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A Tale Of Two Btletters


Dylan
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There's two guys at my work who have 4 BTLs each, I'll call them 'Amateur' and 'Professional'. 'Professional' bought his houses slowly over the last 15 years without MEWing to pay for them and has plenty of equity. 'Amateur' bought all of his in the last 2.5 years, MEWing each to pay the deposit for the IO mortgage on the next.

The three of us were discussing house prices today. Professional is *very* bearish, thinks interest rates will be 6.5% by the end of the year and is preparing to ride out the storm. Amateur said he'd just sell when his fixed rates run out if interest rates are that high. We asked him if he'd come out up if he had to sell, 'just about' was the reply. 'Professional' then asked, 'even after capital gains?' Not a word of a lie, 'Amateur' didn't have a clue about CGT. He thought that if you MEW a property and leave only £10k equity you would only pay CGT on 10k if you sold. My jaw almost hit the floor when 'Professional' had to explain how it's actually calculated!

I'm certain that the number of 'Amateurs' far outways the number of 'Professionals' - people who have jumped on the bandwagon in the last couple of years, hardly giving the details a second thought. And it's going to all get very messy over the next couple of years.

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There's two guys at my work who have 4 BTLs each, I'll call them 'Amateur' and 'Professional'. 'Professional' bought his houses slowly over the last 15 years without MEWing to pay for them and has plenty of equity. 'Amateur' bought all of his in the last 2.5 years, MEWing each to pay the deposit for the IO mortgage on the next.

The three of us were discussing house prices today. Professional is *very* bearish, thinks interest rates will be 6.5% by the end of the year and is preparing to ride out the storm. Amateur said he'd just sell when his fixed rates run out if interest rates are that high. We asked him if he'd come out up if he had to sell, 'just about' was the reply. 'Professional' then asked, 'even after capital gains?' Not a word of a lie, 'Amateur' didn't have a clue about CGT. He thought that if you MEW a property and leave only £10k equity you would only pay CGT on 10k if you sold. My jaw almost hit the floor when 'Professional' had to explain how it's actually calculated!

I'm certain that the number of 'Amateurs' far outways the number of 'Professionals' - people who have jumped on the bandwagon in the last couple of years, hardly giving the details a second thought. And it's going to all get very messy over the next couple of years.

Not sure of the exact stats, but haven't 30% of BTLers jumped on the wagon in the last year?

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How is it calculated?

On Profit where profit = sale price - index linked purchase price. You need a decent accountant to avoid many avoidable problems with selling investment properties.

Personally as soon as the first property needs to be sold all his houses (and his own house) are toast.

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Professional is *very* bearish,

It is impossible for a BTL to be "bearish" otherwise he would not have bought the stuff in the first place. You mean he is a bull who thought he could make a killing but has now realised he cannot make money automatically by simply buying to let and believing that everything goes up for ever. That doesn't now make him a bear. It makes him just another BTL'r who got his hands burnt and is hanging on by a thread.

Sorry to appear pedantic but it is a crucial distinction.

And what is this apparent distinction between "amateur" and "professional". The effect (for everyone else) is exactly the same. Or do you mean one attempts to earn a "living" (and fails) by it and the other merely dabbles?

VP

Edited by VacantPossession
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There's two guys at my work who have 4 BTLs each, I'll call them 'Amateur' and 'Professional'. 'Professional' bought his houses slowly over the last 15 years without MEWing to pay for them and has plenty of equity. 'Amateur' bought all of his in the last 2.5 years, MEWing each to pay the deposit for the IO mortgage on the next.

The three of us were discussing house prices today. Professional is *very* bearish, thinks interest rates will be 6.5% by the end of the year and is preparing to ride out the storm. Amateur said he'd just sell when his fixed rates run out if interest rates are that high. We asked him if he'd come out up if he had to sell, 'just about' was the reply. 'Professional' then asked, 'even after capital gains?' Not a word of a lie, 'Amateur' didn't have a clue about CGT. He thought that if you MEW a property and leave only £10k equity you would only pay CGT on 10k if you sold. My jaw almost hit the floor when 'Professional' had to explain how it's actually calculated!

I'm certain that the number of 'Amateurs' far outways the number of 'Professionals' - people who have jumped on the bandwagon in the last couple of years, hardly giving the details a second thought. And it's going to all get very messy over the next couple of years.

Why do I disbelieve this story?

Dylan -- I will bet you a large amount of cash (well, say £1000) that your story is not true.

Will you accept?

Winnings to charity.

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It is impossible for a BTL to be "bearish" otherwise he would not have bought the stuff in the first place. You mean he is a bull who thought he could make a killing but has now realised he cannot make money automatically by simply buying to let and believing that everything goes up for ever. That doesn't make him a bear. It makes him just another BTL'r who got his hands burnt.

Sorry to appear pedantic but it is a crucial distinction.

VP

If prices crash 40% he'll still have made a lot of money. He's bought the properties to pass on to his children when they need them. You could argue that he should sell now if prices have hit the top and invest the money elsewhere, but when he has rental income and low mortgage costs, why bother? Not every BTL is going to sell immediately or instantly become bankrupt if prices drop. The distinction is between those who run their BTL as a sound business, and those who are just playing at it.

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If prices crash 40% he'll still have made a lot of money. He's bought the properties to pass on to his children when they need them. You could argue that he should sell now if prices have hit the top and invest the money elsewhere, but when he has rental income and low mortgage costs, why bother? Not every BTL is going to sell immediately or instantly become bankrupt if prices drop. The distinction is between those who run their BTL as a sound business, and those who are just playing at it.

Forget that old rubbish, will you accept my £1000 bet? I believe your post was a lie. If you want to earn a grand and protect your honour, reply to this post.

We can nominate an intermediary and I can get the cash to him/her tomorrow, pending the outcome.

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... by simply buying to let and believing that everything goes up for ever.

And what is this apparent distinction between "amateur" and "professional". The effect (for everyone else) is exactly the same. Or do you mean one attempts to earn a "living" (and fails) by it and the other merely dabbles?

VP

Not all BTL want to make the money from the capital gain. I know a few who would be happy to see rent cover the mortgage and have the property price rise at or just above inflation to provide a nestegg for retirement, paid for of course by someone else, but at their risk.

Why shouldnt one earn a living from BTL? Or provide for themselves in future years ? I agree these programmes about the amateur, stoked, cheap to make, expensive for the country - have had a stoking effect - but why should property development be concentrated in the hands of a few wealthy people. After any crash, IF it comes, a lot of amateurs will be burnt and put off for life. Good. There will be a good core of new people who have made money, and will stay on doing it.

Its a free market. Its a (semi) free country. If you take a risk and it pays off...good luck fella. If it goes titsup - tought titties. Suck on them and get over it.

There isnt a right to make money - at least no right that someone should have over another. You have to take risk with an INVESTMENT !

There seems to be an absolute hatred from some people that others have made a lot of money but they havent. Thats life sunshine. Get on with it or die feeling sh1tty.

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If prices crash 40% he'll still have made a lot of money. He's bought the properties to pass on to his children when they need them. You could argue that he should sell now if prices have hit the top and invest the money elsewhere, but when he has rental income and low mortgage costs, why bother? Not every BTL is going to sell immediately or instantly become bankrupt if prices drop. The distinction is between those who run their BTL as a sound business, and those who are just playing at it.

I see what you are saying but I still insist there is no disctinction. There is no such thing as BTL being a "sound business". A sound business involves making things, or working in a way that adds value to something already made. BTL is NOT a sound business, whether you are an amatuer, professional or whatever else you wish to call it. It is just cashing in on a temporary, or even extended period of inflation. It adds no value whatever except to the BTL'r and when it doesn't they generally abandon what was previously, in your own words, a "sound business".

Furthermore, BTL is really BTGC (Buy To Gain Capital) because the BTL'r is not in the least bit interested in being a professional landlord, and the rent he receives is entirely incidental to the main plan which is to sit on the property as long as it gains notional value.

I am not particularly knocking you, or your friends, at least not in this thread, but let us be honest in our descriptions of what people are really doing here.

Cheers,

VP

Edited by VacantPossession
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Forget that old rubbish, will you accept my £1000 bet? I believe your post was a lie. If you want to earn a grand and protect your honour, reply to this post.

We can nominate an intermediary and I can get the cash to him/her tomorrow, pending the outcome.

Quite possibly the most ridiculous thing I've read on here for a while. You can believe what you want RB - does it scare you that there are people like that out there?

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Quite possibly the most ridiculous thing I've read on here for a while. You can believe what you want RB - does it scare you that there are people like that out there?

"You can believe what you want" is always a giveaway. It's an utterly fatuous statement. You may as well say "Breathe air". Hmmm. OK, I don't need you tell me that, and anyway, it doesn't get us anywhere.

Let's get back to the point.

I read a lot of stuff on here that I think is spin and sh1t. I read your original post, for instance, and thought "this is spin and sh1t".

So I've decided to challenge you. I bet you £1000 that what you said is not true. If you want to earn a grand without doing anything much, accept my bet. If you accept, and I win, I'll give the money to charity.

Send me a PM if you want to collect a grand. We can discuss the best way of deciding whether you're telling the truth. If you don't send me a PM within 24 hours, I'll assume that your post was, indeed, spin and sh1t. As we all know it was.

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Not all BTL want to make the money from the capital gain. I know a few who would be happy to see rent cover the mortgage and have the property price rise at or just above inflation to provide a nestegg for retirement, paid for of course by someone else, but at their risk.

Why shouldnt one earn a living from BTL? Or provide for themselves in future years ? I agree these programmes about the amateur, stoked, cheap to make, expensive for the country - have had a stoking effect - but why should property development be concentrated in the hands of a few wealthy people. After any crash, IF it comes, a lot of amateurs will be burnt and put off for life. Good. There will be a good core of new people who have made money, and will stay on doing it.

Its a free market. Its a (semi) free country. If you take a risk and it pays off...good luck fella. If it goes titsup - tought titties. Suck on them and get over it.

There isnt a right to make money - at least no right that someone should have over another. You have to take risk with an INVESTMENT !

There seems to be an absolute hatred from some people that others have made a lot of money but they havent. Thats life sunshine. Get on with it or die feeling sh1tty.

Suspending my distate for your BNP-type outburst on another thread, I have no objections at all to people investing a little to guard against old age and penury, but let's be frank here, the vast majority of BTL's have no interest whatsoever in anything so noble. They have cumulatively ruined everyone else's chances of a civilised approach to property, ie: buying a decent, modest, home, not screwing up the market for everyone else.

Therefore, I stand by points already made.

VP

Edited by VacantPossession
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...I have no objections at all to people investing a little to guard against old age and penury, but let's be frank here, the vast majority of BTL's have no interest whatsoever in anything so noble. They have cumulatively ruined everyone else's chances of a civilised approach to property, ie: buying a decent, modest, home, not screwing up the market for everyone else.

Therefore, I stand by points already made.

VP

Unlike some people here, I don't hate BTL's with a passion - those who aren't just in it to make a quick buck are providing a service to those who, for whatever reason, are renting. The one's who are mortgaged up to the hilt will soon find out that isn't the way to wealth and financial independence. They will be worse off for it and the rest of us will be able to buy a decent home at a reasonable price. If I thought prices will continue to rise at 10% per annum my opinion would probably be different.

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Suspending my distate for your BNP-type outburst on another thread, I have no objections at all to people investing a little to guard against old age and penury, but let's be frank here, the vast majority of BTL's have no interest whatsoever in anything so noble. They have cumulatively ruined everyone else's chances of a civilised approach to property, ie: buying a decent, modest, home, not screwing up the market for everyone else.

Therefore, I stand by points already made.

VP

Suspend all you want mate. Ive never voted for the BNP, nor even the Tories- I regard my self as a true Liberal both economically and philosophically. Nothing to do with the Liberal Party I hasten to add for all those non students of political philosophy. I have a right to free speech and I will say what I believe. Which is that migration is of at best neutral benefit economically. Culturally it is open to debate, but economically, and for the benefit of the country it is questionable. I do believe the BNP is racist? I am opposed to non beneficial immigration from whatever race, preferring to end our social security culture and have our unemployed work in jobs we currently ask foreign nationals to travel to this country to do. Beneficial immigration for which there is a skill shortage and which we cannot train our indigenous people to do, of course I fully support bringing people in to do that. But to bring in floor sweepers while taxes aare spent keeping people idle? Come on. Surely we can have an intelligent debate without childish insults such as BNP STYLE COMMENTS.

I have no objection to people renovating disused or derelict property and selling for a profit. Nor do I resent people for being professional landlords. When will people realise there is a real problem in this country in that THERE ARE NOT ENOUGH HOUSES for the DEMAND, and this drives prices UP ! Bringing more people in, exacerbates this, and paying large amounts of money for social security to individuals for years, sometimes decades, with multiple geerations of some families on benefits is NOT A GOOD USE OF TAX REVENUE !

STOP hoping for a bad economy to bring a crash! Start campaigning for good, cheaper housing! It will affect the whole market beneficially!

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Suspend all you want mate. Ive never voted for the BNP, nor even the Tories- I regard my self as a true Liberal both economically and philosophically. Nothing to do with the Liberal Party I hasten to add for all those non students of political philosophy. I have a right to free speech and I will say what I believe. Which is that migration is of at best neutral benefit economically. Culturally it is open to debate, but economically, and for the benefit of the country it is questionable. I do believe the BNP is racist? I am opposed to non beneficial immigration from whatever race, preferring to end our social security culture and have our unemployed work in jobs we currently ask foreign nationals to travel to this country to do. Beneficial immigration for which there is a skill shortage and which we cannot train our indigenous people to do, of course I fully support bringing people in to do that. But to bring in floor sweepers while taxes aare spent keeping people idle? Come on. Surely we can have an intelligent debate without childish insults such as BNP STYLE COMMENTS.

I have no objection to people renovating disused or derelict property and selling for a profit. Nor do I resent people for being professional landlords. When will people realise there is a real problem in this country in that THERE ARE NOT ENOUGH HOUSES for the DEMAND, and this drives prices UP ! Bringing more people in, exacerbates this, and paying large amounts of money for social security to individuals for years, sometimes decades, with multiple geerations of some families on benefits is NOT A GOOD USE OF TAX REVENUE !

STOP hoping for a bad economy to bring a crash! Start campaigning for good, cheaper housing! It will affect the whole market beneficially!

So you're a "true liberal", democrat and advocate of free speech, but you believe we should keep the dole-scrounging n1ggers out of Britain.

Would that be a fair summary of your view?

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So you're a "true liberal", democrat and advocate of free speech, but you believe we should keep the dole-scrounging n1ggers out of Britain.

Would that be a fair summary of your view?

I think that is what I was alluding to also, in view of his views earlier stated, which are as lacking in "liberal" as it is possible to be.

VP

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Suspend all you want mate. Ive never voted for the BNP, nor even the Tories- I regard my self as a true Liberal both economically and philosophically. Nothing to do with the Liberal Party I hasten to add for all those non students of political philosophy. I have a right to free speech and I will say what I believe. Which is that migration is of at best neutral benefit economically. Culturally it is open to debate, but economically, and for the benefit of the country it is questionable. I do believe the BNP is racist? I am opposed to non beneficial immigration from whatever race, preferring to end our social security culture and have our unemployed work in jobs we currently ask foreign nationals to travel to this country to do. Beneficial immigration for which there is a skill shortage and which we cannot train our indigenous people to do, of course I fully support bringing people in to do that. But to bring in floor sweepers while taxes aare spent keeping people idle? Come on. Surely we can have an intelligent debate without childish insults such as BNP STYLE COMMENTS.

I have no objection to people renovating disused or derelict property and selling for a profit. Nor do I resent people for being professional landlords. When will people realise there is a real problem in this country in that THERE ARE NOT ENOUGH HOUSES for the DEMAND, and this drives prices UP ! Bringing more people in, exacerbates this, and paying large amounts of money for social security to individuals for years, sometimes decades, with multiple geerations of some families on benefits is NOT A GOOD USE OF TAX REVENUE !

STOP hoping for a bad economy to bring a crash! Start campaigning for good, cheaper housing! It will affect the whole market beneficially!

You are missing one major problem, our indigenous people are not making babies!!

Government is letting immigrants in because they are yung and generally healthy, we can not support ourselves without them not because of jobs but because we have too many old people

According to statistics.gov

20.0 million aged 50 and over

that means in 10-15 years a third of our population will be over 65 and out of work, that is very inefficent.

We either need to make more babies to support our ageing population, which is hard to do since people are waiting longer and longer to have babies (one reason being high house prices) or we import grown babies.

Its the medias fault that in 30years we have gone from average marriage age of 22 to 28.

We will fail as an economy if 1/3 of our population is too old to work and is getting a state pension/ healthcare/ housing ect. We need the immigrants to prop up the under 35 group! I guess the ultimate goal is that they let in European immigrants, get them here from 20years of age, hopefully their European countries improve because of the EU and they return at some age about 45.

What do u think of this?

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Did i say that? NO.

Did I think that? NO.

Your PRECONCEIVED AND PREJUDICED opinions of what you THINK my opinions are.

Have you read anything written by John Stuart Mill? John Locke? Adam Smith? Thomas Paine ?

I doubt it.

Most immigration, you utter clots, in the past few years has been from white eastern europeans.

Its irrelevant WHERE they come from. It is the effect they have on housing, social security, medical services, black market work and whether they will leave which is my concern. I accept that their economic contribution is approximate to their economic take, more or less. We live on a small island where land and housing is a valuable finite resource however.

Therefore immigration should be markedly beneficial if it is to occur. Australia and New Zealand have a points system based on what you BRING to the country - skills, age. We just open the doors.

Perhaps you have never been confronted by someone opposed to immigration who isnt, shall we say a bit thick. Probably racist. Definitely ill informed. Maybe its a bit of a shock to you so you decide to go for a cheap shot because you dont or cant provide a counter argument.

So I wont get offended. Ill just wait for your answers as to why a constant stream of several hundred thousand immigrants every year into the UK is a GOOD thing while we have a social security system which breeds dependence with a a large group of unemployed or underutilised people already here, and a birth rate higher than many other industrialised western countries ?

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You are missing one major problem, our indigenous people are not making babies!!

Government is letting immigrants in because they are yung and generally healthy, we can not support ourselves without them not because of jobs but because we have too many old people

According to statistics.gov

20.0 million aged 50 and over

that means in 10-15 years a third of our population will be over 65 and out of work, that is very inefficent.

We either need to make more babies to support our ageing population, which is hard to do since people are waiting longer and longer to have babies (one reason being high house prices) or we import grown babies.

Its the medias fault that in 30years we have gone from average marriage age of 22 to 28.

We will fail as an economy if 1/3 of our population is too old to work and is getting a state pension/ healthcare/ housing ect. We need the immigrants to prop up the under 35 group! I guess the ultimate goal is that they let in European immigrants, get them here from 20years of age, hopefully their European countries improve because of the EU and they return at some age about 45.

What do u think of this?

apart from the fact you got your statistics from statistics.gov voicepiece of the apparatchiks...

it has one other major flaw. As does the immigration argument.

If all these people come to the UK to provide for 'our' old people then either -

the immigrants must leave before they get old,

or

there must be even more immigrants (or increased indigenous persons) to provide for the original indiginous people PLUS the immigrants when THEY get old !

As there is no check on who can come into the country, and no reccored or compulsion to leave the country why should anyone?

Immigration would not be a problem if it was managed. If the people coming to work here had real skills we either couldnt provisde or would take too long to provide, or we couldnt afford our own people to do.

Nurses, doctors, engineers, scientists, computer programmers, and yes even teachers would be welcome if their English is sufficiently good and they are prepared to assimilate into THIS culture, just as we would be expected to do in theirs.

What is not acceptable is to import sweeepers, janitors, fruitpickers, washer uppers, waitresses, burgerking burger flippers and other low grade work when we have a ready source of people who CAN do this but choose not to, while the added influx of people creates a strain on our resources in this country!

If we didnt have sufficient people to do the menail jobs - that might be an argument - but it isnt one I accept while the social security budget is as large as it is.

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On Profit where profit = sale price - index linked purchase price. You need a decent accountant to avoid many avoidable problems with selling investment properties.

Personally as soon as the first property needs to be sold all his houses (and his own house) are toast.

Indexation for CGT for individuals ceased after 5 April 1998. It has been replaced by Taper relief (non Business Taper Relief, unless the property qualifies as a Furnished Holiday Let). This starts at 5% after 3 years and rises to a maximum of 40% after 10 years.

The Annual Exemption (£8800 for 2006-07) can be deducted if not utlised elsewhere (e.g. gains on shares).

Mortgages are not relevant in calculating CGT. I can confirm that, as a Tax Consultant, I am coming across more and more people who erroneously think they do. And the net proceeds of sale may not cover the CGT either (if heavy MEWing has taken place).

Another commom error is a parent giving a BTL property to his/her kid(s) thinking CGT cannot apply as he/she has made no gain from the gift. Unfortunately, CGT applies to "disposals" which includes gifts. Sometimes it takes a few years for this to come to light which can mean HMRC impose interest and penalties on top of the CGT liability.

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