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

moneysavinghero

SpiderLegs said:

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.

200k of no questions asked finance? I doubt it.

theoretica

I am not sure 200k of finance is the fair comparison - for BTL you would need a decent deposit, say £50k.  Investing that £50k in the stock market wouldn't need to be leveraged at all, though it could be. 

7% a year on the stock market and in 25 years the 50k could be 270k with no leveraging and probably less hassle than running a BTL.

moneysavinghero

theoretica said:

I am not sure 200k of finance is the fair comparison - for BTL you would need a decent deposit, say £50k.  Investing that £50k in the stock market wouldn't need to be leveraged at all, though it could be. 

7% a year on the stock market and in 25 years the 50k could be 270k with no leveraging and probably less hassle than running a BTL.

But the point the OP is making is that for that £50k deposit he would get a house worth £200k. Even if house prices only rose at 2% after 25 years then that house would be worth £321k. Even on a interest only basis, that would equate to a 5.68%pa return on the £50,000 investment. Based on actual figures from the last 25 years it could rise to £676k / 34% pa (although no guarantee that prices will rise as much). Anywhere inbetween beats your stockmarket returns.

AdrianC

moneysavinghero said:

But the point the OP is making is that for that £50k deposit he would get a house worth £200k. Even if house prices only rose at 2% after 25 years then that house would be worth £321k. Even on a interest only basis, that would equate to a 5.68%pa return on the £50,000 investment.

Except, assuming 3.5% interest on that mortgage, over the course of the 25 years, the OP will actually pay another £131k in interest - taking the total paid to own that property to £331k. He's lost £10k.

Oh, and then there's the small matter of CGT on the £121k capital growth - assuming no other capital gains in the tax year of dispsal, that's just under £20k, or just over £30k for a higher-rate taxpayer.

mark5

I have a btl myself and yes it does provide a passive income but there’s not enough to repay the mortgage on a typical 25 year repayment, its interest only. 

theartfullodger

theoldmiser said:

I've started a new thread as I don't want to derail my previous one - many of the replies I received seemed to be from people who think that landlords are somehow not receiving money every month in the form of rent, large sums of money compared to the amount of work required, and use this to pay off the mortgage (if they have one), and hence after twenty five years they own an entire house which other people have paid for. The yearly yield is of little consequence compared to that, is it not?

If I were to buy a Buy to Let property today for £200,000 and rent it out for slightly more than the cost of the mortgage each month, am I not, after twenty five years, regardelss of the yield each year, going to own a £200,000 property that other people have paid for, without having to do £200,000 worth of labour myself? Or am I missing something?

One could quibble about a few minor things but yes, in principle, of course that's the landlord game.  And many landlords also bank on the property being then worth a lot more than £200k.

As Proudhon said,

"Property is theft!" (French: La propriété, c'est le vol!)

- see

https://en.wikipedia.org/wiki/Property_is_theft!

Basic flaw of capitalism: Like "Free Enterprise" - neither free nor enterprising.

But of course, in my 'umble experience, many landlords often moan, certainly publicly, about how hard done, downtrodden and ripped off they are. All the way to the bank.

It's nothing to do with "work", although there always is a little to be done.

Artful: Landlord since 2000.  Currently doing his income tax return and declaring capital gains to HMRC after sale of one house some 19 years after purchase.   The clue is in the name of the tax "capital gains": Only paid when you sell for more than you bought.

Best wishes to all, including those who disagree with me.

NB Property prices and rent amounts can and do go up and down.

yksi

I start up a company that will sell widgets. Every year, I sell a good whack of widgets. I have high costs, like staff, machinery and maintenance, and the raw material to make the widgets. I also pay tax. In the first year my business is worthless because of the high setup costs. But I gather more staff, get good reviews, and improve my widget-making. Every few years, something bad happens - we need new machines, our factory got flooded once, and then there was the widget recession of 2008 where we took no income. But after 20 years, I'm earning a good profit of perhaps 20% of the company value, plus, I own a business which is worth £200,000.

Claire buys a rental property. Every year, she charges rent. She has high costs, like her accountant, her property manager, her insurance, and void periods. She also pays tax. In her first year her property value is under water because of the start-up costs like installing a functional kitchen. But she gets some good tenants and starts to get into the swing of things. Every few years, something bad happens - she needs a new washing machine, her flat got flooded once, and then there was the Nightmare Tenant year of 2020 where he owed a year of rent by the time she got him removed. After 20 years, she's pocketing about 50% of the rent she collects - or 2-3% of the value of the property - and she owns a flat worth £200,000.

Angela_D_3

That’s what I’ve done and shall be doing.  I have a repayment mortgage,  by the time the tenant had paid off the mortgage it’ll have doubled in value so I can sell it and the kids have their house deposits or I can have whatever rent it yields as income.  Can’t really lose 

yksi

Do you still think it looks easy? And like a free property? Believe me, you think there is no "work" involved apart from collecting rent, but there is. There's a reason property managers exist, and it's because landlords realise it can be very labour-intensive, in fact, take over an entire day just for something like a leaking tap, where you're chasing people on the phone one after the other. Sure, there's capital gain, but don't forget the capital gains tax. In the end, it's a lot of "work" for something that doesn't necessarily compare favourably with simply shoving it in an index fund and forgetting about it!

caprikid1

Angela_D_3 said:

That’s what I’ve done and shall be doing.  I have a repayment mortgage,  by the time the tenant had paid off the mortgage it’ll have doubled in value so I can sell it and the kids have their house deposits or I can have whatever rent it yields as income.  Can’t really lose 

Do you currently have a BTL ? Do you realise you cannot deduct the full mortgage payments against your tax ? I think most landlords these days would struggle to pay the correct amount of tax, maintain the property and pay a repayment mortgage.