Jump to content
House Price Crash Forum
jiltedjen

Countdown to leveraged BTL going bust thread

Recommended Posts

so we know that leveraged BTL's are going to be due very large tax bills in about a years time. 

and although we have been waiting many years for a property crash, a year or two can pass really quickly. 

so im thinking a simple countdown thread would be worthwhile. a long slow countdown to a HPC celebration of moron leveraged BTL's going bust and loosing their own homes. 

Not quite sure on the exact dates that the brown envalopes drop on door mates (so correct me if I'm wrong). But it's worth reminding ourselves that time marches endlessly on, and for any BTL happening on this forum to see that time is ticking. 

April 2018 - 350 days

January 2019 - 626 days

April 2019 - 715 days
 

Edited by jiltedjen
added january 2019

Share this post


Link to post
Share on other sites

The rumors of my demise are greatly exaggerated

The higher taxes alone will not push many landlords to an overall cashflow negative position. Landlords are unhappy as their marginal properties taxes go up considerably sometimes to nearly 100%

On my rental properties they go towards ~85% marginal property tax rate. Which is of course ridiculous taxes. However I do not fall into a cash flow negative situation overall. That is using full S24 in 2021 and assuming no rent increases and also assuming last years mortgage interest. The good news for landlords is that mortgage rates have fallen further so that will help.

No abuse please this is a discussion and I'm allowed to have my views.

Share this post


Link to post
Share on other sites
29 minutes ago, RushRoad said:

The rumors of my demise are greatly exaggerated

The higher taxes alone will not push many landlords to an overall cashflow negative position. Landlords are unhappy as their marginal properties taxes go up considerably sometimes to nearly 100%

On my rental properties they go towards ~85% marginal property tax rate. Which is of course ridiculous taxes. However I do not fall into a cash flow negative situation overall. That is using full S24 in 2021 and assuming no rent increases and also assuming last years mortgage interest. The good news for landlords is that mortgage rates have fallen further so that will help.

No abuse please this is a discussion and I'm allowed to have my views.

Think you're missing the point here - you don't need income to turn negative for people to be bankrupted. I'm self employed and will pay tax in Jan 18 on income i have already earned up to April 17. Because my tax rates arent changing much I know roughly how much I'll pay and i have put that money to one side. What will happen to a number of leveraged landlords is that their gross income is going to be flat over the next 12 months, so a number will continue to spend as they have done before (the prudent ones wont, but if you were prudent you probably wouldnt be a leveraged landlord at the tail end of a massive property bubble). But then a tax bill will arrive (payable in Jan 19) which will be higher than they expect and they wont be able to pay it unless they have cut back on expenditure in the meantime. The inland revenue will bankrupt you for relatively small amounts if you cant pay. That's how imho this is going to play out. Through net income after tax falling, but it doesnt need to go negative for a number of ll to be bankrupted over time as their net income falls and the tax cheques get bigger and bigger. 

Share this post


Link to post
Share on other sites

Some will survive but just looking at price paid data just from the street i live on most will be land lording for pocket money if they are hit for even half of the coming tax increases 

The last one`s to the party will be the first ones shutting the door behind them unless they own just one or two places and have very little other income 

Add to that prices have not risen for a decade around here and are starting to fall (well the typical BTL places are )..the game of catching the falling knife is about to begin if it has not already started ...my only reservation  is how many greatest fools are left ?

Edited by long time lurking

Share this post


Link to post
Share on other sites
1 hour ago, RushRoad said:

However I do not fall into a cash flow negative situation overall. That is using full S24 in 2021 and assuming no rent increases and also assuming last years mortgage interest. The good news for landlords is that mortgage rates have fallen further so that will help.

RushRoad, it's just mad for you to make it all about you. The fate of the market does not turn on the one landlord who has decided to post on HPC. However, you clearly feel that your affairs are sufficiently representative to be of general interests to other posters and lurkers on the forum. One big problem with that is that you know the details of your affairs and we don't, hence your assertions have no value to us without the additional details. Apologies if you've already given this information, but to make your views interesting we need answers to some questions:

  1. How many mortgage-encumbered properties do you have?
  2. What's the typical LTV and yield?
  3. What kind of mortgages are you using? When do they reset to the SVR?
  4. What kind of LTV and interest cover will you be showing next time you need to remortgage to avoid ending up on the SVR?

Share this post


Link to post
Share on other sites
2 hours ago, RushRoad said:

The rumors of my demise are greatly exaggerated

The higher taxes alone will not push many landlords to an overall cashflow negative position. Landlords are unhappy as their marginal properties taxes go up considerably sometimes to nearly 100%

On my rental properties they go towards ~85% marginal property tax rate. Which is of course ridiculous taxes. However I do not fall into a cash flow negative situation overall. That is using full S24 in 2021 and assuming no rent increases and also assuming last years mortgage interest. The good news for landlords is that mortgage rates have fallen further so that will help.

No abuse please this is a discussion and I'm allowed to have my views.

No one mentioned you specifically, nor has anyone suggested that all leveraged landlords will go bankrupt so I'm not sure where you've heard these rumours of your demise?

If you're so cocksure of your financial position (and I have no reason to doubt you) why the sudden fascination with this site?

Share this post


Link to post
Share on other sites

Whilst the financial analysis is fascinating, it is, to a degree, irrelevant.

In the long term, when there are more votes in the Gov't letting house prices fall than propping up leveraged LL's, they will engineer a price fall.

There is not a lot anyone else can do about it.

As we all know, the leveraged LL is all about capital gains. I wouldn't want to be sitting on a 10% capital loss year on year and neither will they.

There are many other things that would worry me as a leveraged BTL. And assuming things will remain as they are is a very dangerous stance to take.

Share this post


Link to post
Share on other sites
15 minutes ago, CunningPlan said:

And assuming things will remain as they are is a very dangerous stance to take.

There is always a black swan on the horizon.

We could be at war with North Korea at any moment.

An actual country with air defences and an army etc etc

Thats going to cost billions to tomahawk.

 

Share this post


Link to post
Share on other sites

as soon as the bubble stops expanding, it pops.

The calculation has changed, getting a small yield and endless capital gain, might as well keep expanding and buy more, rents were rising, and plenty of morons have joined the gravy train right at the last minute before it crashes. The bubble was feeding on itself. The gov knew this, and also knew the political risk of pricing out several generations to reckless debt-heads, they also knew they were loosing out on a lot of tax.

Moving forward:

Why buy a house if the yield is negative and only faces capital losses and possible future negative equity? especially as rents are starting to fall, as soon as the masses stop buying the whole thing falls apart. No more fuel for the HPI fire. The bubble can no longer be sustained. Markets move at the margins, and those huge capital gains will reverse faster than they came. No more flipping. sentiment turns. the trap so to speak has been sprung. The BTL bragging will stop at diner parties, the media will start to run bankruptcy stories, and BTL will become an embarrassing unpopular thing to admit. 

if people are left with yields that only just wash their face, and capital loss and negative equity, thats fine by me. If they want to wait 20 years for their debt to be eroded and their assets to break even in real terms thats fine by me, if they want the hassle + stress of running their mini BTL empire during all that time (now with poorer lower quality tenants) thats OK. 

Share this post


Link to post
Share on other sites
3 hours ago, RushRoad said:

The rumors of my demise are greatly exaggerated

The higher taxes alone will not push many landlords to an overall cashflow negative position. Landlords are unhappy as their marginal properties taxes go up considerably sometimes to nearly 100%

On my rental properties they go towards ~85% marginal property tax rate. Which is of course ridiculous taxes. However I do not fall into a cash flow negative situation overall. That is using full S24 in 2021 and assuming no rent increases and also assuming last years mortgage interest. The good news for landlords is that mortgage rates have fallen further so that will help.

No abuse please this is a discussion and I'm allowed to have my views.

This isn't about you.  It's about them.

Facewashing BTL businesses have been blown a hole below the waterline.  No matter what they do, they will sink eventually, and their properties will be sold.

For prospective purchases, current yields don't support anything other than minimum leverage.  A whole army of wannabees are now out of the picture.

Will these changes to supply and demand impact house prices?  You bet.  How much?  No one really knows.  But I wouldn't bet my family home on it.

Some portfolios, with better cashflow, might be minded to sell up to protect the family home. But they can't.  You see, they've already spent the CGT due on selling old properties.  To buy new properties.  They are zombie portfolios.  Kept alive by the life support of low bank rates and a rigged rental market.  They no longer have a business model, they are just another policy change away from total destruction.  Section 24(2017) anyone?

Of course, if you believe in HPI forever, then clinging on makes sense.  It doesn't make you an investor though, it makes you a gambler.

On the other hand, a mild 30% HP correction is not a great reward for wearing a 85% marginal tax rate.

Share this post


Link to post
Share on other sites
4 hours ago, RushRoad said:

The rumors of my demise are greatly exaggerated

The higher taxes alone will not push many landlords to an overall cashflow negative position. Landlords are unhappy as their marginal properties taxes go up considerably sometimes to nearly 100%

On my rental properties they go towards ~85% marginal property tax rate. Which is of course ridiculous taxes. However I do not fall into a cash flow negative situation overall. That is using full S24 in 2021 and assuming no rent increases and also assuming last years mortgage interest. The good news for landlords is that mortgage rates have fallen further so that will help.

No abuse please this is a discussion and I'm allowed to have my views.

Do you think:

1) Interest rates will never rise?

2) Rents will never fall?

Share this post


Link to post
Share on other sites
5 hours ago, RushRoad said:

The rumors of my demise are greatly exaggerated

The higher taxes alone will not push many landlords to an overall cashflow negative position. Landlords are unhappy as their marginal properties taxes go up considerably sometimes to nearly 100%

On my rental properties they go towards ~85% marginal property tax rate. Which is of course ridiculous taxes. However I do not fall into a cash flow negative situation overall. That is using full S24 in 2021 and assuming no rent increases and also assuming last years mortgage interest. The good news for landlords is that mortgage rates have fallen further so that will help.

No abuse please this is a discussion and I'm allowed to have my views.

giphy.gif

Share this post


Link to post
Share on other sites
6 hours ago, Chrippie said:

Think you're missing the point here - you don't need income to turn negative for people to be bankrupted. I'm self employed and will pay tax in Jan 18 on income i have already earned up to April 17. Because my tax rates arent changing much I know roughly how much I'll pay and i have put that money to one side. What will happen to a number of leveraged landlords is that their gross income is going to be flat over the next 12 months, so a number will continue to spend as they have done before (the prudent ones wont, but if you were prudent you probably wouldnt be a leveraged landlord at the tail end of a massive property bubble). But then a tax bill will arrive (payable in Jan 19) which will be higher than they expect and they wont be able to pay it unless they have cut back on expenditure in the meantime. The inland revenue will bankrupt you for relatively small amounts if you cant pay. That's how imho this is going to play out. Through net income after tax falling, but it doesnt need to go negative for a number of ll to be bankrupted over time as their net income falls and the tax cheques get bigger and bigger. 

 

While this may be a possibility in theory, I doubt it will be true for many in practice

Leveraged landlords, who are hit by all this, will already have been paying significant delayed taxes for many years so they must already have the discipline to not spend their income without putting some aside to meet the tax payments  . The transition is also over 4 years so it is not one big whack even if they are unaware of the tax rules they will see their taxes going up each year and their accountant will be able to advise how much to put aside for the year after

Share this post


Link to post
Share on other sites
3 hours ago, Fairyland said:

Do you think:

1) Interest rates will never rise?

2) Rents will never fall?

 

My personal view is that interest rates will be zero in real terms for the rest of my life

Rents do fall they have certainly fallen in inner London over the last 18 months. However over a longer period I think local rents will track local GDP growth

Share this post


Link to post
Share on other sites
5 hours ago, Fromage Frais said:

There is always a black swan on the horizon.

We could be at war with North Korea at any moment.

An actual country with air defences and an army etc etc

Thats going to cost billions to tomahawk.

 

I doubt war with North Korea would happen, thats just media hype.

Share this post


Link to post
Share on other sites
3 hours ago, lastlaugh said:

This isn't about you.  It's about them.

The first sentence was said in jest and I did not mean to mean the rumors of my personal demise, I meant it in terms as landlords as a whole

3 hours ago, lastlaugh said:

Facewashing BTL businesses have been blown a hole below the waterline.  No matter what they do, they will sink eventually, and their properties will be sold.

Are there many 'facewashing' BTL landlords? Interest rates are low and landlords coming to the end of their fixed periods will see even lower rates right now.
Most Landlords will likely be on less than 3% interest while most rental properties yield over 5% so I would speculate there are very few right now who are just breaking even

3 hours ago, lastlaugh said:

For prospective purchases, current yields don't support anything other than minimum leverage.  A whole army of wannabees are now out of the picture.

Yes landlord demand using mortgages has crashed. I think it has more to do with the +3% than S24

3 hours ago, lastlaugh said:

Will these changes to supply and demand impact house prices?  You bet.  How much?  No one really knows.  But I wouldn't bet my family home on it.

During 1971 to 1991 landlords sold a net ~1.75 million units yet prices afaik did not go down during that time.

3 hours ago, lastlaugh said:

Some portfolios, with better cashflow, might be minded to sell up to protect the family home. But they can't.  You see, they've already spent the CGT due on selling old properties.  To buy new properties.  They are zombie portfolios.  Kept alive by the life support of low bank rates and a rigged rental market.  They no longer have a business model, they are just another policy change away from total destruction.  Section 24(2017) anyone?

This is largely wishful thinking. Few landlords have less than 25% equity right now as for quite some time you could not get BTL loans for less than 25% down. There were the tiny minority lenders with small lending books which is self explanatory they did not lend to many people.

 

3 hours ago, lastlaugh said:

Of course, if you believe in HPI forever, then clinging on makes sense.  It doesn't make you an investor though, it makes you a gambler.

I do not believe in HPI

I do not even believe in one UK housing market, we have 12 distinct regional markets and also sub regions within regions (eg inner and outer London have moved quite differently over the last 10 or 20 years)

Clearly house price inflation is not guaranteed just look at the north east where prices are still lower in nominal terms now than a decade ago

 

3 hours ago, lastlaugh said:

On the other hand, a mild 30% HP correction is not a great reward for wearing a 85% marginal tax rate.


That would not have been a good thing before S24 either :)

 

Share this post


Link to post
Share on other sites
17 minutes ago, RushRoad said:

Clearly house price inflation is not guaranteed just look at the north east where prices are still lower in nominal terms now than a decade ago

Lower nominally - try lower in actual prices in many case

from a random search on houseprices.io (its the top record if you search for DL3 0)...

17 Feb 2017 £155,000 -16.2% -34.5%
02 Nov 2007 £184,995 * 124.2% 86.4%

That too me is more than nominal and its not a house in disasterous conditions or location...

Share this post


Link to post
Share on other sites
1 hour ago, RushRoad said:

 

My personal view is that interest rates will be zero in real terms for the rest of my life

Rents do fall they have certainly fallen in inner London over the last 18 months. However over a longer period I think local rents will track local GDP growth

Which only goes up innit?

Share this post


Link to post
Share on other sites
9 hours ago, RushRoad said:

The rumors of my demise are greatly exaggerated

The higher taxes alone will not push many landlords to an overall cashflow negative position. Landlords are unhappy as their marginal properties taxes go up considerably sometimes to nearly 100%

On my rental properties they go towards ~85% marginal property tax rate. Which is of course ridiculous taxes. However I do not fall into a cash flow negative situation overall. That is using full S24 in 2021 and assuming no rent increases and also assuming last years mortgage interest. The good news for landlords is that mortgage rates have fallen further so that will help.

No abuse please this is a discussion and I'm allowed to have my views.

It's the situation you have found yourself in due to the debt and housing financialisation choices you have made.

There is nothing ridiculous about it.

You danced into it.  Now lick it up.

The rules were tweaked.  HPCers been posting into the BTLer double down that something would come along to the astonishment of the BTLer double-downers trying to capture and feed upon Generation Rent Forever.

And it's not all about you, but we note that you are edgy and post about selling some of your units.  Fear.  You have it.  Which is great thing about Section24.

Also run some numbers to see what your position is like if house prices edge down.

There are PropertyLater Tw@ts arguing the same thing about their personal tax leaping, but that's because they've laid claim to so many homes, with loads of BTL mortgage debt.

Share this post


Link to post
Share on other sites
1 hour ago, RushRoad said:

 

While this may be a possibility in theory, I doubt it will be true for many in practice

Leveraged landlords, who are hit by all this, will already have been paying significant delayed taxes for many years so they must already have the discipline to not spend their income without putting some aside to meet the tax payments  . The transition is also over 4 years so it is not one big whack even if they are unaware of the tax rules they will see their taxes going up each year and their accountant will be able to advise how much to put aside for the year after

Really?  Maximum leveraged landlords will not have done much more than break even over the last few years. Paying tax will be a shock. Listening to their accountant will be a very strange event indeed.

Share this post


Link to post
Share on other sites
8 minutes ago, CunningPlan said:

Really?  Maximum leveraged landlords will not have done much more than break even over the last few years. Paying tax will be a shock. Listening to their accountant will be a very strange event indeed.

This chap, Rash Rude, is pig ignorant. I'd no sooner accept his assessment of how BTL investors operate than I'd accept Busta's assessment of how to outwit the Revenue.

Share this post


Link to post
Share on other sites
6 minutes ago, Bland Unsight said:

This chap, Rash Rude, is pig ignorant. I'd no sooner accept his assessment of how BTL investors operate than I'd accept Busta's assessment of how to outwit the Revenue.

True. Problem is, much as I try to restrain myself, if you visit a public crapper, every now and again you need to flush someone else's turd.

Share this post


Link to post
Share on other sites
25 minutes ago, CunningPlan said:

Really?  Maximum leveraged landlords will not have done much more than break even over the last few years. Paying tax will be a shock. Listening to their accountant will be a very strange event indeed.

 

Projecting silly prejudices does no one any good

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:   32 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.