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MattW

Btl Brigade: 'it's My Pension, Innit?'

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Just thinking about the incomes of rented property bought with a mortgage...

OK, so Mr. Landord buys a property to rent out with the aid of a BTL mortgage. Property is ready for a tenant, who pays a bit more than the mortgage payment so the landlord is making a profit (of sorts).

Given that many of these are bought as a pension income, it's not much of an income when there's a mortgage to pay. Factor into that repair costs over the term of the mortgage, gas safety checks and lettings agent/service charges if applicable. Once the mortgage is paid up, the property has cost a lot of money in maintenance over the years.

Wouldn't a decent pension plan be less of a long term headache, despite not paying out so brilliantly in the end?

Or am I thinking too simplistically here? :blink:

Edit: Speling Mistaik & paw grama innit bro.

Edited by MattW

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I have always wondered how its such a good deal once the mortgage is paid off ? Up until then - its not making you any profit more than likely - so not much if any tax to pay. But once the mortgage is gone - at exactly the point you want it to be your pension - won't you start paying a wad of tax on the 'profits' ?

Edited by ccc

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This is a joke, right?

So, I secure an asset using someone elses money, get someone else to pay off the debt, someone else to manage it, and at retirement (if I do it right) I'll start to get a wad of cash every month (the first 10k of which is tax free). Which bit of paying tax on it would I worry about if it hasn't cost me a penny, or an ounce of effort, in the first place?

Rinse and repeat several times and it's easy money - cash in the pocket, happy retirement.

As much as I hate it, I can see why people do it... :(

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This is a joke, right?

So, I secure an asset using someone elses money, get someone else to pay off the debt, someone else to manage it, and at retirement (if I do it right) I'll start to get a wad of cash every month (the first 10k of which is tax free). Which bit of paying tax on it would I worry about if it hasn't cost me a penny, or an ounce of effort, in the first place?

Rinse and repeat several times and it's easy money - cash in the pocket, happy retirement.

As much as I hate it, I can see why people do it... :(

Of course, there is no risk at all involved in leveraging.

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Being a landlord won't cost you about of effort in the first place ? Really ?

And 10k tax free is fine - but what about after that ?

I am just saying at the very moment you want it - it starts to be taxed - that's something you don't hear these 'savvy investors' saying much.

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Being a landlord won't cost you about of effort in the first place ? Really ?

And 10k tax free is fine - but what about after that ?

I am just saying at the very moment you want it - it starts to be taxed - that's something you don't hear these 'savvy investors' saying much.

That's the same insanity I heard from people on our street. He retired from being a teacher but was horrified to find he has to pay tax on his pension amd so doesn't have as much to live on as he though, so he's had to go back to work part time - so now he pays tax on his pension and his wages.

If you don't like paying tax then call yourself mr amazon.

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That's the same insanity I heard from people on our street. He retired from being a teacher but was horrified to find he has to pay tax on his pension amd so doesn't have as much to live on as he though, so he's had to go back to work part time - so now he pays tax on his pension and his wages.

If you don't like paying tax then call yourself mr amazon.

Or use a tax-free wrapper to save/invest in.

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I have always wondered how its such a good deal once the mortgage is paid off ? Up until then - its not making you any profit more than likely - so not much if any tax to pay. But once the mortgage is gone - at exactly the point you want it to be your pension - won't you start paying a wad of tax on the 'profits' ?

Cash out via equity withdrawal and extend the mortgage so that it is never paid off. Rinse and repeat to minimise tax liability.

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Easy to see why the Government let them 'hang on in there'.....

http://www.bbc.co.uk/news/business-30491161

The Co-operative Bank has failed a "stress test" by the Bank of England that assessed major UK lenders' ability to withstand another financial crisis.

A further two banks - Lloyds Banking Group and Royal Bank of Scotland - were found to be at risk in the event of a "severe economic downturn".

The Bank of England tested the lenders' resilience to a 35% fall in house prices, and a 30% drop in the value of the pound, among other factors.

Some choice cheaper housing or a bust banking system.

Even in 2014 Brown's inability refusal to reign in the banks when he had the chance haunts us. His underlings at the time now head the party and the morons are looking to be elected next May....

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Cash out via equity withdrawal and extend the mortgage so that it is never paid off. Rinse and repeat to minimise tax liability.

Reliant on hpi though ?

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Doesn't any kind of income get taxed after £10K? Or is this not the case for shares and other types of "non-work" incomes? (genuine question, forgive my ignorance).

Yes you've only got a tax free allowance of 10k ish. But ISAs are tax free. But the interest on them is so crap it's not worth bothering about almost.

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Yes you've only got a tax free allowance of 10k ish. But ISAs are tax free. But the interest on them is so crap it's not worth bothering about almost.

Not if inflation stays at 1% <_<

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Yes you've only got a tax free allowance of 10k ish. But ISAs are tax free. But the interest on them is so crap it's not worth bothering about almost.

You can put investments into an ISA.

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You can put investments into an ISA.

http://www.telegraph.co.uk/finance/personalfinance/investing/experiencedinvestors/10710797/How-to-use-an-Isa-to-invest-in-property.html

Patrick Connolly of Chase de Vere said: “Commercial property can provide consistent long-term returns and this, coupled with its diversifying nature, means that we typically recommend an exposure of between 5pc and 12pc.”

The main one is Hearthstone UK Residential. This was launched about 18 months ago, and invests in a range of buy-to-let property from one-bedroom urban flats, to detached five-bedroom houses. Mr McDermott said: “We like the fact there is no gearing; the fund buys the properties outright so no mortgages are required.” The fund currently yields around 5pc. (With charges of 1.5%)

For example,M&G’s Global Real Estate Securities has a current yield of 2.66pc.

Why would you trust these companies with your money?

Edited by SarahBell

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Not if the tenant is covering a capital repayment mortgage. Shell BTL company would pay out the equity withdrawal via dividends to further reduce tax liability.

How many BTLs do you think are on a capital repayment basis? I'd be surprised if it was even 50%.

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http://www.telegraph.co.uk/finance/personalfinance/investing/experiencedinvestors/10710797/How-to-use-an-Isa-to-invest-in-property.html

Patrick Connolly of Chase de Vere said: “Commercial property can provide consistent long-term returns and this, coupled with its diversifying nature, means that we typically recommend an exposure of between 5pc and 12pc.”

The main one is Hearthstone UK Residential. This was launched about 18 months ago, and invests in a range of buy-to-let property from one-bedroom urban flats, to detached five-bedroom houses. Mr McDermott said: “We like the fact there is no gearing; the fund buys the properties outright so no mortgages are required.” The fund currently yields around 5pc. (With charges of 1.5%)

For example,M&G’s Global Real Estate Securities has a current yield of 2.66pc.

Why would you trust these companies with your money?

I meant shares and bonds really, you can put those it an ISA. You can build a diversified portfolio of assets with these asset classes. No need to keep it in cash, is what I meant.

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Doesn't any kind of income get taxed after £10K? Or is this not the case for shares and other types of "non-work" incomes? (genuine question, forgive my ignorance).

This is a good question that leads straight into the ISA v Pension debate. Because of the Governments change in ISA allowances AND their changes to pension withdrawal, I suspect more and more people will see the attraction of moving funds into an ISA which you can now do at £15,000 per year. Although interest rates are currently poor, any income is tax free and for older people/pensioners that becomes very attractive. Added to that you avoid the charges associated with pensions and other more complex investments plus you can now pass it on to your spouse. Over the longer term and for younger people, the big downside of an 'Isa' strategy is that ISA's count towards benefits calculations, pension funds don't.

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How many BTLs do you think are on a capital repayment basis? I'd be surprised if it was even 50%.

CCC wanted to know how to minimise tax liability once mortgage was paid off. This method is one such route. Also helps to avoid IHT at a later date.

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How many BTLs do you think are on a capital repayment basis? I'd be surprised if it was even 50%.

Buy to let is interest only.

There is no capital repayment hardly ever. It is a loss making proposition in terms of cash flow from day 1.

Without capital appreciation greater than the cost of buying and selling you will lose money.

If you do it with a cash sum your yield is less than a savings account.

HTH

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