Buying to let in Liverpool

silvercar

Be careful of the amount of supply vs demand. Admittedly I looked at Manchester not Liverpool, but I was surprised by the amount of property available to let vs demand.

Also, consider average salaries in Liverpool vs the south east. People on decent money will buy, because house prices are such that they can afford a house of the size they need on their income. People who aren't on decent money will struggle to afford high rents. For this reason I suspect that cheaper properties will do better in the area, but the downside is the maintenance that is required on cheaper properties and the fixed costs eg a gas safety certificate are the same whatever the property, so these become a higher percentage of your rental income.

RedFraggle

I've been watching the Liverpool property market for some time. A lot of the new build flat blocks are hard to sell, have a high proportion of rentals, which can limit residential mortgages, and end up being drastically reduced (the Tobacco Warehouse being a case in point, as well as Park and Quay Central on Jessie Hartley Way). 
If I wanted to invest there I'd be looking at houses in or close to L17 . Popular with young professionals and students but families too. It's keep your options open. 
I'm not convinced the whole development round the new Everton Stadium will live up to it's sales pitch. 

eddddy

bonnemotta said:

I’m currently based in London and considering a buy-to-let investment in Liverpool..

So, is this genuinely viable in practice, or just a bit of a gimmick being pushed by estate agents?

Why Liverpool, when you are based in London?

Are you looking at properties being sold through "conventional" channels - e.g. by regular estate agents working on behalf of regular sellers, or maybe, new builds by well-known developers?

Or are you looking at property developments advertised as "Investments" by companies that specialise in selling "property investment schemes"?


If you're dealing property investment scheme salespeople, you might need to be extra cautious. The schemes can be high risk. They often use high pressure salespeople, who will earn huge commission for each "investment" they sell - so be cautious about believing what they say.

(Have you seen a film called Wolves of Wall Street? Maybe that's what you should be picturing in your mind, when you're talking to the salesperson.)

bonnemotta

@poseidon1

What is your plan to get the net rent ( after corporation tax ) out of the company each year without further dividend tax or PAYE?

The rent will be kept in the company account, and I don’t plan to withdraw it as a dividend or personal income since I already do that with my trading limited company. My focus is on long-term property appreciation and making withdrawals only as allowable company expenses.

Is your 25% to be introduced to the company by way of shareholder loan or shareholder equity?

It will be a company loan from my trading company to the property company. Interest will be paid by the property company to the trading company from rental income. As mentioned, I’m not planning any form of payments from the property company to my personal account.

Who will be handling your annual accounts , corporation tax and Companies House compliance? If not you, is the cost of this annual compliance in your modelling?

I currently use an online accountant for this, but I’m hoping to handle it myself for the property company.

If your long term hope is for a decent capital gain on property, what's your plan to avoid a double tax charge on the same property gain (once within the company on sale and again on company liquidation).

Good question. I haven't thought about it. Any suggestions?

bonnemotta

@eddddy

Entry costs are lower; for example, with £100k to invest, Liverpool’s prices could allow the purchase of two properties rather than one in London. I’m also trying to avoid investment schemes, though it’s noticeable that many property influencers have been promoting Liverpool heavily recently. And I'm wondering, is Liverpool actually a good option, or just a sales pitch.

bonnemotta

RedFraggle said:

I've been watching the Liverpool property market for some time. A lot of the new build flat blocks are hard to sell, have a high proportion of rentals, which can limit residential mortgages, and end up being drastically reduced (the Tobacco Warehouse being a case in point, as well as Park and Quay Central on Jessie Hartley Way). 
If I wanted to invest there I'd be looking at houses in or close to L17 . Popular with young professionals and students but families too. It's keep your options open. 
I'm not convinced the whole development round the new Everton Stadium will live up to it's sales pitch. 

That’s really helpful on Liverpool, especially the houses point around L17. Have you made a similar move on Manchester yet?

poseidon1

bonnemotta said:

@poseidon1

What is your plan to get the net rent ( after corporation tax ) out of the company each year without further dividend tax or PAYE?

The rent will be kept in the company account, and I don’t plan to withdraw it as a dividend or personal income since I already do that with my trading limited company. My focus is on long-term property appreciation and making withdrawals only as allowable company expenses.

Is your 25% to be introduced to the company by way of shareholder loan or shareholder equity?

It will be a company loan from my trading company to the property company. Interest will be paid by the property company to the trading company from rental income. As mentioned, I’m not planning any form of payments from the property company to my personal account.

Who will be handling your annual accounts , corporation tax and Companies House compliance? If not you, is the cost of this annual compliance in your modelling?

I currently use an online accountant for this, but I’m hoping to handle it myself for the property company.

If your long term hope is for a decent capital gain on property, what's your plan to avoid a double tax charge on the same property gain (once within the company on sale and again on company liquidation).

Good question. I haven't thought about it. Any suggestions?

My friend who had unwisely put himself in your position, without considering an exit strategy is now resigned ( at age 67) to retaining his property company holding a single letting property until his death when it will be passed on to his only child at a CGT free uplifted market value for the shareholding. This at least leaves only the substantive corporation tax on the property sale proceeds when his child gets round to winding up the business to consider.

In the interim since he funded the company by way of personal shareholder loan he is at least able to extract some of the accumulated net rents without further tax  by way of occasional loan redemption.

In your case no doubt your idea of a cross company loan relationship with interest chargeable thereon is inspired by the kind of analysis set out below -

https://www.z-e-n.co.uk/can-one-company-lend-to-another-tax-implications/

However if your trading company affairs  are currently addressed by a remote accountancy firm,  maybe wise for that firm to also handle any new property company given the intended inter company loan relationship  and necessity to ensure you do not trip up  reconciling the interest charged and taxable in the one, against tax relief allowable in the other. 

Are you accountancy and tax trained, or just hoping to learn as you go along? Plenty of traps for the untutored.

 

ReadySteadyPop

silvercar said:

Be careful of the amount of supply vs demand. Admittedly I looked at Manchester not Liverpool, but I was surprised by the amount of property available to let vs demand.

Also, consider average salaries in Liverpool vs the south east. People on decent money will buy, because house prices are such that they can afford a house of the size they need on their income. People who aren't on decent money will struggle to afford high rents. For this reason I suspect that cheaper properties will do better in the area, but the downside is the maintenance that is required on cheaper properties and the fixed costs eg a gas safety certificate are the same whatever the property, so these become a higher percentage of your rental income.

Really? Supply has been building for some time and it is much harder for landlords to exit the market than people thought because obviously it is much harder to let a property now.

RedFraggle

bonnemotta said:

RedFraggle said:

I've been watching the Liverpool property market for some time. A lot of the new build flat blocks are hard to sell, have a high proportion of rentals, which can limit residential mortgages, and end up being drastically reduced (the Tobacco Warehouse being a case in point, as well as Park and Quay Central on Jessie Hartley Way). 
If I wanted to invest there I'd be looking at houses in or close to L17 . Popular with young professionals and students but families too. It's keep your options open. 
I'm not convinced the whole development round the new Everton Stadium will live up to it's sales pitch. 

That’s really helpful on Liverpool, especially the houses point around L17. Have you made a similar move on Manchester yet?

Never looked at Manchester. I'm not an investor, I just love Liverpool and it's one of the (many) places I keep a watch on property wise. 

theartfullodger

bonnemotta said:

poseidon1 said:

bonnemotta said:

Sorry about broken formatting, below is tidier a version. 

I’m currently based in London and considering a buy-to-let investment in Liverpool, but I’d like to hear some real opinions from people who’ve actually done it.

I’ve run the numbers using a few online calculators and factored in:

• 1 month annual void period
• 5% mortgage rate
• 10% of rent for maintenance
• 10% agent management feeservice charges where applicabl
• 5% from property price on cosmetic renovation 

Even after those deductions, the ROI still comes out around 6-7%, which seems surprisingly solid.

So, is this genuinely viable in practice, or just a bit of a gimmick being pushed by estate agents?
What hidden costs, local market risks, or management challenges might I be missing as a remote investor based in London?

No indication in your modelling whether you are borrowing significantly to buy ( eg 75%) , whether buying personally or via limited company, and whether you are already a 40% tax payer  ( or higher ) on your other sources of income.

Gross income before tax in my mind is not a good enough measure to determine whether BLT is a 'good thing'. Buying personally as a 40% tax payer impacts significantly on the net return after tax (effect of Section 24), which is part of the reason tens of thousands of BTL landlords have/are departing the sector.

Fair point. The plan is to do it through a limited company. I'm planning to go ahead with a 25% deposit.

Hopefully the (or a) government with remove the tax avoidance advantages of limited companies soon, unfair and imho discriminatory to the majority of property owners. 

Apologies if this view upsets anyone.

Best wishes to all