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If you travel 30 miles from London, the countryside is littered with 4 bedroom houses selling for £500K. These same properties can be rented for between £1200 and £1800 a month (Of this, the owner might lose up to 20% to the agent).

The mortgage interest alone on these properties would be £25,000 - £35,000 a year. On top of that there is depreciation and maintenance on the property. If you actually want to pay back the mortgage over 20 years, you will be looking at a monthly bill of more than £4,000. Then, what happens if the planning laws are relaxed (and this is slowly happening). The value of your property plummets.

Why would anyone buy a detached house today when they can rent. Surely it is economic madness?

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Because so many people have become rich on the back of HPI that they simply don't care?

Or because most people are a bit thick?

Or because they don't want to spend all of their time monitoring which asset class they are "invested" in, as they have more interesting things to do with their lives?

Or because they are attached to their property and want to live in again some day, or pass it on to their children?

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Because the schools are good and LEA's aren't accepting rental agreements for less than 12 months as proof you are entitled to attend the school.

Because people get fed up having to move every 12 months

I like renting but I'm not blind to the advantages of OO either.

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Because the schools are good and LEA's aren't accepting rental agreements for less than 12 months as proof you are entitled to attend the school.

I started to twitch violently when I read this. Don't get me started on LEAs

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If you travel 30 miles from London, the countryside is littered with 4 bedroom houses selling for £500K. These same properties can be rented for between £1200 and £1800 a month (Of this, the owner might lose up to 20% to the agent).

The mortgage interest alone on these properties would be £25,000 - £35,000 a year. On top of that there is depreciation and maintenance on the property. If you actually want to pay back the mortgage over 20 years, you will be looking at a monthly bill of more than £4,000. Then, what happens if the planning laws are relaxed (and this is slowly happening). The value of your property plummets.

Why would anyone buy a detached house today when they can rent. Surely it is economic madness?

I wouldnt want to live in anything else dear Boy!

No horrible neighbours dragging me down. No LL kicking me out in 12 months. Top (non private) schools were everyone wants to learn. No Human TB. Lots of fresh air and space to think. Peace and tranquility. No noise. No boring theatres to go to and watch grown Men in make - up prancing round a stage conveying thier oh soo important messages. A little piece of space you can call your own.

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If you travel 30 miles from London, the countryside is littered with 4 bedroom houses selling for £500K. These same properties can be rented for between £1200 and £1800 a month (Of this, the owner might lose up to 20% to the agent).

The mortgage interest alone on these properties would be £25,000 - £35,000 a year. On top of that there is depreciation and maintenance on the property. If you actually want to pay back the mortgage over 20 years, you will be looking at a monthly bill of more than £4,000. Then, what happens if the planning laws are relaxed (and this is slowly happening). The value of your property plummets.

Why would anyone buy a detached house today when they can rent. Surely it is economic madness?

Your calculations assume that it's a FTB buying the property. This would very rarely be teh case. In reality it's likely to be someone trading up from a £400K London semi or even trading down from a £650K London semi, treating themselves to a lovely house in the country and probably leaving themselves a few quid in the bank to finance those weekend parties.

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Your calculations assume that it's a FTB buying the property. This would very rarely be teh case. In reality it's likely to be someone trading up from a £400K London semi or even trading down from a £650K London semi, treating themselves to a lovely house in the country and probably leaving themselves a few quid in the bank to finance those weekend parties.

That is the only reasonable way to do the calculation. If you put in any cash into the purchase, it becomes dead money (unless you are expecting house price inflation to go on forever).

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That is the only reasonable way to do the calculation. If you put in any cash into the purchase, it becomes dead money (unless you are expecting house price inflation to go on forever).

Sorry, didn't quite follow that.

The OP was incredulous that anyone would want to take on that amount of debt, and I was just saying that in reality, almost no one would take on that amount of debt. The reality is that anyone buying a 500K house would almost certainly be ploughing in a large amount of money from the sale of their previous house. It's a higher-rung on the ladder move, not an initial one, so the stupefaction of the OP is a bit pointless.

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These same properties can be rented for between £1200 and £1800 a month (Of this, the owner might lose up to 20% to the agent).

But if the landlord keeps records, the agent fees can be counted as costs and can be deducted against capital gains tax when they eventually sell the property.

Do agents really charge a LL 20% of £1800rent per month for their services?

£360 per MONTH???

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But if the landlord keeps records, the agent fees can be counted as costs and can be deducted against capital gains tax when they eventually sell the property.

Do agents really charge a LL 20% of £1800rent per month for their services?

£360 per MONTH???

If there are any capital gains!

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If there are any capital gains!

I believe it can be offset against tax on a monthly basis if the LL has owned the property for some time.

i.e. if the rental income exceeds the IO mortgage then all costs can be offset against the tax due on the excess rental income. this tax could be at 40% for high rate taxpayers.

I think the same trick applies to voids.

You can recoup some of your voids on your yearly tax return (i.e. you end up paying less tax on any rent you did get at year end)

If not, all these costs can be offset against capital gains tax when you sell.

Even if you sell at a loss you can offset these losses against future capital gains (eg capital gains made on shares etc)

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I believe it can be offset against tax on a monthly basis if the LL has owned the property for some time.

i.e. if the rental income exceeds the IO mortgage then all costs can be offset against the tax due on the excess rental income. this tax could be at 40% for high rate taxpayers.

I think the same trick applies to voids.

You can recoup some of your voids on your yearly tax return (i.e. you end up paying less tax on any rent you did get at year end)

If not, all these costs can be offset against capital gains tax when you sell.

Even if you sell at a loss you can offset these losses against future capital gains (eg capital gains made on shares etc)

Would you say that these tax advantages put the BTL at a commercial advantage to the home owner?

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Would you say that these tax advantages put the BTL at a commercial advantage to the home owner?

You'd be better asking a tax guru rather than me.

However, if you had £100k to play with, you COULD buy a BTL at auction.

Say you get it and end up with a £100k IO loan on top.

If you left the £100k in the bank you will get about £3k a year interest after tax as a high rate taxpayer.

If you have a BTL you can rent the (£200k?) house out for £10kpa

£5k goes on the IO mortgage.

£5k is subject to tax at 40%, but you get to offset all costs and wear and tear etc.

So you pocket about the same each month as putting the money in the bank.

The £100k in the bank shrinks with 'real' inflation each year. it WILL have less value in three years.

Possibly less than what £85k will buy today.

As long as the tenant keeps paying rent the BTL doesn't care (too much) about a small loss in the value of the property in the first few years. it doesn't hit him directly unless he is forced to sell.

If he has to reduce the rent for a year by £100pm to get a tenant in, it will not hurt too much. However, he can hope for the rent to slowly go up with wage inflation.

Also the house will go up in value in the long term.

Risky stuff, but plenty of people are doing it...

I would guess he would invest the net income in a scheme to pay off the capital. In other words, use the £3k a year rent he gets after tax etc to build up money to pay off some/most/all of the IO loan.

The £5kpa rent subject to tax will be £417pm. knock off 10% of the rent for wear and tear. Knock off £100 maintenance. Knock off insurance and safety check costs and only maybe £180 of the rent will be subject to 40% tax. = £72pm lost to the taxman.

This leaves 417-72 =£345pm to the LL. He has to then deduct those previous costs and will probably clear £200pm averaged over the year or £2400 pa to invest in a capital repayment vehicle.

The alternative is to put the £100k into the stock market for 25 years. But you will pay a lot of capital gains tax on that when you start cashing in every few years along the way. If the BTL plan 'went to plan' he could probably get the house sooner than 25 years if he pumped all the rent into building up capital (a bit like an endowment mortgage)

eg put £2.4k pa into the SM at 8% yoy compound growth and you get a lot of money (but you still have to pay some CGT). But in a few years it will be MORE than £2.4k a year going in because the rental income will rise with wage inflation.

Edited by Without_a_Paddle

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You'd be better asking a tax guru rather than me. However, if you had £100k to play with, you COULD buy a BTL at auction. Say you get it and end up with a £100k IO loan on top. If you left the £100k in the bank you will get about £3k a year interest after tax as a high rate taxpayer. If you have a BTL you can rent the (£200k?) house out for £10kpa £5k goes on the IO mortgage. £5k is subject to tax at 40%, but you get to offset all costs and wear and tear etc. So you pocket about the same each month as putting the money in the bank. The £100k in the bank shrinks with 'real' inflation each year. it WILL have less value in three years. Possibly less than what £85k will buy today. As long as the tenant keeps paying rent the BTL doesn't care (too much) about a small loss in the value of the property in the first few years. it doesn't hit him directly unless he is forced to sell. If he has to reduce the rent for a year by £100pm to get a tenant in, it will not hurt too much. However, he can hope for the rent to slowly go up with wage inflation. Also the house will go up in value in the long term. Risky stuff, but plenty of people are doing it... I would guess he would invest the net income in a scheme to pay off the capital. In other words, use the £3k a year rent he gets after tax etc to build up money to pay off some/most/all of the IO loan. The alternative is to put the £100k into the stock market for 25 years. But you will pay a lot of capital gains tax on that when you start cashing in every few years along the way. If the BTL plan 'went to plan' he could probably get the house sooner than 25 years if he pumped all the rent into building up capital (a bit like an endowment mortgage) eg put £3k pa into the SM at 8% yoy compound growth and you get a lot of money. But in a few years it will be MORE than £3k a month going in because the rental income will rise with wage inflation.

Thanks. I don't understand the tax system well but my instincts tell me that BTLs get a particularly sweet tax deal. kahu and a few others have told me otherwise in the past although I am still puzzled.

Even if the tax arrangements are favourable however, I would still not be tempted by property. I believe that major investment decisions (and a home is an investment decision how ever you look at it) should be suplementary to rather than driven by tax considerations. On property I am firmly in the bear camp.

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I wouldnt want to live in anything else dear Boy!

No horrible neighbours dragging me down. No LL kicking me out in 12 months. Top (non private) schools were everyone wants to learn. No Human TB. Lots of fresh air and space to think. Peace and tranquility. No noise. No boring theatres to go to and watch grown Men in make - up prancing round a stage conveying thier oh soo important messages. A little piece of space you can call your own.

No normally pedantic about these things 'dogbox' but this did make me laugh!! :lol:

Top (non private) schools where everyone wants to learn.

But going on about top schools and making a schoolboy error on your spelling?? :blink:

TB

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No normally pedantic about these things 'dogbox' but this did make me laugh!! :lol:

Top (non private) schools where everyone wants to learn.

But going on about top schools and making a schoolboy error on your spelling?? :blink:

TB

OK, so what does 'no normally pedantic' mean?

Hey, TB

Sounds like you scored a goal (but also let one in... :) )

Edited by Without_a_Paddle

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OK, so what does 'no normally pedantic' mean?

Hey, TB

Sounds like you scored a goal (but also let one in... :) )

Yeah, but mine was a typo and your one was spelling.

I would say that I win on penalties :) (were quite good at that :rolleyes:)

TB

Edited by teddyboy

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Whats madder is commuters often couples travelling nearly 3 hours a day from london to a doll house on a big estate and say they like living in the 'country'. I see more wildlife on the terrace of my central london loft apartment ..squirrels, foxes, feral cats....

Train fares say 2.5K each(5K total) being paid to british rail...talk about dead money!!!! 50K over ten years !

Edited by mercsl

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Why would anyone buy a detached house today when they can rent. Surely it is economic madness?

Because they believe that prices are going to go up.

Billy Shears

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Guest Cletus VanDamme

Because the schools are good and LEA's aren't accepting rental agreements for less than 12 months as proof you are entitled to attend the school.

Is that right? Can LEAs/schools discriminate against renters? Surely if you've lived in the area for a number of years, continually renewing a 6 month AST this will not be the case? Tell me I'm wrong!

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Where did you come up with a figure of 500K for a detached house 30 miles from London. I bought a five bed detached just outside the M25, 27 miles from central London for £295,000 last December. There are bargains out there if you search hard enough and wait a bit.

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Is that right? Can LEAs/schools discriminate against renters? Surely if you've lived in the area for a number of years, continually renewing a 6 month AST this will not be the case? Tell me I'm wrong!

I don't know, I've only made enquiries the once and that was the requirement a 12 month lease. It stops people renting a one bedroomed flat in the catchment area for 6 months to get into the school and then living in the 4 bed detached out of area I guess.

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Where did you come up with a figure of 500K for a detached house 30 miles from London. I bought a five bed detached just outside the M25, 27 miles from central London for £295,000 last December. There are bargains out there if you search hard enough and wait a bit.

What you are talking about are not bargains but houses in bad locations. Alternatively they are three bedroom houses with one of the bedrooms subdivided.

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Dog, sorry mate, you are wrong. My house is in a lovely location, 3 double bedrooms, one en-suite, and two single bedrooms. Fully fitted kitchen, downstairs loo, and another bathroom upstairs. Plus garage and three receptions. Cost £295,000. The decor downstairs is a bit tired, that's all.

We did get a bargain, but I had to play the waiting game.

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Dog, sorry mate, you are wrong. My house is in a lovely location, 3 double bedrooms, one en-suite, and two single bedrooms. Fully fitted kitchen, downstairs loo, and another bathroom upstairs. Plus garage and three receptions. Cost £295,000. The decor downstairs is a bit tired, that's all.

We did get a bargain, but I had to play the waiting game.

I would say that you have made a very good buy.

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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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