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Sledgehead

Myra Butterworth : Latest Hack Admits Btl Woes

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Butterworth has been an ardent bull, advocating property at any cost, even to FTBs, as late as April this year. Her attitude is typified by the Telegraph article Tips for first-time buyers : Seven steps to get on the housing ladder, where she "helpfully" suggests:

6 Divide your loan between lenders

In theory, you can ask two different lenders to loan the total required to buy a home.

ie, borrow the deposit ( :o ) from a 3rd party.

She also has a regular Telegraph column entitled "Confessions of a Landlady" where she espouses the virtues of property as an investment.

Given such unbridled endorsement, one might be forgiven for suggesting her latest 'Confessions' represent poetic-justice of the highest order.

In last Saturday's (01/08/2008 web) column, subtitled "As Myra Butterworth's bills mount, rising rents keep the Barge above water", Butterworth, who describes herself as "one of the lucky ones", admits that her btl property "The Barge" commands rents that exceed her mortgage by only £14 a month. That's a 'whopping' £168 pa: well a whoopee-doo! Unsurprisingly she baulks at the thought of paying her letting agent "£659.77" (note the pennies). So she's already out of pocket before she stumps up for insurance, council tax, wear and tear (ie decorating once i a while) and all those nasty bills from plumbers, sparkies and corgis. Add to that the factthat her property may well be losing large capital sums and you can see why she, an ardent BTL, concludes :

"If the mortgage costs climb above the rent, I would definitely have to consider selling up."

With the anniversary of the credit crunch now upon us, a failed high street bank, and year on year negative HPI reports from all the indices, perhaps the most telling words however are those that precede and qualify this admission:

This is a scary thought and I'm not sure I've got my head around it yet.

Woman, how much facking time do you need?

Edited by Sledgehead

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I’ve slipped onto my lender’s standard variable rate, having been unable to secure a new mortgage deal, and my monthly payments have climbed from a low of £406 to £501.

...

I bought the two-bedroom property three years ago, in which time the monthly rent has risen a little from £495 to £515.

I'd be interested to know whether that figure for the monthly rent is before or after income tax.

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I'd be interested to know whether that figure for the monthly rent is before or after income tax.

She won't be paying income tax on it, since she is making a loss (rent less than the sum of mortgage + agent fees).

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I'd be interested to know whether that figure for the monthly rent is before or after income tax.

Aftr all the costs, she is not going to be paying income tax on any of it.

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'That's a 'whopping' £168 pa: well a whoopee-doo! '

yes: £168 for an asset worth considerably more.

Rent dropping below the value of the mortgage payment is not necessarily the point of bailing out.

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Aftr all the costs, she is not going to be paying income tax on any of it.

I must admit, I'm not 100% au fait with the tax treatment of income from property. But surely if a BTLer earns an income from a day-job - as this lady clearly does - then it's her total income that matters?

For example, if I get a few hundred quid in dividends from a shareholding, that income is taxed at 40% because I've already used up all my allowances in the lower bands by earning a salary. Are you saying that rental income is treated more favourably?

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'That's a 'whopping' £168 pa: well a whoopee-doo! '

yes: £168 for an asset worth considerably more.

Rent dropping below the value of the mortgage payment is not necessarily the point of bailing out.

LOL, so now the BTL investment model is what exactly? Subsidies your tenants because the house might be worth more than the total you spend on it over the mortgage term, not to mention going bust in the meantime.

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Yes it is. Any mortgage on a property is tax-deductable if it is rented out. Part of the reason for the explosion of BTL.

I've just become aware through circumstance of this and quite frankly it's one of the most disgraceful things I've ever heard. I thought BTL's were simply selfish greedy bastards pulling the ladder up by leveraging their own inflated assets... But no it's worse than that. They are effectively being subsidised by the people that they are pricing out of the market. After all someone has to pay for that tax not being collected don't they?

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With BTL, you take the costs of running the property (management fees, CORGI, insurance, etc) then deduct the costs from rent. Each tax year, whatever's left over, you pay tax on at your highest rate. There are other tax breaks, you can deduct 10% per year of the income as the wear & tear element.

For some, the figures could work out thus:

Day job - a little into the upper tax bracket

BTL - makes a small loss

Add them together, bringing the whole yearly income to under the upper tax bracket.

You are then required to pay tax on your earnings... but that means you've overpaid tax this year as your day job took some 40% tax from you. So you get a tax rebate.

Admittedly it won't work for many, but depending how many properties you have, how much they lose, how much over the upper tax limit you're paying, it could effectively reduce your tax bill so it's all at the 20% rate.

Edited by ScaredEitherWay

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Yes it is. Any mortgage on a property is tax-deductable if it is rented out. Part of the reason for the explosion of BTL.

Not exactly: only that portion of the mortage that is interest. i.e. any portion that repays capital is taxable - and the Revenue are going after this as well (according to reports).

If she is 100% I/O then it's all deductible, but that only makes the RoI even less worthwhile :)

http://property.timesonline.co.uk/tol/life...icle1851885.ece

It is understood that many of the 80,000 taxpayers who have underdeclared have incorrectly claimed deductions for mortgage repayments. Landlords have to pay income tax on the rents they receive from tenants. But under the law, landlords can offset some of the tax they pay if they have an interest-only mortgage.

For example, a landlord who pays 40 per cent tax on a rental income, can offset the total £625 monthly cost of a £150,000 interest-only loan against the tax bill. However, the repayments must relate to the interest part of the mortgage alone. Landlords cannot claim deductions for mortgage repayments that pay off some of the capital borrowed.

EDIT: added link/text quoted

Edited by dryrot

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If she bought it any time during the last four years, she

has already made a capital loss.

Real sales appear to be going through at about 20% discount

as of this month - taking us back to about 2004.

She can assume a further drop of another 20% over the next

eighteen months or so.

It is already too late for her to do anything about her situation.

She is now forcibly committed to sitting out the next ten years

waiting for prices to come back up so that she can make a

capital profit.

There are words to describe this kind of business model......

cretinous, stupid, illogical etc etc

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If she bought it any time during the last four years, she

has already made a capital loss.

Real sales appear to be going through at about 20% discount

as of this month - taking us back to about 2004.

She can assume a further drop of another 20% over the next

eighteen months or so.

It is already too late for her to do anything about her situation.

She is now forcibly committed to sitting out the next ten years

waiting for prices to come back up so that she can make a

capital profit.

There are words to describe this kind of business model......

cretinous, stupid, illogical etc etc

They will be tax changes and other incentives coming along soon to make it all viable again -trust me ...

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For example, if I get a few hundred quid in dividends from a shareholding, that income is taxed at 40% because I've already used up all my allowances in the lower bands by earning a salary. Are you saying that rental income is treated more favourably?

NO! You don't have a mortgage against your shares, do you. Your shares don't cost you anything to keep them; a BTL does.

For some, the figures could work out thus:

Day job - a little into the upper tax bracket

BTL - makes a small loss

Add them together, bringing the whole yearly income to under the upper tax bracket.You are then required to pay tax on your earnings... but that means you've overpaid tax this year as your day job took some 40% tax from you. So you get a tax rebate.

NO! You end up with a rental income loss that you carry forward until such time as your rental is making a profit.

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With BTL, you take the costs of running the property ...There are other tax breaks, you can deduct 10% per year of the income as the wear & tear element.

When I first heard this I realised that, for tax purposes, BTL is almost entirely equivalent to a corporation: you can even deduct depreciation from your earnings before you determine your level of taxable income. You can see how this leads to a situation where BTLers believe it acceptable, even useful, to run a BREAKEVEN / even LOSS making business.

This of course has allowed this boom to reach its ridiculous levels. And yes, it does have parallels in the normal corporate world.

When NuLabour came to power they levied windfall taxes on the privatised utilities AND removed the dividend tax credit from listed company shares. Both of these measure encouraged a reduction in profit making in favour of investment. NuLabour thought they'd found the holy grail as the country went investment mad. The stockmarket saw a massive boom in Initial Public Offerings as people piled capital into companies that promised growth .. but at the expense of profits. Yet nobody cared about that. See, by investing in start-ups, investors could avoid their profits being taxed simply because there were no profits (and none planned). Instead of hoping for dividends (which the government would further tax) they prayed for share price growth as the companies they invested in piled all their profits into increasingly hairbrained schemes.

That era - the dotcom boom - is now seen as the era of profitless growth and dividend destruction.... much as this one will become known for break-even / loss making BTLs.

In the end, everybody realised that loss making companies really weren't such a great idea, and those stratospheric share prices collapsed even more sharply than they had risen. The results for BTL will not be so different.

Edited by Sledgehead

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Guest sillybear2
Good idea, she could borrow from one of those guys

Al Capone

Frank Costello

John Gotti

Carlo Gambino

Joe Bonanno

:lol::lol:

Ahh, the Big Five.

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I don't know anything about Myra Butterworth and have never read one of her columns so cannot comment further but what I can say generally about anyone who is going/gone in to BTL is that they should consider the following factors:

1. Anyone who has BTL is effectively a running a small business involving a large amount of debt;

2. That debt multiples the impact of any fall in the value of the underlying asset or rise in interest rates;

3. A business cannot be run properly while the owner is also holding down another job;

4. About 75% of all new small businesses fail in one way or another;

5. Most small businesses that survive make less money for the owner than if they had worked for someone else; and

6. Many small business owners lose their main homes when their business fails.

We are now beginning to see the consequences of these factors coming into effect and many BTL owners will suffer very severe financial distress - many may even lose their main homes.

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I don't know anything about Myra Butterworth and have never read one of her columns so cannot comment further but what I can say generally about anyone who is going/gone in to BTL is that they should consider the following factors:

1. Anyone who has BTL is effectively a running a small business involving a large amount of debt;

2. That debt multiples the impact of any fall in the value of the underlying asset or rise in interest rates;

3. A business cannot be run properly while the owner is also holding down another job;

4. About 75% of all new small businesses fail in one way or another;

5. Most small businesses that survive make less money for the owner than if they had worked for someone else; and

6. Many small business owners lose their main homes when their business fails.

We are now beginning to see the consequences of these factors coming into effect and many BTL owners will suffer very severe financial distress - many may even lose their main homes.

Some very pertinent points. Do you have any feelings about why 6 occurs? My feeling is it's all down to misplaced faith in their business and a willingness to try and "ride out the storm" with capital accumulated in their homes. I note a very similar attitude amongst BTL bulls. I see no clear reason why 6 should not apply equally to them.

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I don't know anything about Myra Butterworth and have never read one of her columns so cannot comment further but what I can say generally about anyone who is going/gone in to BTL is that they should consider the following factors:

1. Anyone who has BTL is effectively a running a small business involving a large amount of debt;

2. That debt multiples the impact of any fall in the value of the underlying asset or rise in interest rates;

3. A business cannot be run properly while the owner is also holding down another job;

4. About 75% of all new small businesses fail in one way or another;

5. Most small businesses that survive make less money for the owner than if they had worked for someone else; and

6. Many small business owners lose their main homes when their business fails.

We are now beginning to see the consequences of these factors coming into effect and many BTL owners will suffer very severe financial distress - many may even lose their main homes.

Good post, but many didn't see it as a business, and instead thought it was easy money. The fact that in recent years many BTLs seemed to completely disrgard yield and capital repayment means they are even more screwed than other small businesses. At least a guy who runs a local shop tries to have a monthly income, rather than covering his outgoings with money from a second job (obviously it doesn't always work out that way but BTLers seemed willing to throw in a couple of hundred quid a month extra to cover the mortgage and other costs).

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If she bought it any time during the last four years, she

has already made a capital loss.

Real sales appear to be going through at about 20% discount

as of this month - taking us back to about 2004.

She can assume a further drop of another 20% over the next

eighteen months or so.

It is already too late for her to do anything about her situation.

She is now forcibly committed to sitting out the next ten years

waiting for prices to come back up so that she can make a

capital profit.

There are words to describe this kind of business model......

cretinous, stupid, illogical etc etc

Buy and hold?

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Guest Shedfish
When I first read one of the Myra Butterworth columns I genuinely thought it was a spoof.

She's so incredibly thick it's unbelievable.

And all this stuff about 'the barge'. Doesn't she realise she's slowly sailing up sh1t creek in it?

never heard of her before, but i thoroughly enjoyed that article. a man has to have his 2 minutes hate from time to time

i feel purged

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When I first read one of the Myra Butterworth columns I genuinely thought it was a spoof.

She's so incredibly thick it's unbelievable.

And all this stuff about 'the barge'. Doesn't she realise she's slowly sailing up sh1t creek in it?

I read the first three of her 'Landlady' column in the Telegraph Property Club. Uninteresting twaddle.

Can't see any trace of the Property Club now - nothing from Google. Has Telegraph given up on it altogether?

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'That's a 'whopping' £168 pa: well a whoopee-doo! '

yes: £168 for an asset worth considerably more.

Rent dropping below the value of the mortgage payment is not necessarily the point of bailing out.

And while she hangs on the value of the 'asset' becomes considerably less.

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  • 399 Brexit, House prices and Summer 2020

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      • down 5% +
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      • up 5%



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