2nd home / Holiday Let as a retirement income

zagfles

Dazed_and_C0nfused said:

I suspect that this would be on the negatives list for many people,

You can get a 20% tax credit based on your mortgage interest payments, https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782

Indeed, for higher rate taxpayers they can't even fully deduct a genuine business expenses (ie mortgage interest) from the rental income they receive.

zagfles

SouthCoastBoy said:

MallyGirl said:I bought my first flat as a repo in the 80s - previous owner had bought at £66k and I got it for £44k after just a few years. ... I sold it for £34k and was glad to be rid. Back then there was MIRAS and I didn't have any capital gains but I still don't look back at the experience fondly.

I was in my 20s in the late 80s and have been scarred by the housing bubble ever since, I have always expected house prices to crash in a similar vein when they have reached, IMO, ridiculous values, which they never have. This in turn has meant I live in a far smaller house than I can afford. Interesting how experiences in live shape decision making.

Never have??

Have you looked at 2007 onwards: https://www.allagents.co.uk/house-prices-adjusted/

Or far more extreme, in NI: https://www.agendani.com/northern-ireland-house-price-index-2/

zagfles

Mick70 said:

p00hsticks said:

Not sure what tax loopholes you are talking about, or what countries you are thinking about, but if you are considering England or Wales be aware that there is a lot of pressure being put on government at present from those in overrun tourist locations to close some of those loopholes as locals are getting priced out of the market and the communities are collapsing.

UK

You can register holiday lets for business rates and avoid paying any council tax ,  seem to be a few other loopholes that can exploit also

I don't pay any council tax nor business rates on my pension. Is that a loophole

Malthusian

SouthCoastBoy said:

• You can get a 20% tax credit based on your mortgage interest payments, https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782

Just to emphasise the above, this isn't a positive, not even for basic rate taxpayers (and it's a big negative for higher / additional rate taxpayers).

A tax credit for money you have spent on an investment isn't the Government giving you anything, it's just declining to tax you on negative income (income tax is payable on money in, not money out).

Effectively higher rate taxpayers and above have to pay tax to the Government for borrowing money.

There are no "tax loopholes" for residential property. Residential property is subject to the most penal taxation regime of any investment available to ordinary UK investors. Maximising use of allowances and deductions so that you can pay penal rates of tax instead of extremely penal rates of tax isn't a loophole.

There's a reason nobody on this forum ever says "I wish I'd put money into buy to let instead of my pension".

SouthCoastBoy

zagfles said:

SouthCoastBoy said:

MallyGirl said:I bought my first flat as a repo in the 80s - previous owner had bought at £66k and I got it for £44k after just a few years. ... I sold it for £34k and was glad to be rid. Back then there was MIRAS and I didn't have any capital gains but I still don't look back at the experience fondly.

I was in my 20s in the late 80s and have been scarred by the housing bubble ever since, I have always expected house prices to crash in a similar vein when they have reached, IMO, ridiculous values, which they never have. This in turn has meant I live in a far smaller house than I can afford. Interesting how experiences in live shape decision making.

Never have??

Have you looked at 2007 onwards: https://www.allagents.co.uk/house-prices-adjusted/

Or far more extreme, in NI: https://www.agendani.com/northern-ireland-house-price-index-2/

I think that enforces my point, looking at the numbers after adjusted for inflation, even after the 2007 adjustment house prices were still way above the peak of the late 80s

zagfles

SouthCoastBoy said:

zagfles said:

SouthCoastBoy said:

MallyGirl said:I bought my first flat as a repo in the 80s - previous owner had bought at £66k and I got it for £44k after just a few years. ... I sold it for £34k and was glad to be rid. Back then there was MIRAS and I didn't have any capital gains but I still don't look back at the experience fondly.

I was in my 20s in the late 80s and have been scarred by the housing bubble ever since, I have always expected house prices to crash in a similar vein when they have reached, IMO, ridiculous values, which they never have. This in turn has meant I live in a far smaller house than I can afford. Interesting how experiences in live shape decision making.

Never have??

Have you looked at 2007 onwards: https://www.allagents.co.uk/house-prices-adjusted/

Or far more extreme, in NI: https://www.agendani.com/northern-ireland-house-price-index-2/

I think that enforces my point, looking at the numbers after adjusted for inflation, even after the 2007 adjustment house prices were still way above the peak of the late 80s

They crashed after a big rise! You were "scarred" by the late 80's, others were "scarred" by the post-2007 crash, especially the Irish. Obviously if you bought mid 90's you wouldn't be "scarred" by the 2007 crash. Just like people who put money into equities over the last 20 years won't be scarred by the recent falls in equity prices as they're just a small downturn after massive rises. 

bostonerimus

My retirement income plan includes a rental property. I bought it when I was still working and used the rent to pay off the mortgage. Now that's done the rent is a nice bit of regular retirement income. However, this was a long term plan and I would be dubious about taking on more debt and locking a lot of capital up in a rental property in retirement. Also a holiday let would not be idea because of the uneven nature of the rental income and the work involved in letting and maintaining it.

MX5huggy

Look at what Welsh government is doing around 2nd homes for a guide to the direction of travel. Local Authorities currently have to option of 100% council tax uplift for 2nd homes rising to 300% from next April. To avoid it by going to business rates the property must be let (actually let not just available) for 182. Days a year. 

Roger175

We have a second house, the income from which is all treated as part of our retirement planning, but it was never actually planned that way. In our case, we did a self-build and rather than face having to get involved with a self build mortgage, we kept our former home (which was un-encumbered), rented it out and took out an offset mortgage on it, so we had money available to fund the new house build as and when we needed it. At the end of the build, we intended selling the former house, but realised that we could do worse than keep it, so we converted the mortgage to a BTL type.

In our case we yield about 4% pre-tax on what we have borrowed but it would be less than half of that if we took into account the equity we have in the property and that's with us doing all our own maintenance and not using an agent.

I fully accept that this is not great and that we would probably be at least as well off selling the property, releasing the equity and investing this. Once we could get it all into pensions and Isa (which would take a few years) we would be better off, but we actually like the idea of the diversification and furthermore, we have seen a significant appreciation in the capital value in the last couple of years.

I certainly wouldn't advocate a BTL as an alternative to a pension, but as a balance second/supplemental pension income, it suits us. We will however be selling and investing the equity once we get a few years older. The hassle of doing this deep into retirement doesn't appeal! 

Nebulous2

I know some people with 2 or 3  holiday lets. Cleaning based on a few hours turnaround is very demanding. They have struggled to get consistency of cleaners, and have to pay quite a bit for it. They stay an hour's drive away and have busy lives, making it difficult to do it themselves. 

One of their fathers, who lives closer is in his eighties and usually visits before the new people arrive to check it is in an acceptable state and to leave a welcome pack - fresh bread etc. 

They have a routine, and have been doing it for some time, but it is demanding in time and effort. 

Demand is high, but given the spike in inflation it will be interesting to see if that remains the case....