Sunday, Mar 20, 2016

Raise rents or sell?

Daily Telegraph: ‘Our 17 properties will lose £16,000 per year’

Existing landlords are caught between an income tax bill which is set to begin rising next year, or the stamp duty hit involved in incorporating their properties now

Posted by tom101 @ 11:10 AM (4932 views) Add Comment

16 Comments

1. Lives In A Cave said...

No sympathy with any of them. They thought this was the road to easy income and capital gains. Risk and return. It's risky and they will lose the returns. Bring it on.

Sunday, March 20, 2016 05:35PM Report Comment
 

2. crash bandicoot said...

"Shirleyann Haig has a large portfolio of buy-to-let properties which currently break even."

Is that an investment or a hobby? If you read the blurb below it's something of a charity.

If they have been buying up local property at prices that they can't make a profit from they've hardly been helping the wider community.

Sunday, March 20, 2016 10:26PM Report Comment
 

3. mombers said...

@1 +1. Seems the business model is punting on capital gains if they're not making any net income. As such, it should be treated like folk gambling on the stock exchange, i.e. no interest deduction.

Monday, March 21, 2016 10:44AM Report Comment
 

4. libertas said...

crash bandicoot. You completely miss the point, most small time investors are not in it for yield. They only care about capital gains and for those not on interest only, they only care about coming away owning the property outright in circa 20yrs. For a new parent, buy a studio flat when the baby is born on a 5% deposit and the tenant will have paid for a whole flat for your child by the time they are 20yrs old. Sell it and break that price up and it could form a deposit each for up to four children to get them on the ladder.

Stop looking at a single metric and suggesting that you understand the market. Different investors have different time and risk preferences and yield is just one of many factors in making an investment decision, noting that a property presently breaking even may well make great profit in 5yrs time if rents continue to rise.

Furthermore, the new stamp duty can be discounted from capital gains tax when the investor sells, and so you do not loose its nominal value.

Monday, March 21, 2016 01:24PM Report Comment
 

5. Hugh111111 said...

With 17 ex-council houses rented out to housing benefit recipients I'd suggest this is a full time occupation (in fact a 24/7 occupation). Are you suggesting she is willing to work 25 years in a full-time stressful job with no pay? For what; eventually she is the proud owner of 17 low quality houses in a Liverpool sink estate which I would generously value at 500k.

Surely a more appealing alternative is to get an cushy job earning 20K per annum and put all your earnings into an inflation tracker for 25 years. Same result, a lot less stress.

Monday, March 21, 2016 05:47PM Report Comment
 

6. This comment has been removed as it was found to be in breach of our Blog Policies.

 

7. libertas said...

This is how negative yields work. If they can afford to supplement the rent of their 17 properties for the meagre sum of 17k per year, that unlocks, lets say, an average of 400 a month per property (Its Liverpool).

Thus, their 17,000 subsidy unlocks 81,000 of rent that will be paying down capital, exposing them to capital gains, plus rents are rising and so that subsidy may flip into surplus in the next five years. So long as their household income is positive, they may well keep going, or just sell a proportion of the 17 to maintain cash flow.

Monday, March 21, 2016 06:33PM Report Comment
 

8. crash bandicoot said...

You probably need to explain that to her because she seems pretty disturbed by the situation.

Personally I'd wager that those houses are on interest only mortgages, that was the favoured way to go a few years back, and as mombers says above if you're punting on capital gains with no yield you are just gambling.

As we're on a website call housepricecrash would you accept that there is a possibility that they could well be looking at a huge loss in five years time too? At what point should she liquidate to prevent losing money? Or is bankruptcy the best option?

Monday, March 21, 2016 08:39PM Report Comment
 

9. mombers said...

@libertas the point is that having vital infrastructure owned by speculators is a huge problem. If they are not making any yield, how can you expect repairs to be made promptly? And the only way to make money is to sell, resulting in a no fault eviction. This is not how most if not all renters want to live. Not a recipe for stable lives for the huge and growing numbers of private renters (very few of whom could 'stretch' and 'hold their noses' to escape the sector, contrary to your beliefs...)

Tuesday, March 22, 2016 09:50AM Report Comment
 

10. sneaker said...

The interests of Generation Rent should dominate public debate here. If investors & speculators are buying things at zero-yield in the hope of capital appreciation things can't really get any more nutty. It's back to 2007 all over again.

But really the problem is this: how do you pay rent when you retire?

Unless this gets sorted out, future governments are due for massive housing benefits to pay for rents for the elderly - with implications for taxation, government finances and all forms of welfare. So it's an issue for us all and we need to do something about it today not some time in the future.

Tuesday, March 22, 2016 12:21PM Report Comment
 

11. Streamingfreedom said...

@7 yes, or raise the retirement age to something like 75 which feels like the current Plan A. Which doesn't work of course as anyone with a manual job wouldn't be able to keep going. And I can't see many employers wanting to take on a 65 year old...

In the real world, we know that exponential growth cannot go on forever. It's just a matter of when we get a correction.

Tuesday, March 22, 2016 01:32PM Report Comment
 

12. khards said...

The government will have no choice but to either print/borrow the rent or a massive dedicated building plan for retirees.
I suspect the dedicated retiree council housing will be most likely since it will be generation rent that is in power.

Tuesday, March 22, 2016 02:56PM Report Comment
 

13. mombers said...

@8 I hope that publicly owned retirement housing is built for all pensioners who are still renting. There is no way that someone will get off Housing Benefit after they retire and it makes no sense to subsidise private landlords and push rents up through HB handouts. Also, NIMBY opposition to public housing should be much less if it exclusively occupied by harmless old folk.

Tuesday, March 22, 2016 04:06PM Report Comment
 

14. techieman said...

Libby "For a new parent, buy a studio flat when the baby is born on a 5% deposit and the tenant will have paid for a whole flat for your child by the time they are 20yrs old. Sell it and break that price up and it could form a deposit each for up to four children to get them on the ladder."

I see and how is the young couple going to get a BTL mortgage with a 5% deposit when they likely have large student debts . If they do get one then at a 5% deposit what rate are they going to pay now and more importantly in the future? Also if everybody became a LL as you seem to be advocating who is gonna pay the rent?

You seem to think the World is full of Jeremy and Jermimas having their portfolios paid for by Wayne and Waynettas + HMG.

I' don't understand the 400 you refer to "its Liverpool". Yep its Liverpool part of the NW., and rents there have been falling by 3.2% in the last 8 months,

As for the 3% SD, only a third of that would be offset by CGT, and ofc that 3% is going to be attracting interest over 25 years.. Most small investors aren't interested in yield they are interested in Cap Gain . Perhaps but that doesn't make them right, most pros ARE interested in yield and - aside from HMOs they aint getting it.

The small investor is likely akin to the small spec on the markets, whereas the Pros are like the commercials. Small investors normal pay too much and are forced sellers. If things get bad here - which is likely , albeit timing is everything, then we shall see if the whole BTL market is built on solid foundations of not.

Tuesday, March 22, 2016 04:24PM Report Comment
 

15. techieman said...

Mombers, I think you have hit the nail on the head. HB makes no sense if it just serves to provide a LL with a large profit. The way it is calculated will likely be the next thing that is looked at.[its already been changed ]

Personally I think there is a place for a Private LL sector and yes they should be compensated for the risk they take. However, surely they should not be able to amass fortunes like the Wilson's. Fair play to them they took a massive risk and rode the bull market / great moderation for all it was worth. They must have had a few jitters in 2007 but by then their gearing was likely relatively low, and there was no large fall in rents then..

I personally think they should have had penal CGT in bands applied, if the rents are paid for by HB. Shame IDS has gone - I would have had a chat with him at his next surgery. !!

Tuesday, March 22, 2016 04:35PM Report Comment
 

16. jack c said...

techieman - IDS will likely be out to lunch with Sylvia Pankhurst !

Tuesday, March 22, 2016 05:23PM Report Comment
 

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