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Cheap debt was the only thing landlords had left – now we’re losing that!


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38 minutes ago, fellow said:

Does anyone actually believe interest rates will rise? Rate rises have been predicted so many times but it never happens.

If governments could so easily just print money / allow inflation without consequence to their chances of re-election, why have rates ever been higher than 0.1%?

It's time to pay the piper.

Edited by oatbake
Missed important clarification
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B

3 hours ago, fellow said:

Does anyone actually believe interest rates will rise? Rate rises have been predicted so many times but it never happens.

The markets are starting to bet on increases. 1% in the UK by end of 2022. The markets aren’t always right though 😆🤦🏻‍♂️

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21 hours ago, PropertyMania said:

what's this about holiday lets not being subject to the BTL tax changes? Can someone elaborate please

FHL ar very different, tax n mortgage wise, to io btl.

You need a specific FHL mortgage.

Idiot io btl piled into FHL after s24.

Fhl is about to get rinsed.

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2 hours ago, Pop321 said:

B

The markets are starting to bet on increases. 1% in the UK by end of 2022. The markets aren’t always right though 😆🤦🏻‍♂️

Ithink that's more likely to be 1% by q2 2022.

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44 minutes ago, spyguy said:

FHL ar very different, tax n mortgage wise, to io btl.

You need a specific FHL mortgage.

Idiot io btl piled into FHL after s24.

Fhl is about to get rinsed.

yep, just had a quick look - totally different kettle of fish tax wise. Surprised holiday lets in EU can still qualify post brexit.

Staycation oversupply will collapse next year, unless the public has suddenly found a love for rainy fortnights in Cornwall

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The guy in the article is completely correct, low intrest rates having been masking poor investments, rents hardly cover the upkeep on many btl properties, one or two none payers or a smashed up apartment and its nothing but a burden. and then add in all the time and effort it all takes spending your sundays giving the hallway a paint and having to hunt down your tenent to discuss the loud music they neighbour complained about. 

it all only ever made sense with low intrest rates and price appreciation. remove the low intrest rates and its a buisness hell, its a buisness for people that know nothing about buisness. and most end up getting out lucky if they made minimum wage on the effort put in while the builders and speculators the real buisness people laugh all the way to the bank at their stupidity. 

nevermind though you can tell your neighbour about your btl porfolio and they can tell you how smart you are. 

 

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On 12/10/2021 at 20:10, koala_bear said:

And yet some are getting into or adding more BTL.

While walking past an overpriced new build development of flats yesterday, a firm of specialist BTL furniture suppliers were busy unloading two vans.

(SW London)

 

Someone obviously not reading the Telegraph! (Or any sensible info source either)

What is the name of a specialist btl furniture supplier ?!  I m in Clapham and I don’t think these exist!!

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4 hours ago, jimmy2x3 said:

The guy in the article is completely correct, low intrest rates having been masking poor investments, rents hardly cover the upkeep on many btl properties, one or two none payers or a smashed up apartment and its nothing but a burden. and then add in all the time and effort it all takes spending your sundays giving the hallway a paint and having to hunt down your tenent to discuss the loud music they neighbour complained about. 

it all only ever made sense with low intrest rates and price appreciation. remove the low intrest rates and its a buisness hell, its a buisness for people that know nothing about buisness. and most end up getting out lucky if they made minimum wage on the effort put in while the builders and speculators the real buisness people laugh all the way to the bank at their stupidity. 

nevermind though you can tell your neighbour about your btl porfolio and they can tell you how smart you are. 

 

The only honest, direct thing that Fatty Fergus ever said was in 2008ish and  something along lines of -

If the banks had not lowered the mortgages rates below 3% we'd have been bust.

 

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18 hours ago, oatbake said:

If governments could so easily just print money / allow inflation without consequence to their chances of re-election, why have rates ever been higher than 0.1%?

It's time to pay the piper.

Yes, imported deflation from China and other emerging economies has permitted govts to do this whereas in previous times it would have been impossible

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6 minutes ago, Si1 said:

Yes, imported deflation from China and other emerging economies has permitted govts to do this whereas in previous times it would have been impossible

The Western government, by trade, transfered a lot of inflation from late 90s til ~2015ish.

This was used to hold wages down and IR down, or at least provide cover for those.

Now CHina is exporting inflation.

That transfer was a temporary shuffling. Its now all coming back, wage inflation, prices etc.

 

 

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3 minutes ago, spyguy said:

The Western government, by trade, transfered a lot of inflation from late 90s til ~2015ish.

This was used to hold wages down and IR down, or at least provide cover for those.

Now CHina is exporting inflation.

Indeed. It's quite interesting

3 minutes ago, spyguy said:

That transfer was a temporary shuffling. Its now all coming back, wage inflation, prices etc.

 

 

But also a matter of degree.

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5 hours ago, jimmy2x3 said:

The guy in the article is completely correct, low intrest rates having been masking poor investments, rents hardly cover the upkeep on many btl properties, one or two none payers or a smashed up apartment and its nothing but a burden. and then add in all the time and effort it all takes spending your sundays giving the hallway a paint and having to hunt down your tenent to discuss the loud music they neighbour complained about. 

it all only ever made sense with low intrest rates and price appreciation. remove the low intrest rates and its a buisness hell, its a buisness for people that know nothing about buisness. and most end up getting out lucky if they made minimum wage on the effort put in while the builders and speculators the real buisness people laugh all the way to the bank at their stupidity. 

nevermind though you can tell your neighbour about your btl porfolio and they can tell you how smart you are. 

 

Schedule 24 doesn’t really have much impact if your mortgage rate is 1%. It’s not just the cash flow but even the tax return implications aren’t high because the whilst you can’t deduct the amount before calculation your tax bracket, the amount in question for most is nominal.  

In terms of cash flow you still get 20% (ie 0.2%) off that and a pay rate of 0.8%.

Despite having cash I have kept my mortgages going because….why wouldn’t anybody. I have old trackers and my average gross rate is around 1.1%.

If mortgage rates were 5% (and some could be fairly quickly) then if you don’t have the cash to compensate…the wheels will fall off exactly as you describe.

I remember getting 12% on my Skipton sovereign shares account. No amount of profit from property would compensate losing that 12%. The whole ‘plan’ works now rates are low.

Inflation begins to change everything. Property generally can be a hedge against inflation (assuming of course they aren’t already overpriced…which many of us suspect they are). However there are other much easier hedges and even the average FTSE 100 share is offering better yields than property….some substantially.

So those with cash to invest I believe are looking at non property….and if rates nudge up those who need mortgages will back away as well.

Lloyds & Co are slightly different. They won’t be buying terraces in Stoke at stupid retail prices.

Edited by Pop321
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1 hour ago, house-down said:

What is the name of a specialist btl furniture supplier ?!  I m in Clapham and I don’t think these exist!!

They do "Furniturepack". The vans advertise HMO and BTL furniture on the side - a big give away! There are several other firms as well and there were even more when BTL investment was happening at a much higher pace. 

The development is on the former Wimbledon dog track carpark, which the developers are having problems selling because the prices are a little silly!

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4 hours ago, Pop321 said:

Schedule 24 doesn’t really have much impact if your mortgage rate is 1%. It’s not just the cash flow but even the tax return implications aren’t high because the whilst you can’t deduct the amount before calculation your tax bracket, the amount in question for most is nominal.  

Am I misunderstanding the S24 situation? I thought that the entire monthly mortgage payment was tax deductible, therefore just the absolute payment size matters and the interest rate is irrelevant?

If someone earns 60k and then has a BTL with rent of 1000 and mortgage payments of 900, before s24 they would only be liable for 40% on £100. Now after s24, they are liable for 40% on £1000. Where does the interest rate factor into that?

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18 minutes ago, Locke said:

Am I misunderstanding the S24 situation? I thought that the entire monthly mortgage payment was tax deductible, therefore just the absolute payment size matters and the interest rate is irrelevant?

If someone earns 60k and then has a BTL with rent of 1000 and mortgage payments of 900, before s24 they would only be liable for 40% on £100. Now after s24, they are liable for 40% on £1000. Where does the interest rate factor into that?

No, pops wrong.

You could leverage up on IO and deduct the mortgage interest against rent, leaving zilch tax to pay.

The one I knew 'made' zilch, afetr costs - 1k/rent, 900/m rent, few deductions in - bongo, zilch!

Now they face only having a ~20% tax credit against non property earnings.

The rent is treated and taxed like income.

UC limits go, CB removed.

 

 

 

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3 hours ago, spyguy said:

No, pops wrong.

You could leverage up on IO and deduct the mortgage interest against rent, leaving zilch tax to pay.

The one I knew 'made' zilch, afetr costs - 1k/rent, 900/m rent, few deductions in - bongo, zilch!

Now they face only having a ~20% tax credit against non property earnings.

The rent is treated and taxed like income.

UC limits go, CB removed.

 

 

 

I understand. Maybe not explaining what I mean  

If I owe £100k and interest rates are so low then S24 impacts my gross income by say £1k @ 1% interest rate, ie probably not increasing the gross income a great deal because interest isn’t really a big cost anymore.

So under the old pre s24 and at higher rates the ability to deduct interest of say £8k (plucked from the air example) from my BTL income before calculating my gross income was a huge advantage. However, because I only pay £1k interest then even if there we were pre S24 then the ability to deduct pre or post calculation of gross income has much less impact. 

In my case the council tax on houses would now more than my interest.

So not saying it doesn’t make a difference, it does. But I am saying rates are so low it makes little difference. These guys are currently showing higher gross incomes due to S24 but they would be almost showing the same gross income under the old regime because interest costs are just no longer significant. 

Really if you had a BTL 6/7 years ago and put it in a tracker rate then the cash flow today should be huge. Of course this assumes you aren’t an idiot and borrowed even more for a white Range Rover which I guess most 118’ers will have done. 

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19 minutes ago, Pop321 said:

If I owe £100k and interest rates are so low then S24 impacts my gross income by say £1k @ 1% interest rate, ie probably not increasing the gross income a great deal because interest isn’t really a big cost anymore.

At a 3% yield (pretty typical) you would get £3k per year.

Before S24, you would pay £800 tax and net revenue would be £1200

After S24, you would pay £1200 tax. The tax bill has increased 50%. Net revenue would be £800, a 33% hit.

This is before costs are taken out.

So do you think that most IO BTL landlords can afford a 33% hit in gross revenue? Genuine question.

 

Otherwise, do you think that a significant number of landlords are on repayment mortgages? Also, could a landlord have deducted the repayment part of a mortgage from their taxable income before S24?

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56 minutes ago, Locke said:

Sorry, do you mean mortgage payment? Or the interest part of the mortgage payment?

Sorry. Just interest payments.

Im assuming that al BTL is IO BTL which frankly, what is has been.

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34 minutes ago, Locke said:
34 minutes ago, Locke said:

At a 3% yield (pretty typical) you would get £3k per year.

Before S24, you would pay £800 tax and net revenue would be £1200

After S24, you would pay £1200 tax. The tax bill has increased 50%. Net revenue would be £800, a 33% hit.

This is before costs are taken out.

So do you think that most IO BTL landlords can afford a 33% hit in gross revenue? Genuine question.

 

Otherwise, do you think that a significant number of landlords are on repayment mortgages? Also, could a landlord have deducted the repayment part of a mortgage from their taxable income before S24?

Thx. I won’t do lots of numbers but what I mean is if we stick with the £100k example (and ignoring other costs), had interest rates been 4% the impact isn’t 33%, rather it’s exponential. 

Before S24 would have a £1000 loss ie £3k rent - £4K interest. Therefore paying no tax, and indeed carrying a loss forward.

Post S24 that would have changed to £3k taxable gross profit (£1200 tax bill) less a 20% credit. ie tax to pay and effectively an % infinite increase😉

In its simplest terms all I mean S24 has had impact but the thing it has had impact on (mortgage interest) has massively been reduced. So if/when rates go back the impact is almost exponential for some landlords. 

Edited by Pop321
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