Jump to content
House Price Crash Forum
fru-gal

Btl And Pensions

Recommended Posts

I know this is really simplistic but one of the main reasons that house prices are so high is because of BTL. BTL is popular because other pension investments are unpopular and inefficient for tax. If all the tax breaks and incentives were removed from BTL and it was made much harder to be a landlord (via regulation, reduced housing benefit etc) but at the same time a lot more tax incentives were offered for things like investing in companies, shares in UK companies etc house prices would fall and a lot more landlords would sell up. There would be more investment in actual companies which would be good for the economy and society as a whole, encourage entrepreneurs and the welfare bill would go down (especially housing benefit). The government could kill two birds with one stone, keep the boomers happy (since it is basically all about having money to them, whether that is in the form of BTL or stocks and shares) whilst providing more homes to own and lower rents for tenants. They could do this by shifting the seesaw back towards the pre-Brown tinkering of pensions. Is the only reason they don't do this because it is actually about making the banks/bankers rich rather than worrying about peoples pensions because the main people that HPC would be bad for is the bankers and banks.

Share this post


Link to post
Share on other sites

Sounds eminently sensible to me. I think the weakness of the plan is that you would be eliminating middle men(people) who make a living from the complexity and absurdity of our current system and thus put them out of work which, now I think about it, makes it an even better plan.

Share this post


Link to post
Share on other sites

Lot of assumptions there. Not saying they're wrong, but they do need supporting with evidence.

For example if a significant percentage of BTL landlords suddenly decided to sell their properties, I can see how this would drive house prices down. But I'm not sure if it would also drive rents down.

Maybe it would, maybe it wouldn't.

It could be that the BTL landlords sold their properties to young first time buyers who were previously living with their parents. In that case you'd then have the same number of renters chasing fewer rental properties, which would tend to drive rents up.

Regarding pensions. I agree that Brown damaged final salary pension schemes with his change to dividend taxation. But that wasn't the only reason final salary schemes came under pressure. The increase in longevity and the extended underperformance of the stock market post 2000 also played a part. I'm a trustee of our company's pension scheme (which is closed to new entrants but hanging on by its fingernails for existing employees) and I see it from both sides. Personally I think the pension genie is now well and truly out of the bottle, and the days when most companies shouldered the full liability for providing final salary pensions are over. It's a terrible shame, but the reality is I can't imagine the circumstances that would cause a company to re-start a final salary scheme or re-open it to new entrants.

Share this post


Link to post
Share on other sites

Not every BTL is a success story, nor is it...or will it be profitable; although, the MSM would have you believe so.

If you have the gumption and moxy to strip down and rebuild places like Beeny you can make a good profit, otherwise you're playing the long game with bankers and politicians.

Good luck with that.

Share this post


Link to post
Share on other sites

You've also got the baked-in mindset that property is best investment over longterm even if it is going through a bad patch.

When you talk to boomers they can't see past this - and hammer their kids with it - and right now the stats are on their side.

6 years ago I was talking to a boomer who was selling a 650K house - asking why he didn't drop it to 580K given things were looking ropey. He was 100% not for moving on it - even though he knew the market was likely going down - he was prepared to wait until values returned to "get what it is worth".

It's still on RM at same price but now they pay for the 'featured' listing too.

(I later found out they've another house for sale for £950K down the road which they've been letting out - and they live most of the time in Canada where they bought a place but can only live 6 months a year due to immigration restrictions)

It will take a long time for that mindset to shift in this country.

Share this post


Link to post
Share on other sites

You've also got the baked-in mindset that property is best investment over longterm even if it is going through a bad patch.

When you talk to boomers they can't see past this - and hammer their kids with it - and right now the stats are on their side.

6 years ago I was talking to a boomer who was selling a 650K house - asking why he didn't drop it to 580K given things were looking ropey. He was 100% not for moving on it - even though he knew the market was likely going down - he was prepared to wait until values returned to "get what it is worth".

It's still on RM at same price but now they pay for the 'featured' listing too.

(I later found out they've another house for sale for £950K down the road which they've been letting out - and they live most of the time in Canada where they bought a place but can only live 6 months a year due to immigration restrictions)

It will take a long time for that mindset to shift in this country.

Yes but there was a time before BTL when owning stocks/shares was what people bragged about. I remember my uncle reeling off a list of shares he had, very proudly. These were the things for investors to be "into" at the time. That's sentiment. We've had 15 plus years of BTL being the thing to get into,that is also sentiment, driven by preferential tax polices and HPI but also by the media. If the media were to change course and the next big thing for boomers to buy into would be stocks again (with loads of tax breaks and incentives to buy), perhaps sentiment would change? At the end of the day it is all down to money and people wanting to feel secure.

Share this post


Link to post
Share on other sites

There are different types of BTL investors.

My parents-in-law would never have bought a BTL flat (indeed they were massively against it) however they had several hundred k sitting in a bank account earning 1%.

If they'd shopped around they'd be getting 2% at best in a savings account (maybe slightly more)

If they'd bought shares they might have gone up, maybe down and with dividends they'd be making maybe 4%. However in living memory the stock market has lost and recovered 50% of its value.

With the flat they bought they get a yield of about 4% (after costs and contingency), price might go up or down (up about £50k so far) in the long term.

Put it this way if they could get 4-5% in a savings account - like was common up to 2008 - there is no way they'd own a BTL flat. But as they want an income in retirement BTL is a sensible way of getting a BTL income.

Now levereged BTL for flats in Bulgaria is another matter...

Share this post


Link to post
Share on other sites

There are different types of BTL investors.

My parents-in-law would never have bought a BTL flat (indeed they were massively against it) however they had several hundred k sitting in a bank account earning 1%.

If they'd shopped around they'd be getting 2% at best in a savings account (maybe slightly more)

If they'd bought shares they might have gone up, maybe down and with dividends they'd be making maybe 4%. However in living memory the stock market has lost and recovered 50% of its value.

With the flat they bought they get a yield of about 4% (after costs and contingency), price might go up or down (up about £50k so far) in the long term.

Put it this way if they could get 4-5% in a savings account - like was common up to 2008 - there is no way they'd own a BTL flat. But as they want an income in retirement BTL is a sensible way of getting a BTL income.

Now levereged BTL for flats in Bulgaria is another matter...

Really? I've never seen a post 2002 BTL with a hihg yield. Most are losing cash. The yield almost sounds unbelievable.

I think you'll find a single flat or house is much more volatile than the diverse stock and bond portfolio.

Cash you can get ~ 3%.

Share this post


Link to post
Share on other sites

Really? I've never seen a post 2002 BTL with a hihg yield. Most are losing cash. The yield almost sounds unbelievable.

I think you'll find a single flat or house is much more volatile than the diverse stock and bond portfolio.

Cash you can get ~ 3%.

12k a year after costs on a £240k flat.

Share this post


Link to post
Share on other sites

You've also got the baked-in mindset that property is best investment over longterm even if it is going through a bad patch.

When you talk to boomers they can't see past this - and hammer their kids with it - and right now the stats are on their side.

6 years ago I was talking to a boomer who was selling a 650K house - asking why he didn't drop it to 580K given things were looking ropey. He was 100% not for moving on it - even though he knew the market was likely going down - he was prepared to wait until values returned to "get what it is worth".

It's still on RM at same price but now they pay for the 'featured' listing too.

(I later found out they've another house for sale for £950K down the road which they've been letting out - and they live most of the time in Canada where they bought a place but can only live 6 months a year due to immigration restrictions)

It will take a long time for that mindset to shift in this country.

The mindset doesn't have to change. You had all the oldies also not prepared to sell their RBS shares at something like £6 or £8 in 2008. They wouldn't sell for "less than it's worth."

Other investors began selling for less, to buyers, all the way down. £4, £2, £1, to 15p, even 10p as I recall it. So many older owners who thought their holding worth £25K, £50K or more, were left holding shares worth a trace of that, by holding and "not selling for less than it's worth".

Other sellers made it happen. Values are set at the margin - via other sellers and buyers. Even on low volume, prices can shoot upwards, as well as cascade downwards. One buyer and one seller made it happen, and the market confirmed it by no other bids challenging the transaction price.

I get slammed for suggesting it's long-wave inequality between boomers and young people - yet here's another example of it.

Malinvestment bailed out, and "take a long time for that mindset to shift in this country" as if it even matters. As if such owners control or have anything but the slightest implact on the market. Same people claiming not fair that 10 year renters should see a crash, and pay lot less, as that would be "unfair win" with all the focus being on not hurting bomad-fuelled FTBs who paid silly prices (and especially not affecting values for the bomad themselves).

Edited by Venger

Share this post


Link to post
Share on other sites

Why would landlords sell up when the rent is guaranteed? Plus you make tens of thousands from doing nothing. What's not to like.

What do you mean?

I read an article yesterday, an anecdote of saying 98% of London tenants were rubbish. And others about slow payers/non payers and all the other trouble like voids, repairs and so on.

The smart landlords will come to market when they see alarming signs the market is softening. Slackers guy will probably hold all the way down.

Share this post


Link to post
Share on other sites

There are different types of BTL investors.

My parents-in-law would never have bought a BTL flat (indeed they were massively against it) however they had several hundred k sitting in a bank account earning 1%.

If they'd shopped around they'd be getting 2% at best in a savings account (maybe slightly more)

If they'd bought shares they might have gone up, maybe down and with dividends they'd be making maybe 4%. However in living memory the stock market has lost and recovered 50% of its value.

With the flat they bought they get a yield of about 4% (after costs and contingency), price might go up or down (up about £50k so far) in the long term.

Put it this way if they could get 4-5% in a savings account - like was common up to 2008 - there is no way they'd own a BTL flat. But as they want an income in retirement BTL is a sensible way of getting a BTL income.

Now levereged BTL for flats in Bulgaria is another matter...

Not in my opinion. Part of the reflated prices (£50K) is because of buyers such as your parents-in-law paying higher prices to escape low rates on savings. And mistrust of money in the banking system. So people rushing to put it in safety of property....

Rates on savings are low, because risks out in the market are loopy and high, imo.

They wanted an income, so get it from others looking to buy a home, but priced out. Using their superior position of compounded returns over the decades, wage inflation, own home bought cheap and mortgage wiped out within a few years . I know all the other justifications such as they provide a valuable services to renters who need to move about. T

They are providing a valuable service for me. We'll buy their houses cheap in a crash, either the BTL or their mid-to-prime homes. If not them, it's more likely some will have more real need to sell, to proceedable buyers at lower prices, bringing all values down.

Share this post


Link to post
Share on other sites

Things are beginning to perk up on other finance forums now. Quite a few fun MMR stories too of people stuck even though got lot of equity - where the implication being they'll have to sell.

gwynlas 16-01-2010
third mortgage
I currently have one residential mortgage and one buy to let,now wish to obtain third mortgage. Third mortgage will be on residential property purchased with 50% deposit provided by partner.Income will be retirement pension and rental from buy to lets both of which have reasonable equity. Would it be best to obtain third mortgage as residential based on sole name and income or joint? Would there be any advantage in setting up a limited company? Where could I obtain best advice?
--
gwynlas 17-03-2013
Cancelling Direct Debit
I've currently placed one of two flats on the market but unfortunately there's been a boiler problem in the past week. This meant I have had to get it replaced in order for tenants to have heating and hot water. Not having any spare cash to pay for this all I can think to do is to cancel direct debit mortgage payment and write to company informing them why. I will be redeeming mortgage once property sells but wondered if this was likely to cause me problems in the short term. Any advice would be appreciated
--
gwynlas 10-07-2013
New Clause re Rentals
The managing agents of my flat are now saying that for insurance purposes they need to vet new tenancy agreements and that flats can only be let to families or professional couples. Given that flat is 3 bed 3 bath in private block owned by mostly absentee landlords I and others have previously let to professional sharers. Can they introduce this clause which will appear to affect the rentability of our flats and therefore potential income?
--
gwynlas 24-05-2014
LPA Receiver appointed. What to expect?
Starting new thread as the nearest situation I could find on search related to borrower having to raise personal loan to clear debt.
Having fallen into arrears with my BTL and not communicating with lender they have appointed Receiver. However this only happened within last few weeks and I will be able to clear this on sale of another property completing in 10 days. BTL does have tenants who are paying rent which more than covers mortgage. I have written to lender explaining cause of arrears(illness and loss of other rental income pending sale) and method of repaying this asking if can resume management once clear.
All correspondence regarding this was sent to a previous address and picked up last weekend. I had defaulted on other mortgage but I am in regular communication with lender and they are happy that arrears will be cleared soon.
Does anyone have experience of dealing with a situation such as this?
What are my options as technically I will be up to date, though have broken contract?
I have defaults related to CC on file but will also be able to make inroads into these now partners pension commenced.
Please don't flame me for burying my head in the sand I did look at secured lending for consolidation but interest horrendous as they wanted to include all debts and mortgages and this appeared better
option.
--
gwynlas Yesterday, 12:26 PM
Up ****Creek, Lost paddle, no compass, Help
Posted on BTL previously but no response. Through circumstances beyond my control, redundancy, illness, life events etcI have landed in a financial mess that I believed I could sort out through sale of property.
This completes next week and will release equity with which I planned to pay arrears on 2 BTL mortgages, one aware other writing to wrong address however within past two weeks both have gone down the route of appointing LPA receivers. First West Brom not prepared to allow me to retake management of property but appear happy with current tenants. 2nd Mortgage Works I haven't approached as yet.
Have defaults registered by CC companied making minimal payments over past year.
Can anyone advise on best way forward and I don't need to be told what I might have done better. Hindsight is a wonderful thing.

Share this post


Link to post
Share on other sites

Things are beginning to perk up on other finance forums now. Quite a few fun MMR stories too of people stuck even though got lot of equity - where the implication being they'll have to sell.

Some of those posts are quite old - just saying.

IMO there is a much greater risk of an older borrower defaulting on a mortgage since it's unlikely anyone in retirement will be looking for new lines of credit, thus couldn't give a darn unlike youngsters who would be bricking themselves with the years of damage a default would do to them.

Share this post


Link to post
Share on other sites

Things are beginning to perk up on other finance forums now. Quite a few fun MMR stories too of people stuck even though got lot of equity - where the implication being they'll have to sell.

Might be good to do a stand-alone thread on that MSE content - but the poster seems to have had a lot of hard luck, so be gentle.

Share this post


Link to post
Share on other sites

Some of those posts are quite old - just saying.

IMO there is a much greater risk of an older borrower defaulting on a mortgage since it's unlikely anyone in retirement will be looking for new lines of credit, thus couldn't give a darn unlike youngsters who would be bricking themselves with the years of damage a default would do to them.

Their current predicament is NOW - and I included the posts from 2010 for it showed their carefree BTL happy day ways.

Also it flowed from Slacker suggesting his mate holding on to high value properties, and slacker's belief sellers will always hold out, to "get what is worth." Some owners will meet circumstances where they have to sell, and when they sell/transact at lower prices.... it's not just that property which falls in value.

And flowed from Timak with his parents-in-law getting special flowers pass as they only went into BTL because interest rates on savings so low, bless em, for a sensible way to get an income from the young.
I think it will come from those older owners too. When they come to market to sell, they'll find very few upsizers for their £500K+ homes, and have to almost give them away.

Might be good to do a stand-alone thread on that MSE content - but the poster seems to have had a lot of hard luck, so be gentle.

Maybe so re thread, but there's enough real bleeding hearts on hpc who've got a long history of excuses for those who've taken the most reckless of positions, even if you're being sarcastic about hard-luck and being gentle.

Share this post


Link to post
Share on other sites

Things are beginning to perk up on other finance forums now. Quite a few fun MMR stories too of people stuck even though got lot of equity - where the implication being they'll have to sell.

Pretty outrageous deception to pay rent in good faith and find your LL has not been payiny the mortgage. The sooner types like that are liberated from their portfolios the better.

Share this post


Link to post
Share on other sites

BTL is popular because other pension investments are unpopular and inefficient for tax.

Pensions can be quite tax efficient. My effective marginal tax rate is now 65% for the current tax year which I can reduce to 15% via use of salary sacrifice into pension and then later withdraw at 15%. (basic rate of 20% with 25% lump sum tax-free).

BTL can be leveraged for higher returns/losses but the maintenance costs are much higher than a pension which can easily be sub-1%.

BTL is popular since you have something you can actually see and it looks like money for nothing.

Share this post


Link to post
Share on other sites

Some of those posts are quite old - just saying.

IMO there is a much greater risk of an older borrower defaulting on a mortgage since it's unlikely anyone in retirement will be looking for new lines of credit, thus couldn't give a darn unlike youngsters who would be bricking themselves with the years of damage a default would do to them.

I think it should be read as the rise and fall of a single BTLer... Given that they started out in 2010, the first market low [there are many more to come], it makes interesting reading.

Share this post


Link to post
Share on other sites

Unlike a regular pension, BTL properties (minus IHT) can be passed onto people like relatives, kids when the BTLer dies. I would imagine this has an appeal over regular type pensions.

Share this post


Link to post
Share on other sites

Unlike a regular pension, BTL properties (minus IHT) can be passed onto people like relatives, kids when the BTLer dies. I would imagine this has an appeal over regular type pensions.

You will be able to do this under for a regular pension under the proposed 2015 changes i.e. take it all out, pay tax at marginal rate and pass it on (then die).

Share this post


Link to post
Share on other sites

Unlike a regular pension, BTL properties (minus IHT) can be passed onto people like relatives, kids when the BTLer dies. I would imagine this has an appeal over regular type pensions.

If you are under 75 and die, then you can pass on the whole pension pot with no IHT.

If you are over 75 and die, and have drawdown (as the new rules allow), you can pass on the drawdown to your dependants who can continue with the drawdown and pay the prevailing tax rate with no IHT.

If you have no dependants (no spouse, no children under 23 or mentally/physically impaired), then the residual fund can be taken as a lump sum subject to paying 55% tax, but ouside IHT.

Most pension plans are written in trust as default, so the value of the fund will be outside of your estate for IHT.

Edited by arrgee1991

Share this post


Link to post
Share on other sites

My bad. I forgot about defined contributions pensions. I was referring to defined benefit pensions (final salary) when I mentioned the potential appeal of BTL.

Share this post


Link to post
Share on other sites
gwynlas 17-03-2013
Cancelling Direct Debit
I've currently placed one of two flats on the market but unfortunately there's been a boiler problem in the past week. This meant I have had to get it replaced in order for tenants to have heating and hot water. Not having any spare cash to pay for this all I can think to do is to cancel direct debit mortgage payment and write to company informing them why. I will be redeeming mortgage once property sells but wondered if this was likely to cause me problems in the short term. Any advice would be appreciated

Nice timeline history. This comment struck me the most, are they seriously saying they need to replace the boiler and to raise the cash they're just going to cancel the DD on their mortgage? Afterall they'll be selling and soon and can pay back what they owe then, so what does it matter! I must have missed something here?

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   224 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.