Buy to Let in 2025

finchy_2020

WellKnownSid said:

Yes, the Ltd Co isn't going to be able to expense the interest and costs for somebody else's BTL - so it's £15,600 profit.

Seems unlikely a brand new Ltd Co with no history is going to be able to get a mortgage.  I know when I first started out decades ago I couldn't even get a mobile phone without 3 years of accounts 

I'm not sure how this is supposed to work or what the Ltd Co is supposed to be achieving in this case.

The mortgage has already been approved on the Ltd. As it's a LTD BTL SPV it can work slightly differently and we can pay the deposit personally on the house and the Ltd company simply deals with rental income and basic expenditure. Plan is to grow and acquire multiple properties over 10/15 years.

Hoenir

finchy_2020 said:

WellKnownSid said:

Yes, the Ltd Co isn't going to be able to expense the interest and costs for somebody else's BTL - so it's £15,600 profit.

Seems unlikely a brand new Ltd Co with no history is going to be able to get a mortgage.  I know when I first started out decades ago I couldn't even get a mobile phone without 3 years of accounts 

I'm not sure how this is supposed to work or what the Ltd Co is supposed to be achieving in this case.

Plan is to grow and acquire multiple properties over 10/15 years.

That business model more or less ended with the GFC. It's capital intensive. On a £4.5k  annual profit before any cost contigency. Not going to be self funding. 

Pension utilisation should be the primary focus. For no other reason than that it's tax efficient in many ways. 

WellKnownSid

finchy_2020 said:

WellKnownSid said:

Yes, the Ltd Co isn't going to be able to expense the interest and costs for somebody else's BTL - so it's £15,600 profit.

Seems unlikely a brand new Ltd Co with no history is going to be able to get a mortgage.  I know when I first started out decades ago I couldn't even get a mobile phone without 3 years of accounts 

I'm not sure how this is supposed to work or what the Ltd Co is supposed to be achieving in this case.

The mortgage has already been approved on the Ltd. As it's a LTD BTL SPV it can work slightly differently and we can pay the deposit personally on the house and the Ltd company simply deals with rental income and basic expenditure. Plan is to grow and acquire multiple properties over 10/15 years.

It's a limited company so works exactly the same as any other limited company - you're just self-identifying that the only reason that the company exists is as a tax dodge vehicle.

You paying personally for the deposit for a BTL property you won't ever own any part of muddies the waters - so be very crystal clear with your accountant how you intend to account for that money and the downsides / risks.

Critically - understand how you (and when you) will get that money out of the company (and make sure you understand the circumstances in which you might not be able to recover any of it).

Make projections of what that'll look like - model the next five-ten years in Excel and see what that looks like - taking account of potential voids and assumptions about rising interest rates.  If your means to recover the deposit is to sell the property - make certain you factor in capital gains.

WellKnownSid

Hoenir said:

finchy_2020 said:

WellKnownSid said:

Yes, the Ltd Co isn't going to be able to expense the interest and costs for somebody else's BTL - so it's £15,600 profit.

Seems unlikely a brand new Ltd Co with no history is going to be able to get a mortgage.  I know when I first started out decades ago I couldn't even get a mobile phone without 3 years of accounts 

I'm not sure how this is supposed to work or what the Ltd Co is supposed to be achieving in this case.

Plan is to grow and acquire multiple properties over 10/15 years.

That business model more or less ended with the GFC. It's capital intensive. On a £4.5k  annual profit before any cost contigency. Not going to be self funding. 

Is there some firm of accountants or estate agents out there touting this as a wonderful new idea to first-time landlords I wonder? 

dinosaur66

the biggest benefit i can see to your model is you plan it long term

25 years the capital gains if the BTL is a relatively nice area and follow the trend from 2000 to 2025 then your BTL will more than double in value .   / profit wise for the first time you rent it i would set it at the max for your current area  / tell the tenants upfront that you put up the rent once a year in line with your area / if your area does not go up the you will freeze it that year .

if the tenants are long term ie 5 years plus and are looking after your property well i would let them be under the area rent to keep them happy .

better the devil you know applies when being a landlord rather than chasing top dollar.

voids are virtually non exsistent now bar to redecorate in between tenants.

you need a fund i might have missed it in your workings for repairs if you are starting out just so you do not have to dip into savings .

and a local self employed gas saftey boiler man to do your yearly certs and boiler repairs /gas cooker / mine also doubles as a plumber .

do your buy to let garden front and back as low maintence as it can possibly get /

treat all tenants unless they are white van men  as idiots who cannot change a lightbulb when it comes to repairs and give then your number if they get a fault / do inspections yourself twice a year or whenever you do a repair .

show them as slow and as many times as you can how to repressurise a boiler / and have the instructions in large writing on a4 paper next to where the boiler is installed.

main call outs 1/ boilers / 2 leaky tap /  3 white goods - i let with brand new white goods and if it breaks down and not fixable tenant buys replacement on understanding they can take it with them when they leave / 4/ kitchen cupboards/kickboards off hinges out of allignment  5/ garden fences /6/garage doors/ roofs / flat roofs damp patches/leaking/7 flashing /guttering /tiling roof  //8 blown double glazing/ 9/ electrics /10 /front door latches & locks usually caused by dropped door /

to late now as you are in the process of buying but i stayed clear of propertys with sewage drains in gardens maybe not an option in your area

i am 58 retired and used my rentals  for exact same reason /  as my pension .

RHemmings

dinosaur66 said:

voids are virtually non exsistent now bar to redecorate in between tenants.

Voids may be rarer, but there are still cases of it taking a very long time to evict a non-paying tenant. And there is the possibility that when the tenant is finally gone that the house is trashed. 

I'm not saying this is likely or a reason not to rent out houses in general. But, a plan should account for things like this happening. 

dinosaur66

RHemmings said:

dinosaur66 said:

voids are virtually non exsistent now bar to redecorate in between tenants.

Voids may be rarer, but there are still cases of it taking a very long time to evict a non-paying tenant. And there is the possibility that when the tenant is finally gone that the house is trashed. 

I'm not saying this is likely or a reason not to rent out houses in general. But, a plan should account for things like this happening. 

 true

but you have so many tenants  to chose from now on viewings you feel sorry for so many of them but you have to be hard headed and go for the safest option and do due dillegence

and experienced landlords with a few propertys get asked by long term tenants all the time if you get a property come up local can there relatives have it and they will act as guarantor.

of course i watch the tv programes about bad tenants /bad landlords / never experienced it myself but i know and read about it happening /  well mostly bad tenants albeit i have a friend of mine lives in a 1 bed bungalow and landlord has not done any repairs  in 3 years /she rings him and tells him of faults but she cannot move as she pays £800 a month and its £1300 a month for a 1 bed now with a 1 in 50 chance of getting it.

but if it were me as the landlord why would you let your 300k property fall into disrepair  makes no sense .

finchy_2020

Hi everyone,

Thank you so much for you all your input! It's great to have such an easy way of accessing information and advice from people around the UK!

I've digested everyone's thoughts and feedback and really did look at everyone's comments! I did some final calculations last night with my wife, and everyone was right... for this to work we'd need a success rate of 100%, no tenant issues, void periods or damages, and even then after tax / other deductions (LTD or not), we'd still be paying £200 a month or so more, which is not the end of the world as we expected this in the first year or two but spending more money even when everything is going smoothly and rental income is consistent isn't ideal, throw in a few months arrears and a faulty boiler and we're suddenly in the red by £1000's. We'd only benefit from this if the house value went up but even then it would have to be a substantial gain over 20+ years for it to be worth the stress and hassle.

Instead, we're going to take out half the money, use £10k for our honeymoon, £10k for house works, £20k for a S&S ISA for the both of us and £5k for my business to reinvest in new kit and marketing.

Comparing this to not taking any money out at all vs what we pay towards bills each month and because of the rates, it's only costing us £100 per month more for a once in a lifetime trip (I hope!!), get the final bits done to our house, potentially increasing equity even more and a £5k loan to myself.

Hopefully in 2 years rates MIGHT have dropped by 1% or thereabouts, saving us another £200pm while still having all of the above benefits.

We can easily afford our new mortgage, so chances are if rates drop by 1% in 2 years time the extra £200 per month I'd like to overpay on our mortgage, ending it 10 years earlier without any further overpayments, and hopefully topping this amount up by any gains in the S&S ISA (Mainly S&P500).

If house prices continue to price as predicted, and by only following the above method of overpaying our mortgage by £200pm, excluding any inheritance, we'd be mortgage free by 57.

Perhaps in a couple of years time we may revisit it, as I think there's still time to explore this avenue... I'm 28!

Thanks again everyone, happy Saturday!

BungalowBel

theartfullodger said:

In November 1979 rates jumped from (?) 10% to 17%. I was lucky, my building society only went to 15%. It was painful (Thatcher's in ). Two salaries.

You young folk....

I got told off last time I mentioned those interest rates.....