overlander

Btl Scum Regrouping And On The Offensive. -- Merged

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On 22/03/2017 at 11:31 PM, Phil321 said:

Small leveraged landlord - yes. Avoids the direction of travel of 2 million LLs buying and owning 10 each buying all the UK stock. Then when rates rise (because non are repaying the debt) the house of cards collapsing.  

 

Why do rates need to rise because non are repay the debt (I have taken this to mean they are all using IO mortgages, but you may also mean the music has stopped and unemployment has started).

IO is perfect for making the most money for banks.  BoE has provided clear margin for them to earn between the consumers rate and the rate the bank has to borrow at.

The capital is secured with deposit.  All the IO money they are making is better than any repayment mortgage scenario, with repayment each year that passes the bank makes less money, as less interest is charged due to less principal being outstanding.  So they need new repayment loans out there to replace.  This presumes a background of static interest rates (which is what we have).

Surely a bank prefers IO to repayment, it gets month 1 year 1 interest every month (forever) for the equivalent repayment.  Since the capital sum is secured, its better than a credit card for making money, because even with a credit card regulations state some % of the capital owed must be repayed via minimum payment.  This is not even the case for IO mortgage.

But with IO the banks continue to make money without writing out new loans.  The problem with IO is when the money supply dries up, it stands to reason not everyone will be in a position to meet their interest payments each month, because not enough new money is created (as everyone that can has taken a loan out already and spent it into the economy) and all the money circulating is paying someone elses interest payment that month.  They can not pay their own due to unemployment.

I can only think that rates need to rise due to an evil desire to "shake the tree".  The bank taking back that umbrella when it starts to rain.

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3 hours ago, Odin said:

From the numbers I see on this forum the arithmetic is slightly better than this:

* OO does not have voids, and industry standard void % is around 3-5 ?  There is a report somewhere on this forum recently

* Rented 1BR dwellings often have a single person renting, but OO 1BR often do not.  People generally (more often than with rented) live with someone else in OO 1BR.  There is a report somewhere on this forum recently.

So for every 1 OO that is taken up more than 1 Rented is reduced, at least as much as 1.03, maybe at much as 1.4 because statistically the take up behaviour is different.  BTL LL might assume they are going to sell to another BTL LL and would prefer to, as it keeps the demand of all the other BTL stock up.

So I am saying here that total rental _demand_ is actually getting destroyed for every 1 OO that converts.  Some might read your statement and think the demand remains much nearer parity.  I am claiming it doesn't, there is a demand destruction curve there somewhere.

I make the point to try and take argument as to why my thinking is incorrect.

Excellent observation, particularly in voids. That had not occurred to me before. 

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On ‎3‎/‎25‎/‎2017 at 8:54 AM, SarahBell said:


What it will ultimately create is more pensions to be funded. 
Employing council staff to manage private rentals isn't a sensible idea. (Manage they will, to fill plenty of officer hours)

What councils need is more environmental enforcement officers trained to deal with substandard housing.
And to enforce action against bad landlords.

The initial scheme in Manchester's Moston and Lightbowne folded. FOI would reveal the scale of damage to council tax payers and the huge waste of time it was.

If you want landlords to improve properties, then ensure there ar systems to force them - and there currently are - but by EH not a new branch of the council.
And if you want neighbour nuisance dealt with then you need to actually learn how to change people.
Councils just evict bad tenants. Do they expect more from private landlords?

Not much chance of that,  over a year ago I tried to report a house that had been turned into 2 self contained flats and let out, without planning permission (application rejected) or a landlords licence.

Helpful council person explained that, their team was swamped with work and hadn't been expanded after Croydon introduced their very expensive licensing scheme so as before they could only deal with the most important violations - and that this wasn't one of them.    

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12 hours ago, Odin said:

Why do rates need to rise because non are repay the debt (I have taken this to mean they are all using IO mortgages, but you may also mean the music has stopped and unemployment has started).

IO is perfect for making the most money for banks.  BoE has provided clear margin for them to earn between the consumers rate and the rate the bank has to borrow at.

The capital is secured with deposit.  All the IO money they are making is better than any repayment mortgage scenario, with repayment each year that passes the bank makes less money, as less interest is charged due to less principal being outstanding.  So they need new repayment loans out there to replace.  This presumes a background of static interest rates (which is what we have).

Surely a bank prefers IO to repayment, it gets month 1 year 1 interest every month (forever) for the equivalent repayment.  Since the capital sum is secured, its better than a credit card for making money, because even with a credit card regulations state some % of the capital owed must be repayed via minimum payment.  This is not even the case for IO mortgage.

But with IO the banks continue to make money without writing out new loans.  The problem with IO is when the money supply dries up, it stands to reason not everyone will be in a position to meet their interest payments each month, because not enough new money is created (as everyone that can has taken a loan out already and spent it into the economy) and all the money circulating is paying someone elses interest payment that month.  They can not pay their own due to unemployment.

I can only think that rates need to rise due to an evil desire to "shake the tree".  The bank taking back that umbrella when it starts to rain.

Agree, banks like interest only. But to clarify I was not suggesting a cause and effect link suggested between IO and interest rates. 

Only that if you have IO debt, (ie an infinite term and therefore an infinite chance of change) then over the next 30 years (or 1000 years) the interest rates will rise.

So the reason to increase rates will not be an evil desire but they will rise for numerous unrelated housing and non housing reasons - the 0.25% base rate is a historical blip. 

S24 is very neat, it makes a 118'er realise what debt is......it is a debt. 

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I'm moving houses at the moment as my current landlord puts the flat on sale and served us S21. We have found a new place, wanted a 2-3 year deal but were only offered 12 month so wanted to know whether there's a mortgage on it, as we would hate to move again in a year if our new landlady feels the pinch of S24. The conversation with the landlady's representative went somewhere along these lines:

 

ME: Do you happen to know whether there's a mortgage on the house or maybe it's owned outright?

LL: Yes, it's mortgaged.

ME: See, that's why we're pushing for a longer deal. We would like to know that we won't have to move our kids again in a year if the landlady decides to sell.

LL: I can assure you that she's not planning to sell.

ME: She might not be planning to do so now, but I'm more worried about a year from now, when tax changes start coming into force.

LL (looks surprised): Don't worry about it, we've got other properties and they are all mortgaged too, so it would have to affect them too.

ME: That only reinforces my point. She might have to sell all of them.

LL burst into tears of laughter and needed a moment to get herself back together

LL: Oh, that's definitely not happening, we're not selling any of our properties. In fact, we're planning to buy some more.

 

I'm still trying to figure out which one if us is the idiot here.

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2 hours ago, kibuc said:

I'm moving houses at the moment as my current landlord puts the flat on sale and served us S21. We have found a new place, wanted a 2-3 year deal but were only offered 12 month so wanted to know whether there's a mortgage on it, as we would hate to move again in a year if our new landlady feels the pinch of S24. The conversation with the landlady's representative went somewhere along these lines:

 

ME: Do you happen to know whether there's a mortgage on the house or maybe it's owned outright?

LL: Yes, it's mortgaged.

ME: See, that's why we're pushing for a longer deal. We would like to know that we won't have to move our kids again in a year if the landlady decides to sell.

LL: I can assure you that she's not planning to sell.

ME: She might not be planning to do so now, but I'm more worried about a year from now, when tax changes start coming into force.

LL (looks surprised): Don't worry about it, we've got other properties and they are all mortgaged too, so it would have to affect them too.

ME: That only reinforces my point. She might have to sell all of them.

LL burst into tears of laughter and needed a moment to get herself back together

LL: Oh, that's definitely not happening, we're not selling any of our properties. In fact, we're planning to buy some more.

 

I'm still trying to figure out which one if us is the idiot here.

As they're definitely not selling, they won't mind putting a clause in the contract that drops your rent by, say 30%, in any period in which the property is put up for sale. 

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someones moving out in a year. worth getting a note put in the contract that you will refuse house viewings until you have vacated the property in the event of a sale.

that would be a kick in the teeth for them if they wanna sell.

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14 minutes ago, Patient London FTB said:

As they're definitely not selling, they won't mind putting a clause in the contract that drops your rent by, say 30%, in any period in which the property is put up for sale. 

It's a pity I'm not in a position to drive too hard of a bargain, as I'd love to see her reaction to that :)

There was one more gem, though. She said that there would be a standard 3% annual raise. When I pointed out that rents are already falling and are projected to fall further, she responded with "It's our standard policy". It kind of remind me of that one topic from P118 about S24 that was quoted here, where one LL was listing a "standard £50 raise" among other factors for increased rent.

My landlady seems oblivious to the fact that it took her 6 months of void, a full refurbishment with new kitchen and garden, 2 months on the market and a 15% reduction from the initial price (1950 -> 1650) to find tenants. Neither snow nor rain nor heat nor gloom of night nor adverse market conditions stay these landlords from the swift increase of their rents.

Edited by kibuc

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sounds like she knows you wont want to move in a year, so your a perfect target for a large rent hike in 12 months time.

Let you settle in first, then BAM. 

Does not sound like its worth renting from this person at all, but i also dont think your going to find a mortgage free landlord. And theres no gaurentee than when your told 'no mortgage' that its the truth anyway.

Just be mentally prepared to move in another 12 months time, i sadly predict that there will be a temporary boost in rents for a 6 month period as masses of people are served section 21 notices. On the plus side if your in a position to buy it certainly will be a buyers market.

 

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Just now, Patient London FTB said:

Kids to think of? Or short deadline to move?

Deadline is not that short and it could easily be extended, as landlord's notice is invalid anyway (since the start of our tenancy we haven't been given any info about what happened to our deposit and if/where it's protected). That's the last resort, though, as we prefer to play nice until forced to play ugly. The biggest problem is my missus has gone double crazy since we got the notice, and I couldn't possible handle more than a few weeks of that.

Anyway, it don't want this topic to suddenly become about me and my housing issues. I simply find my new landlady's happy-go-lucky approach to future tax changes very odd, especially if she's got loads of mortgage debt already. Is it just ignorance about S24? It is denial? Is there a trick she might have pulled to make herself immune to that? Is it just her or does it project to leveraged landlords in general? I'm baffled.

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12 minutes ago, kibuc said:

Deadline is not that short and it could easily be extended, as landlord's notice is invalid anyway (since the start of our tenancy we haven't been given any info about what happened to our deposit and if/where it's protected). That's the last resort, though, as we prefer to play nice until forced to play ugly. The biggest problem is my missus has gone double crazy since we got the notice, and I couldn't possible handle more than a few weeks of that.

Anyway, it don't want this topic to suddenly become about me and my housing issues. I simply find my new landlady's happy-go-lucky approach to future tax changes very odd, especially if she's got loads of mortgage debt already. Is it just ignorance about S24? It is denial? Is there a trick she might have pulled to make herself immune to that? Is it just her or does it project to leveraged landlords in general? I'm baffled.

She is ignorant of the effect of the changes and/or thick.

First year of tax changes is 2017/18. Tax due Jan 2019. HMRC enquiry period one year from that if returns aren't completed correctly (which many won't be). 

The penny will start to drop in Jan 2019 when people like this LL have to cough up for the extra tax.

But it's only being phased in gradually - the first year isn't that bad. By say Jan 2021 she will be getting stung very painfully.

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27 minutes ago, kibuc said:

Deadline is not that short and it could easily be extended, as landlord's notice is invalid anyway (since the start of our tenancy we haven't been given any info about what happened to our deposit and if/where it's protected). That's the last resort, though, as we prefer to play nice until forced to play ugly. The biggest problem is my missus has gone double crazy since we got the notice, and I couldn't possible handle more than a few weeks of that.

Anyway, it don't want this topic to suddenly become about me and my housing issues. I simply find my new landlady's happy-go-lucky approach to future tax changes very odd, especially if she's got loads of mortgage debt already. Is it just ignorance about S24? It is denial? Is there a trick she might have pulled to make herself immune to that? Is it just her or does it project to leveraged landlords in general? I'm baffled.

She probably doesn't pay tax (doesn't declare), so in her mind it won't affect her. If she hasn't protected your deposit, it's quite likely she's not going to be doing anything else by the book either.

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1 hour ago, luvadealme said:

off topic, but Allsopps auction is tomorrow, be interested to see if lots of BTL dumping here.....

It will be interesting. But if there's not much to report then it still won't change my views.

I'm sensing a growing feeling on the forum that S24 has failed to deliver a meaningful fall in house prices, or at least a rising apprehension that all the hopes invested in S24 might not be realised.

Personally I think that would be a premature conclusion. No landlord, no matter how overstretched and highly leveraged, has actually paid a penny in additional S24 taxation yet, and the landlords I talk to are generally deep in denial, and trusting that something will turn up to make the nightmare go away.

Consequently I'm not expecting much impact from S24 until 2019 or 2020. But when that impact does arrive it'll be both substantial and rapid. It wouldn't be surprising to read a growing ground swell of opinion on this forum throughout 2017 and 2018 that S24 was a damp squib; and then see a game changing avalanche of BTL sales in 2019 and 2020. 

The blindingly obvious thing is that until real, actual tax demands start dropping onto landlord's door mats then we're still in a "phoney war".

Many leveraged landlords are counting on growing house prices to sustain their entire house of cards lifestyles, so they'll cling to the current model until the taxman takes their legs from under them by demanding a cash fee, in the shape of S24 tax, to stay in the game. At that point their bluff will have been called and they'll fold in a chain reaction of distress selling.

But that isn't a scenario that's going to happen this year or next, but happen in 2019 or 2020 it surely will. 

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4 hours ago, fru-gal said:

She probably doesn't pay tax (doesn't declare), so in her mind it won't affect her. If she hasn't protected your deposit, it's quite likely she's not going to be doing anything else by the book either.

Very possible.

And therefore the obligation to grass up your landlord falls to you, kibuc.

I rather like the idea of HPC gradually ending up as a cadre of knowledgeable renters blowing up non-declaring landlords one at at time by tipping off HMRC. 

This is one of the more delightful aspects of section 24. As we've noted previously, without it there may well have been very little tax revenue for HMRC to chase from these leveraged portfolio types. With it, landlords have to declare to get the relief at basic rate and if they don't declare then once fines are considered the non-declaring landlords turn into a real gold mine.

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6 hours ago, fru-gal said:

She probably doesn't pay tax (doesn't declare), so in her mind it won't affect her. If she hasn't protected your deposit, it's quite likely she's not going to be doing anything else by the book either.

Everything changes under S24.  How many examples do I have to put up of BTLers who have structured their finances so there is legitimately no tax to pay.... or very little tax to pay, under today's rules.

We have those who believe very few BTLers pay tax now, and are all ahead of HMRC and that they will remain so.... 

And those who believe everything changes with S24 for so many BTLers and the properties they have laid claim to.

It's like day vs night in policy change and impact.

Grateful to The Exile for sending me this link, no matter that we're in disagreement about many matters re BTL/S24/Tenant 'impact'/Bank Systematic Solvency in HPC / S24 / why S24 eventually was brought in...... late is better than never, after BTLers have doubled down into it imo.

http://www.propertytribes.com/incorporation-investment-value-cgt-t-127628946.html

I recalled reading more about the thread starter a while ago.  He seemed to be very confident with his 'strategy'.  Although I can't find the main post that I was thinking of.

Quote

11 Dec 2016 at 13:02 
I paid something like £1800 admin fee to Paragon to move 10 properties, and about the same to Lloyds to move 5 properties.

plus 9k in solicitors fees, and about 30k in SDLT, but that was prior to aprils 1st, if I were to do it now, SDLT would be about 110k.

http://www.propertytribes.com/valid-method-to-incorporate-with-no-tax-t-127627664.html

--

http://www.propertytribes.com/pension-planning-and-btl-t-127628111-3.html

 

Edited by Venger

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47 minutes ago, Venger said:

Everything changes under S24.  How many examples do I have to put up of BTLers who have structured their finances so there is legitimately no tax to pay.... or very little tax to pay, under today's rules.

We have those who believe very few BTLers pay tax now, and are all ahead of HMRC and that they will remain so.... 

And those who believe everything changes with S24 for so many BTLers and the properties they have laid claim to.

It's like day vs night in policy change and impact.

Grateful to The Exile for sending me this link, no matter that we're in disagreement about many matters re BTL/S24/Tenant 'impact'/Bank Systematic Solvency in HPC / S24 / why S24 eventually was brought in...... late is better than never, after BTLers have doubled down into it imo.

http://www.propertytribes.com/incorporation-investment-value-cgt-t-127628946.html

I recalled reading more about the thread starter a while ago.  He seemed to be very confident with his 'strategy'.  Although I can't find the main post that I was thinking of.

 

The property tribes link about transferring mortgages and paying £9k legal, £30k SDLT is really interesting. 

I occurs to me these guys will do ANYTHING rather than sell a couple of properties or repay the debt. I know all the 'reasons' for this some from 118 and some from here....but really if there was ever 'writing on the wall' surely this is it. 

None of us can fully predict changes to come in the future but the removal of tax relief in any shape or form for debt on residential properties is surely a strong possibility as is the removal of IO mortgages. Just balmy wanting to cling on and never wanting to be told. There are even outlier risks eg Right to Buy, rent controls and whilst I believe those are not likely....never say never. 

As is a popular cry on these forums...."sell everything sell everything now."

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Great news.

For sure there will be more LL's would be finding themselves in a much more difficult situation than this. 

It's all down to their inability to think the real reasons of why S24 was bought in the first place. Their only Moto have been hoard of few houses on debt and somehow invent a way to fund their lifestyle in LaLa land without doing anything. 

In a few months I would see more poverty later posts crying foul for using Busta's Ponzi scheme.

 

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5 minutes ago, hi5lo5 said:

Great news.

For sure there will be more LL's would be finding themselves in a much more difficult situation than this. 

It's all down to their inability to think the real reasons of why S24 was bought in the first place. Their only Moto have been hoard of few houses on debt and somehow invent a way to fund their lifestyle in LaLa land without doing anything. 

In a few months I would see more poverty later posts crying foul for using Busta's Ponzi scheme.

 

I guess some of the lenders might be interested in hearing about folks who've taken up Busta's schemes soon. Maybe not quite yet for HMRC? Busts runs a tight ship though so things might surface on PT instead.

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1 hour ago, Phil321 said:

I occurs to me these guys will do ANYTHING rather than sell a couple of properties or repay the debt.

Apparently this is a well-worn strategy in the UK property market. 

It's called Hang Onto Avaricious Rentierism til Death, or HOARD for short. 

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7 hours ago, silver surfer said:

The blindingly obvious thing is that until real, actual tax demands start dropping onto landlord's door mats then we're still in a "phoney war".

Many leveraged landlords are counting on growing house prices to sustain their entire house of cards lifestyles, so they'll cling to the current model until the taxman takes their legs from under them by demanding a cash fee, in the shape of S24 tax, to stay in the game. At that point their bluff will have been called and they'll fold in a chain reaction of distress selling.

But that isn't a scenario that's going to happen this year or next, but happen in 2019 or 2020 it surely will. 

Have to say you're probably right. Demand has been killed, especially from BTLers wanting to add to their portfolios and second home buyers. But that doesn't equate to a supply of willing or forced sellers, yet, when interest rates are so accommodative and people have been taught they must hold on to property at all costs. 

Edited by Patient London FTB

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9 hours ago, Phil321 said:

The property tribes link about transferring mortgages and paying £9k legal, £30k SDLT is really interesting. 

I occurs to me these guys will do ANYTHING rather than sell a couple of properties or repay the debt. I know all the 'reasons' for this some from 118 and some from here....but really if there was ever 'writing on the wall' surely this is it. 

None of us can fully predict changes to come in the future but the removal of tax relief in any shape or form for debt on residential properties is surely a strong possibility as is the removal of IO mortgages. Just balmy wanting to cling on and never wanting to be told. There are even outlier risks eg Right to Buy, rent controls and whilst I believe those are not likely....never say never. 

As is a popular cry on these forums...."sell everything sell everything now."

Surely if they are reluctant to sell, then the pain when the time arrives and they are forced to sell later will mean a bigger crash? 

The longer it stays non-crashy the bigger the Crash surely?

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8 hours ago, Patient London FTB said:

Apparently this is a well-worn strategy in the UK property market. 

It's called Hang Onto Avaricious Rentierism til Death, or HOARD for short. 

:D

The longer they hang on the more debt they accumulate the more beautiful the crash.

HOARD on my Entrepreneurs, HOARD on.

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