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

steve866

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?

You get to keep the house? No way! Thanks for posting this thread, you’ve inspired me to become a landlord.

Angela_D_3

caprikid1 said:

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.

The numbers work for me,  otherwise I wouldn’t have done it.  I had a managed fund I paid into for 20 years.  The property out paced it significantly 

moneysavinghero

AdrianC said:

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.

The OP has already stated that rental payments will cover the interest payments on the mortgage. He's not paying it, the tenant is, that's his whole point.

CGT would be payable on the shares as well.

Retireby40

Inherited half a house (mum didnt have life insurance). Became a landlord by default. Had to get small loan and use all my savings to clear the other half of the house.

Loan repayment £380 a month.
Rental- £590- 20% tax - 9% agency fee - £80 rates - £15 insurance.

After all the deductions it works out less than the loan repayment but the majority of the loan is being paid by the tenant. There is the odd repair needed but that's a given. It has never taken any of my time up and I have never had a single hours of effort sorting it. The management company sort everything the most I have to do is reply to an email. So those who say it's a lot of work.....it doesnt have to be.

Theres a huge backlash when anyone ever talks about becoming a landlord or buy to let. I found on this forum it's basically one of the worst thinks you can say. I dont know if it's because people have had bad landlords or people are just !!!!!! off that someone wants to improve their financial situation by investing in property while providing a service for someone who cant buy their own house. Or who doesnt want to.

While buy to let is certainly less attractive than before it can still work. Does it need abit of luck? Of course. But so does any investment. Would I put everything i had into it? No. But if you had some spare savings getting 0.0% interest it could be an option.

AdrianC

moneysavinghero said:

The OP has already stated that rental payments will cover the interest payments on the mortgage. He's not paying it, the tenant is, that's his whole point.

Indeed it is. His whole point is based on a total misunderstanding of, well, everything.

CGT would be payable on the shares as well.

True - but a lot easier to spread between tax years.

Angela_D_3

moneysavinghero said:

AdrianC said:

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.

The OP has already stated that rental payments will cover the interest payments on the mortgage. He's not paying it, the tenant is, that's his whole point.

CGT would be payable on the shares as well.

He’s not paying the capital
though so basically the landlord is renting from the bank and the tenant is renting from the landlord.  Unless there’s serious capital gains,  there’s only one winner there. 

The rent must pay off the capital for the plan to work 

Salemicus

Very easy to put your stock market investment into an ISA and escape CGT. Much harder to do that with your BTL flat.

AdrianC

Retireby40 said:

Became a landlord by default.

I hate it when you wake up and find you've signed a tenancy agreement without realising.

Theres a huge backlash when anyone ever talks about becoming a landlord or buy to let. I found on this forum it's basically one of the worst thinks you can say. I dont know if it's because people have had bad landlords or people are just !!!!!! off that someone wants to improve their financial situation by investing in property while providing a service for someone who cant buy their own house. Or who doesnt want to.

You'll find many of us ARE landlords, and are simply making people aware of the realities of the business they're starting.

While buy to let is certainly less attractive than before it can still work. Does it need abit of luck? Of course. But so does any investment.

It isn't an "investment". It's a business. And, like any business, it doesn't need luck - it needs planning, a sound business plan, and graft.

Retireby40

AdrianC said:

Retireby40 said:

Became a landlord by default.

I hate it when you wake up and find you've signed a tenancy agreement without realising.

Theres a huge backlash when anyone ever talks about becoming a landlord or buy to let. I found on this forum it's basically one of the worst thinks you can say. I dont know if it's because people have had bad landlords or people are just !!!!!! off that someone wants to improve their financial situation by investing in property while providing a service for someone who cant buy their own house. Or who doesnt want to.

You'll find many of us ARE landlords, and are simply making people aware of the realities of the business they're starting.

While buy to let is certainly less attractive than before it can still work. Does it need abit of luck? Of course. But so does any investment.

It isn't an "investment". It's a business. And, like any business, it doesn't need luck - it needs planning, a sound business plan, and graft.

Firstly it wasnt my plan for my mother to die leaving me to pick up the pieces of her estate while I work and live in another country. So it kind of was default. I had 2 options. Sell the family home or rent it out. Considering I had no other family to discuss it with rather than rush into selling I decided the second option would be better. At least until I was in a good head space to make a decision.

You say like any business it doesnt need luck? So it isnt luck to find good tenant? Theres no element of luck that they look after your property? It isnt luck that they dont lose their jobs and cant pay their rent on time? It doesnt matter how well you do your homework luck is a big factor. And you would be very arrogant and ignorant to think otherwise.

Lastly it is an investment. You put money in and over a long period of time you get your money back, plus more while more often than not the price of the house increases. Does it always go to plan? No. But neither does any other form of investment.

lr1277

Not luck to find a good tenant. When I was a landlord I used agents for a tenant finding service but did the maintenance and rent collection myself. I had 3-4 agents I would use for finding tenants. In the end I took tenants from 2 of them. I would also meet and interview tenants before accepting them. On the whole it worked out ok. There was 1 agent who provided great tenants, but then there was a change of management and staff and the quality of service was appalling so I stopped using them. Their branch closed down sometime soon after, unsurprisingly.
You need to stay on top of things. A different way to look at it as compared to your OP is that you are lending the tenant the mortgage amount to live in your property and you are responsible for all outcomes. Are you aware even though you might put the tenant’s deposit in a protected scheme, if the scheme is unable to payout, you are still responsible for returning the deposit to the tenant? As stated earlier you need goals, plans and a list of good trades people. Run it as a business.