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Check Out This Pearl Of Wisdom From An Ea

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Article in latest homes, brighton from an estate agent about FTB-ers and about the definition of a FTB has changed.

It ends like this "The sad truth is that any void left by the 'youngsters' is being amply filled by the buy to let market, which is supplying rented accomodation to those very people who would otherwise be first time buyers themselves. It certainly keeps the market afloat, albeit at the expense of those who would prefer to own their own home earlier in life"

It makes me want to spit!

Any comments? :angry:

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As long as BTL investors can have mortgage interest payments classed as an expense for tax purposes they will always have the upper hand.

The tax rules favour investors. Changing that might be a start.

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Article in latest homes, brighton from an estate agent about FTB-ers and about the definition of a FTB has changed.

It ends like this "The sad truth is that any void left by the 'youngsters' is being amply filled by the buy to let market, which is supplying rented accomodation to those very people who would otherwise be first time buyers themselves. It certainly keeps the market afloat, albeit at the expense of those who would prefer to own their own home earlier in life"

It makes me want to spit!

Any comments? :angry:

More fools in now means better pickings later on!

btp

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A weak atempt to whip up the market.

Actually, the irony of that quote from the magazine is that there are more places to rent at the moment than I have ever seen & I have been here 6 years! You used to have to fight to get a place but now there is a massive glut of places to rent!

I hope there is the biggest mess in property history - I am so sick of smug "you have missed the boat" comments and articles.

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Article in latest homes, brighton from an estate agent about FTB-ers and about the definition of a FTB has changed.

It ends like this "The sad truth is that any void left by the 'youngsters' is being amply filled by the buy to let market, which is supplying rented accomodation to those very people who would otherwise be first time buyers themselves. It certainly keeps the market afloat, albeit at the expense of those who would prefer to own their own home earlier in life"

It makes me want to spit!

Any comments? :angry:

Actually I think the EA was bang on, and not being smug, just stating a fact. I am renting a flat because I can't afford to buy. Someone else owns that flat and lives elsewhere, hence it is a buy-to-let.

It's obvious really, where do you think all the hopeful FTBs are living, in a tent? Sure some may still be at home with parents, but the vast majority are renting homes from BTLers.

I said ages ago that FTBs had been replaced by the buy-to-let investors, which is one of the reasons the market was holding up. Things are less attractive to BTLers now, so time will tell. If enough of them take their money elsewhere, we may see prices come down to a level where normal FTBs can buy in.

I for one, hope so.

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That is correct as far as it goes, except...

the model only holds up when the ratio of housing expenses to rental income produces a clear unambiguus profit.

The UK passed that point some time ago. Anyone getting into BTL in the last couple of years has been suckered - they are in effect subsidizing their tenants.

This is obviously unsustainable. The average btl wannabee punter simply wont be able to sustain a steady monthly loss on the mortgage/running costs etc, coupled with likely voids, repairs, costs of complying with new govt regs etc.

I'd say make the most of it while you can - the mug punter 'inside track' suckers wont be able to hold out for long.

Frankly it's a bit disingenuous of the EA to say that... not that we dont know what his REAL agenda is of course! It's an attempt to 'flush out' thse FTBs who may still be able to just about stretch to it, because the EA knows even more clearly than we do that most of his BTL customer base has already evaporated, and the rest will follow soon. Hence he has to try and scare ANYONE into buying.

What he's really saying is

HELP ME! PLEASE! PLEASEEEE! HELLLP ME

poor little sod. not.

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The EA is actually unwittingly arguing for HPC.

Its simple really. He accepts that FTB's have almost ceased to exist and the only new money coming into the market is in the form of BTL, which is driven be speculation about further gains. Given that returns are now so low and that HPI is now down to almost zero, that can't continue for much longer so there will be no new money coming into the market.

With no new money coming into the market prices will inevitably start to slide, the BTL brigade seeing this will start to dump their properties, result: house price crash of epic proportions.

Its coming.

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Actually I think the EA was bang on, and not being smug, just stating a fact. I am renting a flat because I can't afford to buy. Someone else owns that flat and lives elsewhere, hence it is a buy-to-let.

It's obvious really, where do you think all the hopeful FTBs are living, in a tent? Sure some may still be at home with parents, but the vast majority are renting homes from BTLers.

I said ages ago that FTBs had been replaced by the buy-to-let investors, which is one of the reasons the market was holding up. Things are less attractive to BTLers now, so time will tell. If enough of them take their money elsewhere, we may see prices come down to a level where normal FTBs can buy in.

I for one, hope so.

I agree with you and I live in a rented flat that is a BTL. What makes me angry about it is the lack of recognition from EA's that property is overvalued and that they have a hand in overvaluing it and further ramping up the market so that it becomes more & more impossible for FTB'ers to buy their first home.

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I agree with you and I live in a rented flat that is a BTL. What makes me angry about it is the lack of recognition from EA's that property is overvalued and that they have a hand in overvaluing it and further ramping up the market so that it becomes more & more impossible for FTB'ers to buy their first home.

It used to make me angry in the same way, but lately i've taken a resigned approach to it. Better that than go mad. Prices are so far out of reach that it makes no difference what they do anymore. I won't be buying until I see advertised prices at a level I can afford (as oppossed to over-reach myself on a mortgage), and that will mean a drop of %40 in Sussex.

As for EA's, well they're just glorified sales people. Anyone in sales will tell you whatever it takes to close the deal. They act on behalf of the vendor, so on one side they will be telling potential buyers "everything is rosy, there's high demand at the moment", but they'll be telling their clients "the market is a bit slack, drop your price a bit".

Frankly, if an EA told me, as a potential buyer, that I shouldn't buy now because things are a bit shaky, I'd thank them for their advice, then suggest they try a different career.

What does make me genuinely angry is the apparent lack of recognition by the Government that there is a major problem here. And worse still, make no serious attempt to resolve it, other than a half baked shared ownership scheme. The reason I believe, is most in Government are BTLers. The top man certainly is.

Direct your anger towards Government. The Ea's are pathological liars and can't help themselves, pity them. Come to think of it so are politicians <_<

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:lol::lol::lol:

Hilarious. Obviously this estate agent must have just fallen out of the stupid tree (and hit his head against every branch on the way down!).

Estate Agent: "Mr BTL investor. I have this wonderful flat you could buy for £800 per month. You could rent it out to FTBers who cannot afford to buy."

Mr BTL Investor: "Cool. So if it costs me £800 per month, what sort of rent could I get?"

Estate Agent:"Oooohh, around £700 per month"

Mr BTL Investor:"Hang on, that means I won't make any profit. In fact, I won't even break even."

Estate Agent: "But the property might go up in price and you can sell it at a higher price."

Mr BTL Investor: "Who to?"

Estate Agent:"A first time buyer!"

Mr BTL Investor: "The same first time buyer who can't afford to buy it at todays price? How will they be able to afford to buy it at a higher price?"

Estate Agent: "Ehmm......."

Hopefully he'll find some investors who have fallen from the same tree that he did!

:lol:

Edited by classixuk

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Estate Agent: "Mr BTL investor. I have this wonderful flat you could buy for £800 per month. You could rent it out to FTBers who cannot afford to buy."

Mr BTL Investor: "Cool. So if it costs me £800 per month, what sort of rent could I get?"

Estate Agent:"Oooohh, around £700 per month"

Mr BTL Investor:"Hang on, that means I won't make any profit. In fact, I won't even break even."

Estate Agent: "But the property might go up in price and you can sell it at a higher price."

Mr BTL Investor: "Who to?"

Estate Agent:"A first time buyer!"

Mr BTL Investor: "The same first time buyer who can't afford to buy it at todays price? How will they be able to afford to buy it at a higher price?"

Estate Agent: "Ehmm......."

Continued...

Estate Agent: "Ehmm.... another BTL investor"

Mr BTL Investor: "cool, so that will cost him £900 per month and he will be able to rent it out for?"

Estate Agent: "Ehmm.... about £700 per month"

Mr BTL Investor: "so why would he want to buy it then?"

Estate Agent: "so he can sell it at a profit to another BTLer or a FTBer"

Mr BTL Investor: "You're a bit of a f***ing idiot are'nt you?"

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Continued...

Estate Agent: "Ehmm.... another BTL investor"

Mr BTL Investor: "cool, so that will cost him £900 per month and he will be able to rent it out for?"

Estate Agent: "Ehmm.... about £700 per month"

Mr BTL Investor: "so why would he want to buy it then?"

Estate Agent: "so he can sell it at a profit to another BTLer or a FTBer"

Mr BTL Investor: "You're a bit of a f***ing idiot are'nt you?"

Well done Young Goat!

I think we've covered all the bases there (unless any other budding script writers can think of a juicy twist)!

:lol:

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As long as BTL investors can have mortgage interest payments classed as an expense for tax purposes they will always have the upper hand.

The tax rules favour investors. Changing that might be a start.

No, the tax rules favour owner occupiers.

frugalista

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No, the tax rules favour owner occupiers.

frugalista

I presume you mean for Capital Gains Tax purposes and for that tax you are right.

However, I wonder how many owners who could not sell have now decided to let out their house instead? In that case, there are various rules which give exemption from Capital Gains Tax - the main one being the 3 year rule for previous principal private residences.

If you know how to work the system the rules favour investors.

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I presume you mean for Capital Gains Tax purposes and for that tax you are right.

However, I wonder how many owners who could not sell have now decided to let out their house instead? In that case, there are various rules which give exemption from Capital Gains Tax - the main one being the 3 year rule for previous principal private residences.

If you know how to work the system the rules favour investors.

Okay, let's ignore capital gains for now. Even in income tax terms owner occupier is better off.

Suppose there are two identical houses, house A is occupied by owner, house B is rented out.

Owner occupier of A and landlord of B both have mortgages of 100k at 6% interest only (to keep it simple).

Landlord of B charges £1000 per month, pays £500 per month in mortgage interest. Therefore, makes £500 profit per month, or £6k per year. Landlord of B must pay tax on this £6k.

Owner occupier of A gets to live in the house (this is a benefit in kind worth £1000 per month) and pays £500 per month mortgage interest. Therefore, profit of £500 per month, or £6k per year. Owner occupier of A does not have to pay tax on this £6k.

So, tax treatment favours owner occupier over landlord.

frugalista

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Continued...

Estate Agent: "Ehmm.... another BTL investor"

Mr BTL Investor: "cool, so that will cost him £900 per month and he will be able to rent it out for?"

Estate Agent: "Ehmm.... about £700 per month"

Mr BTL Investor: "so why would he want to buy it then?"

Estate Agent: "so he can sell it at a profit to another BTLer or a FTBer"

Mr BTL Investor: "You're a bit of a f***ing idiot are'nt you?"

Estate Agent: "No...in 25 years' time you'll own the property outright. And meanwhile all those punters who won't do the stretch to buy will be trapped in renting never-never land."

Mr BTL Investor: "Ah, now I get it...where do I sign up?"

Edited by munro

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I see your point Frugalista but I'm coming from a slightly different angle. My angle is to discourage BTL.

A landlord with a property business can offset expenses such as mortgage interest against profit to reduce or negate a tax bill. Many property empires have been built in recent years on this basis.

A home owner who works a normal job will pay tax on their income. Mortgage interest relief is not available against their income despite it being a significant expense.

Many will argue that mortgage interest relief is valid as a business expense. But, can you imagine what would happen if landlords did not get this relief. Maybe rents would rise or maybe BTL would cease to become attractive.

Just a thought!

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Okay, let's ignore capital gains for now. Even in income tax terms owner occupier is better off.

Suppose there are two identical houses, house A is occupied by owner, house B is rented out.

Owner occupier of A and landlord of B both have mortgages of 100k at 6% interest only (to keep it simple).

Landlord of B charges £1000 per month, pays £500 per month in mortgage interest. Therefore, makes £500 profit per month, or £6k per year. Landlord of B must pay tax on this £6k.

Agreed in the main, however the landlord will also be able to take tax allowances for furnishings whether or not this money is spent and on any maintenance/repair costs. The landlord pays tax on the earnings less interest charges at his marginal rate.

Owner occupier of A gets to live in the house (this is a benefit in kind worth £1000 per month) and pays £500 per month mortgage interest. Therefore, profit of £500 per month, or £6k per year. Owner occupier of A does not have to pay tax on this £6k.

The owner occupier has already paid tax on the £6k, and also on the £6k which paid the interest.

To look at it another way:

If I am a top rate tax payer and I buy the house above, repaying £1000 per month instead of renting for £1000 per month I get no tax deductions either for owning the property or for my interest payments.

However, if I let the house out the interest payments and upkeep costs are tax deductible. I'd be better off renting my place and claiming the reliefs available, and renting a similar place.

I see your point Frugalista but I'm coming from a slightly different angle. My angle is to discourage BTL.

Many will argue that mortgage interest relief is valid as a business expense. But, can you imagine what would happen if landlords did not get this relief. Maybe rents would rise or maybe BTL would cease to become attractive.

I agree entirely. Many countries allow owner occupiers to claim tax relief on mortgage interest payments, which puts the owner occupier in the same position as a BTL owner. The one good stealth tax Gordon Brown could charge would be the removal of tax relief on interest payments for residential property. Does anyone have an e-mail address for our beloved Chancellor?

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Estate Agent: "No...in 25 years' time you'll own the property outright. And meanwhile all those punters who won't do the stretch to buy will be trapped in renting never-never land."

Mr BTL Investor: "Ah, now I get it...where do I sign up?"

Err... in my example they already owned the house outright, they repurchased their own house from the bank simply to MEW for some useless tat.

Also, your example is flawed, they're pushing IO mortgages these days! :lol:

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Estate Agent: "No...in 25 years' time you'll own the property outright. And meanwhile all those punters who won't do the stretch to buy will be trapped in renting never-never land."

Mr BTL Investor: "Ah, now I get it...where do I sign up?"

A longish one, but what the heck! It's great fun!

Classixuk: "Sorry to interrupt, but before you do sign up, can I ask if you have half a brain?"

Mr BTL Investor: "I think so. Why?"

Classixuk: "Well you see, you're about to go into debt for £200K. To service the debt you will need to spend at least £100 per month, perhaps £800 per month when the building isn't let, and let's not forget buildings insurance, repairs, maintenance etc."

Mr BTL Investor: "Go on...."

Classixuk: "Well, I have a small business for sale. It's £50K and turns over a net profit of £2000 per month. How would you like to give up being a wage slave now instead of in 25 years time?"

Mr BTL Investor: "Carry on..."

Classixuk: "Unless you are very stupid and have no skills at all, anyone can set up a business retailing things or providing services. The business I am selling is a shop that has been running for 5 years. You will need to go into the shop once per month to pay the wages. The rest of your time is your own."

Mr BTL Investor: "How would that stack up against the gains in property?"

Classixuk: "Well...not only will you make £2000 per month after tax (instead of a £100 loss), the value of your business will also increase should you wish to sell it at anytime in the future. Heck, if you still think that property is a good idea as a long term pension plan why not carry on working in your job as you were planning to, bank the £2K profit every month and sell up in 5 years time? Without interest you should have at least £120K saved plus realistic equity of around £30K from your business."

Estate Agent: "Ha...but what if his property goes up from £200K to £350K. He will have made the same amount!"

Classixuk: "Not quite thicko. Doing it your way will cost him at least £6K over the next 5 years and that's being optimistic. How do you think he will be able to pay that £6K? Simple, he'll have to stay in his job. Work full time for the next 5 years paying towards £200K worth of debt (with just 20 years left to go at the end of it), or give up the 40 hour weeks, earn more, be debt free within 5 years and with an asset to sell?"

Mr BTL Investor: "Could I set up more than one of these businesses?"

Classixuk: "With the £200K you're about to spend you could set up four."

Mr BTL Investor: "Wouldn't that quadruple my return to £600K?"

Classixuk: "Yes, and you'll still be debt free in 5 years time."

Mr BTL Investor: "Why aren't more BTLers doing this?"

Classixuk: "Because they take financial advice from a guy who has to work 40 hours a week as an estate agent for some wise guy who has done exactly what I'm telling you to do - set up a business. If BTL will make you rich, why hasn't the estate agent selling you the property been able to give up his job by now? Surely with the pick of the properties he has available he should be well retired by now?"

Classixuk to Estate Agent: "Does the owner of your estate agents work 40+ hours a week?"

Estate Agent: "I don't personally know the owner of Foxtons. I've never met him."

Mr BTL Investor: "Sign me up Classix....."

:P

Edited by classixuk

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Actually, the irony of that quote from the magazine is that there are more places to rent at the moment than I have ever seen & I have been here 6 years! You used to have to fight to get a place but now there is a massive glut of places to rent!

I hope there is the biggest mess in property history - I am so sick of smug "you have missed the boat" comments and articles.

Worry not - markets are cruel - the situation you describe is not sustainable. The BTL ers will eventually subside and prpoerty will fall in price. Eventually they will be sold and money recouped . New BTLers will not want to pay the prices in the market as yields will eventually reduce . I dont think there will be a crash but there will be a gradual decline in house prices over the long term. You cannot defy the FTB for ever

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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