[dom]

laurejon, on Dec 4 2004, 02:59 PM, said:

My experiences are somewhat different, we are talking police raids for drugs with smashed in front doors and furniture burnt in the garden.
<{POST_SNAPBACK}>

'.'@$%£^£@?????? @?@?@:{:

[Blind]

you can't offset a loss from property income against your other income (assuming its no a holiday let)

You can only carry the loss forward to offset against future letting profits.

[lucky]

Dear Laurejon,

A correction to your idea that you don't need to tell the lender that it is being let out. Oh, yes you do, if you bought as an intended owner-occupier. It costs more to btl, as the risks to the lender are higher.

I failed to notify once and when by chance they found out - they had someone come round for some reason - I was informed that they were considering foreclosing the mortgage as I was in breach of the conditions. In the end, they accepted it was a mistake and simply added one or two percent to the mortgage and we carried on as usual.

When things get nasty, pity anyone who's letting out a house without telling their lender. They won't be pleased.

Lucky,

p.s. sorry to hear about your bad tenants

[laurejon]

A correction to your idea that you don't need to tell the lender that it is being let out. Oh, yes you do, if you bought as an intended owner-occupier. It costs more to btl, as the risks to the lender are higher.


I have a mortgage with the Abbey and last year was considering letting it out to work on a contract in Oz. I called the Abbey and they said it was no problem at all, no increase in interest rates as that was my primary concern as I was on a fixed rate with huge penalties.

They did say that the most important issue was to ensure that I change the house insurance policy as your normal policy does not cover outside of family.

As I say that was the Abbey, maybe others are different and I would guess that if it was a bona fide business then as with all business borrowings the rates are slighty higher.

[laurejon]

The whole concept of running a business is to make a PROFIT


Wrong

The concept of a business is for you to make a profit, not the business.

May I suggest a short course at your local college. I did just that and it certainly changed my views on how to run a business.

Key priorities in all businesses are

1. Ltd Company
2. Dont use your own money
3. Dont secure your own personal assets on the business
4. Pay your bills as late as possible
5. Tax avoidance at every corner
6. Dont ever...ever make a profit


Do the math

[laurejon]

Quote

you can't offset a loss from property income against your other income (assuming its no a holiday let)

You can only carry the loss forward to offset against future letting profits.

In fact you can people only think you cant so they dont.

Where people become confused is the difference between a proffessional Landlord and someone who just owns a property and lets it out.

A proffesional landlord will have registered his business. He would be VAT registered and comply with current accounting regulations with regard to AGM's Company Secretary and all the other stuff that goes with it.

Scenario: The business makes a profit of 2k after offsetting Loan Interest and proffessional fees. Have the wife as secretary and pay her the 2k its below the NI and Tax thresholds to pay tax on.

Scenario the Business loses 5k after offsetting your Loan interest and proff fees.
You work as a self employed plummer you can offset these losses by incorperating your plumming business and your property business under one roof. Therefore what you would have paid in tax on your income as a self employed plummer would be offset against your property taxes.

[Time to raise the rents.]

lucky, on Dec 5 2004, 06:51 AM, said:

Dear Laurejon,

A correction to your idea that you don't need to tell the lender that it is being let out. Oh, yes you do, if you bought as an intended owner-occupier. It costs more to btl, as the risks to the lender are higher.

<{POST_SNAPBACK}>

I'd just like to wade in with a response to that. In the past, UK landlords paid commercial rates which helped to keep rents high & discourage landlording (for want of a better word) along with the nasty laws that were in place.

After the 1996 Housing Act guaranteeing possession will be returned to the landlord for new tenancies, the BTL loan was born & was priced a little higher than the average OO loan.

Since then BTL has proven itself as quality lending, with default rates much lower than OO defaults (owing to the credibility and financial stature of us landords).

BTL rates are now MORE COMPETETIVE than OO loans, especially for FTB's who due to their small deposits and lack of a long term history, still pay 2% & even more over the base rate.

My loans are base + .74% and if it weren't for the redemption penalty for the next 2 years, I'd head out and refinance at what is now on offer, base + .64%.

If any FTB's can get a long term low variable rate like that, I'd love to hear about it. But please, no 1 year 3% followed by 24 years 6.99% thanks.

The feeling that landlords pay a higher rate due to a higher risk is therefore a property myth and I shall now add this to the property myths thread.

[Time to raise the rents.]

On the subject of rental deposits, the current Housing Bill which should be law in 12 months from now, will make it illegal for anyone (landlord or agent) to hold a tenants deposit unless they're a member of a new scheme set up by the govt for dispute resolution.

Good news and bad news really.

I have always given back deposits on the day that I get possesion of a property back from the outgoing tenants. I wonder whether tenants can now expect that level of service, or whether delays will be incurred to comply with the new laws?

[laurejon]

I too have seen some very competitive deals for BTL's

The fact is that to get BTL loans you do need a decent amount of security and therefore the risk to the lender is far less than a young couple starting out with a 5% deposit borrowed from Granny.


Hence the reason most FTB end up with a MIP.

[Time to raise the rents.]

This is another reason why it's fair to assume that landlords will beat FTB's back into the market when they feel confident, because they can get hold of cheaper money than FTB's can. Also a fair reason why BTL has still been buying when FTB's have pulled back, because the equation is different when a different IR is used.

This is the problem experienced in Australia & other mature BTL markets, investors can move faster than OO's can & competition exists that didn't exist in the UK (not to the scale it does now) last time round.

[laurejon]

Quote

This is another reason why it's fair to assume that landlords will beat FTB's back into the market when they feel confident, because they can get hold of cheaper money than FTB's can. Also a fair reason why BTL has still been buying when FTB's have pulled back, because the equation is different when a different IR is used.

I think it is also the case that the security offered by a BTL is far greater than the FTB's who have high gearing.

In addition vast majority of BTL's who would have weathered any storm would have the benefit and experience of recognising the trough long before the FTB's have the confidence to jump in with their first purchase by which time the horse would have bolted.

Another factor often overlooked here is that Banks will not lend diddly squat on property in the bad times, I know I tried their message was "We have closed the book on property". When the book re-opens the lending criteria is much stricter, C&G were notorius for their lending criteria in the late 90's up to 2001 as such many paid their fees for mortgage application which is several hundred quid and then were refused.

The problem once you are refused is that when you apply for a mortgage with another lender on their forms they ask if you have ever been refused for a mortgage, answer YES to this and you will be refused again losing your mortgage application fee once again.

Its a dead end once you have been refuses so my advice is get agreement in principle before you part with any dosh.

[Topher Bear]

Another reason these new upstart BTLs don't inform anyone, is that if they can claim residence for a while on the property, then it is established as their home and then when they convert to letting they can claim capital gains relief (ie no tax for first three years and then a reduced amount for a further 2 I believe it is). So its a tax avoidance dodge, and our landlady is on it big time....plus we know her lender...tis the same as ours :-) easy for them to check in that case, they will have two different names residing at the one address...but we'll have council tax bills to back up our claim of residency....we WILL be informing the bank and others when we leave, I assure you.

laurejon, on Dec 5 2004, 07:33 AM, said:

Key priorities in all businesses are

Hmm, these may make YOU money but...

Quote

1. Ltd Company

don't know the ins and outs of this

Quote

2. Dont use your own money

This is obvious if you can get away with it, which is easier said than done

Quote

3. Dont secure your own personal assets on the business

once again, obvious (maybe this is where ltd comes into it, creditors can't come after the directors personal wealth...even if they've bled the company dry!)

Quote

4. Pay your bills as late as possible

This is one of the biggest headaches for small businesses, and forces many to go under. Late payment of bills to new start companies which don't have much spare capital to pay for these periods and chase the late payers. Only for a few pounds extra interest payments. This is an extremely selfish practise which only goes to show the nastiness of those carrying it out

Quote

5. Tax avoidance at every corner

And who ends up paying for all this avoided tax? The rest of us normal citizens. By not paying up tax you are preventing money going into much needed public services. Another socially irisponsible practise which should be universally despised rather than praised for its "cleverness"

Quote

6. Dont ever...ever make a profit

Won't ever get any backing if you ever need it...you never know, your business might just hit a rocky patch, and if you've bled it for all it was worth in the good times, then when bad times come there will be nothing in the kitty to see you through, and no-one will be willing to lend money to a company which hasn't made a penny of profit in all its past years of trading.
Maybe this is why so many small companies go under...bad advice from greedy irrisponsible "business guru's"

Quote

Do the math     
<{POST_SNAPBACK}>

With business running like that, its no wonder the western world is going to the dogs and why we get boom and bust. You see, Capatilism fuels this kind of greed and manipulation to the detriment of others, and ultimately to the system. Pure capatilism may work, but its run by people who are too selfish to let it run its course so , like every other system of business or government, it will ultimately fail.

What has happened to the good old days of a gentlemans agreement.

[adamUK]

laurejon, on Dec 4 2004, 07:33 PM, said:

Hence the concept of two sets of books, one for the taxman and one for yourself.
<{POST_SNAPBACK}>

Is that what they call 'double entry book-keeping' okay..... just kidding.

[adamUK]

laurejon, on Dec 5 2004, 08:33 AM, said:

The concept of a business is for you to make a profit, not the business.

May I suggest a short course at your local college. I did just that and it certainly changed my views on how to run a business.

Key priorities in all businesses are

1. Ltd Company
2. Dont use your own money
3. Dont secure your own personal assets on the business
4. Pay your bills as late as possible
5. Tax avoidance at every corner
6. Dont ever...ever make a profit
Do the math     
<{POST_SNAPBACK}>

Depends on what you want to do with your business but for many it's to give you a tax-efficient and low (personal) risk vehicle for your investment capital. I am assuming you are a shareholder of your business so whatever profit the business makes is yours. If your business makes no profit then you get no return.

2) If you use other's cash they tend to want an equity stake or interest depending on the perceived risk of your venture. If you used your own cash then you would make your own return and effectively the return the lender would be seeking too - if your venture is so good then by all means use your own cash. Better you investing it than lending it to the bank (via your current or savings account) and having them make money from it.

3) Totally... jeez. Don't secure the business on your house - go Ltd or LLP.

4) As far as paying the bills as late as possible, it's common practice but you might also find your customers doing the same. Get interest payable on overdue invoices in the contract or introduce a performace bonus for those who pay on-time. It's amazing how this affects accounts-payable's attitiude. Though we are currently owed 100k and it's a pain-in-the-**** ringing up them to get the cash out of them (buggers they are)

5) I think the term you need to use is 'efficient tax planning'

6) If you want to pay yourself from dividends rather than salary (which incurs PAYE and both employers and employees NI) you must make an accounting profit since you can only pay dividend from profit and the taxman has recently tightened the rules up on this... Your overall tax burden will be lower this way unless you want to operate outside of the law...

[uro_who]

Dear Mr/Mrs/Ms Laurejon,

Might I make a minor point? Could you consider changing your post to read, 'do the maths'. It's just that one would hate for a passing reader to gain the impression that this was the Californian HPC forum.

Thank you in anticipation.