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olde guto

Pension Pot Btl

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This is more of an anecdote than anything else, but worth flagging up.

Anyway, yesterday evening I heard from a friend that the letting agents he rents via seem to have thought-up a scheme to help pension pot raiders invest in BTL. According to what I was told basically the agent buys (or aids the purchase) of a property, gathering together enough raiders willing to buy a share in a property and then purchasing the place outright - so no BTL mortgage. The letting agent then manages this property on their behalf.

I'm not naming names as the person who told me might not have their facts 100% straight. But if it is true then it's a worrying development really. I personally assumed that pension pot raiders would just go down the conventional BTL route, never really occurred to me that say 10 pension pot raiders might get/be brought together and buy a property. I'm sure it'll be a nightmare to manage and will all end in tears, another potential "misselling" scandal in the making perhaps.

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Slightly garbled account of selling shares in a lettings business? That's been around for years. Some of them are listed on the stockmarket making them liquid investments open to all.

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Cannot do this, its illegal. Its a collective investment and will need to be regulated by the FSA.

Slightly garbled account of selling shares in a lettings business? That's been around for years. Some of them are listed on the stockmarket making them liquid investments open to all.

Like I said I'm not entirely sure what's going on (person in question had had a few already by the time I heard this story) which is why I haven't named names. So it's possible it's selling shares in a business that buys and/or lets out property.

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Cannot do this, its illegal. Its a collective investment and will need to be regulated by the FSA.

It's certainly not as easy as it sounds, and fraught with difficulties (what happens when the roof needs repairing? Or when one of the investors wants their capital back?). What it is is a good deal for the agent - who gets himself a captured client.........

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I'm 99% certain there are already (probably regulated) joint schemes out there where canny but skint investors can invest as little as a few hundred quid in BTL.

When it gets to the stage where you've run out of people who can buy a whole house all to themselves, you know the fat lady is just finishing her warmup and is about to let rip.

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This is more of an anecdote than anything else, but worth flagging up.

Anyway, yesterday evening I heard from a friend that the letting agents he rents via seem to have thought-up a scheme to help pension pot raiders invest in BTL. According to what I was told basically the agent buys (or aids the purchase) of a property, gathering together enough raiders willing to buy a share in a property and then purchasing the place outright - so no BTL mortgage. The letting agent then manages this property on their behalf.

I'm not naming names as the person who told me might not have their facts 100% straight. But if it is true then it's a worrying development really. I personally assumed that pension pot raiders would just go down the conventional BTL route, never really occurred to me that say 10 pension pot raiders might get/be brought together and buy a property. I'm sure it'll be a nightmare to manage and will all end in tears, another potential "misselling" scandal in the making perhaps.

Lol, how much would they have to make to make it worthwhile? If house is in London and costs £800k to buy divided by 10 people equals £80k each minus SDLT and all the other costs. Say it is a 4 or 5 bed and they convert living room into another bedroom to stuff in the renters and rent it at £150 per week per room. That is £900 per week before tax. Then divide by 10 = £90 per week. So £4000 odd pounds per year (before tax and any costs).

Edited by fru-gal

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What tax?

Lol, how much would they have to make to make it worthwhile? If house is in London and costs £800k to buy divided by 10 people equals £80k each minus SDLT and all the other costs. Say it is a 4 or 5 bed and they convert living room into another bedroom to stuff in the renters and rent it at £150 per week per room. That is £900 per week before tax. Then divide by 10 = £90 per week. So £4000 odd pounds per year (before tax and any costs).

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That's crowdfunding the loan.

The people supplying the money do not take shared ownership of the asset.

Good luck with those loans. Bargepole comes to mind.

Actually been flicking through and a common arrangement seems to be shared ownership of a 'vehicle', one per property. I think quite a few people would be satisfied with this - even though it is the opposite of the 'safe as houses' view... I think these arrangements have been around for a while, but I was surprised by how many there were now and the supposed investment numbers - they seem to have escalated recently.

They do remind me somewhat of the timeshare arrangements in the early 2000s - these fell apart when i) management costs escalated and ii) you found that you couldn't actually sell the 'share' easily (or at all). I guess in about 5 years or so we'll know...

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That's crowdfunding the loan.

The people supplying the money do not take shared ownership of the asset.

Good luck with those loans. Bargepole comes to mind.

Not sure that's correct. I think the sites use a spv/company to purchase property without a loan then distribute shares in the company. As I don't think there can be very many names on a deed it might not be very practically different to the OP's vague example.

I may also be entirely wrong, and have no idea what other financing might be going on behind the scenes.

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What tax?

Income tax. I know many landlords don't declare their income but they do actually have to pay tax on rental income if their full income is above the tax threshold.

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