two months ago... https://www.moneysavingexpert.com/credit-cards/stooze-cash-credit-cards/

Some people even BtL'd off 0% credit cards.

But, of course, somebody could remortgage their home and release £200k of equity, then invest that. Everybody would think they were mad... even though the potential return is actually far higher, and the medium-term risk is lower.

Stoozing is more about investing in basic savings accounts where their capital is secure, not the stock market - although yes there is nothing to stop someone taking that gamble if they so choose. But considering the length of time 0% offers last it would be quite a big gamble.

caprikid1

Large of amounts of extra tax when you buy, heavy tax on the income for small investors and tax when you sell. Interest now not a fully allowable expense.
Not many Landlords these days are paying off their mortgage I suspect, if nothing else its not very tax efficient.
Not sure why many landlords bother to be honest.

whirlyhead

I am a landlord and I would gladly get rid of the whole damn lot - it's nothing but a pain in the bum and doesn't make any money, plus it's always great fun having drunk tenants ringing you up at 1am as they have locked themselves out of the building. I can't sell my properties at present because they are flats and "might" have cladding issues.  

Crashy_Time

maisie_cat said:

Rent paid to a landlord is in exchange for the roof over your head. This is a separate transaction to that of the landlord repaying any loan to a lender.  When you pay for your electricity, you are not buying shares in the company, simply exchanging money for electricity.

Rent is a cost mortgage is a debt, more chance of rent falling now than mortgage interest rates IMO.

Robin9

You could argue that if it was your house - it's your employer that pays your salary has paid for your house.- and following it farther back it's me that is a customer of your employer buying the services/things he sells that has paid for your house.

steampowered

You need to take account of the opportunity cost. Capital has a return attached to it. The stock markets return on average about 7.5% per year before inflation.

Becoming a landlord requires a significant capital outlay - BTL mortgages require a 25% deposit. You also have stamp duty, conveyancing, letting agent, mortgage, ground rent, service charge and maintenance costs to remember.

The real question is whether you would get a better return putting all of that money into a different asset class (e.g. stocks and shares).

Leveraging yourself up to the eye-balls with as much debt as possible on heavily mortgaged BTL properties with interest-only payments is also a very high risk investment strategy. Unlike a diversified stocks and shares investment, you can lose everything if it goes south - e.g. if capital values decrease, you find yourself unable to remortgage onto a reasonable interest rate or you have non-paying tenants. You only need to google "insolvent landlord" or "bankrupt landlord" to find news stories about this.

SpiderLegs

moneysavinghero said:

SpiderLegs said:

theoldmiser said:

...Or am I missing something?

Not really.

if I invest 200k in equities, each year I will receive some ‘rent’ from the companies in return for their use of my money, and in 25 years one would also hope that my investment has appreciated by a substantial amount .
all without me having to do 200k of labour.

What is your actual point?

But to invest 200k in equities you would need 200k to start with. No one is going to lend you 200k to dabble in the stock market with. I think the point the OP is making is that with buy to lets you only need the deposit not the full 200k.

Lots of lenders are willing to offer me finance to do whatever I want with, no deposit required, no questions asked.