• Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
  • Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!

Buying Buy To Let through LTD

Collapse
X
  •  
  • Filter
  • Time
  • Show
Clear All
new posts

    #21
    Originally posted by Jessica@WhiteFieldTax View Post
    no matter how BoE try to encourage lenders to throttle back.
    since when is 0.25% interest encouraging anyone to not borrow or lend.

    HMRC/treasury/govt might be trying to use tax to prick the housing bubble but the supply side issues with housing seem to be ignored.
    See You Next Tuesday

    Comment


      #22
      Originally posted by Lance View Post
      since when is 0.25% interest encouraging anyone to not borrow or lend.

      HMRC/treasury/govt might be trying to use tax to prick the housing bubble but the supply side issues with housing seem to be ignored.
      The LTV stress test models imposed via PRA of 125% rent to mortgage, increasing to 145% next year, is what I'm referring to. I believe thats on assumed 5.5% interest rate.

      I'd like to be convinced that 5.5% is enough, a bit of inflation and interest rates could easily climb beyond that over five years.

      I've always worked on 10% for anything, its cautious but leads to a better nights sleep.

      Comment


        #23
        Originally posted by Jessica@WhiteFieldTax View Post
        Alas, I know some people where a 4% rise in interest rates is going to push them into negative cash flows on BTL before worrying about tax.

        There are still some people out there very heavily geared, no matter how BoE try to encourage lenders to throttle back.
        That's the problem with buying a business hoping for long term capital gains without looking at the current profit and loss stream...

        As for S24 I doubt it will have much effect. The killer bit will be when people try and remortgage and discover that the new affordability is 145% coverage of interest from rent (instead of the previous required 125% coverage) and the new stress interest rate of 5.5% rather than 5%.

        There are then supposedly issues with Basel 3 and the entire concept of interest only loans for business purposes. I can't be bothered to go through the details here as I don't have them to hand but supposedly when Basel 3 takes effect its going to be virtually impossible for BTL loans to be interest only.....

        I did the calculations a while back. Given a rent of £500 a month someone in June 2016 you could borrow £96,000, after the PRA changes its (January 2017) £72,000 and were interest only not allowed its something like £56,000 (say June 2018). And of course everyone that fails to meet the criteria has no choice but to stay on the banks standard mortgage rate for ever more....
        Last edited by eek; 8 November 2016, 16:56.
        merely at clientco for the entertainment

        Comment


          #24
          Originally posted by eek View Post
          That's the problem with buying a business hoping for long term capital gains without looking at the current profit and loss stream...

          As for S24 I doubt it will have much effect. The killer bit will be when people try and remortgage and discover that the new affordability is 145% coverage of interest from rent (instead of the previous required 125% coverage) and the new stress interest rate of 5.5% rather than 5%.

          There are then supposedly issues with Basel 3 and the entire concept of interest only loans for business purposes. I can't be bothered to go through the details here as I don't have them to hand but supposedly when Basel 3 takes effect its going to be virtually impossible for BTL loans to be interest only.....

          I did the calculations a while back. Given a rent of £500 a month someone in June 2016 you could borrow £96,000, after the PRA changes its (January 2017) £72,000 and were interest only not allowed its something like £56,000 (say June 2018). And of course everyone that fails to meet the criteria has no choice but to stay on the banks standard mortgage rate for ever more....
          Seriously? I'm assuming you aren't affected by S24 or don't realise it's full impact. It is a completely flawed implementation of a tax change. Now I am not affected so much by it because I don't leverage to a great extent and my plan has always been to pay off the loans over time so as to have a reasonable retirement. But even then, I can see what a bad idea S24 is and how it will hit many average investors.

          Increased rental cover is simply a symptom of S24. It will lead to higher rents, in fact it already is - hence why S24 is being termed the Tenant Tax in media circles.

          I don't know much about Basel3 - I doubt it will be allowed to impact borrowing in the way you describe but I stand to be corrected and will take an interest in how things develop. Personally, I would always advocate repayment loans anyway. On that note, there was no need for that intellectually-challenged Osborne to implement S24: he could quite easily have specified all BTL loans to be capital+interest, much like residential loans. That would have had the desired impact of slowing the market and reducing risk. Makes one wonder what his actual objective was.

          Comment


            #25
            Originally posted by ChimpMaster View Post
            Seriously? I'm assuming you aren't affected by S24 or don't realise it's full impact. It is a completely flawed implementation of a tax change. Now I am not affected so much by it because I don't leverage to a great extent and my plan has always been to pay off the loans over time so as to have a reasonable retirement. But even then, I can see what a bad idea S24 is and how it will hit many average investors.

            Increased rental cover is simply a symptom of S24. It will lead to higher rents, in fact it already is - hence why S24 is being termed the Tenant Tax in media circles.

            I don't know much about Basel3 - I doubt it will be allowed to impact borrowing in the way you describe but I stand to be corrected and will take an interest in how things develop. Personally, I would always advocate repayment loans anyway. On that note, there was no need for that intellectually-challenged Osborne to implement S24: he could quite easily have specified all BTL loans to be capital+interest, much like residential loans. That would have had the desired impact of slowing the market and reducing risk. Makes one wonder what his actual objective was.
            Sorry but S24 is a perfectly reasonable tax designed to remove a bias in the housing market that has allowed your average BTLer to out bid any first timer from buying a house. Yes it may impact people who have over leveraged or over paid for houses but I'm sure the market will fix that as people sell.

            Personally I agree with Kenneth Clarke and there should be no tax relief on loans at all and there definitely should be none on asset classes where some people can claim tax relief (a BTLer) while others cannot (a house owner). So while you believe its an unfair tax, I don't believe it goes far enough....

            As for S24 increasing rents, it may for those landlords who want increased voids and voids in BTL destroy returns very very rapidly... I've seen enough evidence to say that supply and demand determines what the rent paid is nothing else (Aberdeen at the moment is an example where the highest rent paid for a 2 bedroom flat is 30% less than it was a year ago as demand has dropped).
            Last edited by eek; 8 November 2016, 18:56.
            merely at clientco for the entertainment

            Comment


              #26
              Originally posted by eek View Post
              Sorry but S24 is a perfectly reasonable tax designed to remove a bias in the housing market that has allowed your average BTLer to out bid any first timer from buying a house. Yes it may impact people who have over leveraged or over paid for houses but I'm sure the market will fix that as people sell.

              Personally I agree with Kenneth Clarke and there should be no tax relief on loans at all and there definitely should be none on asset classes where some people can claim tax relief (a BTLer) while others cannot (a house owner). So while you believe its an unfair tax, I don't believe it goes far enough....

              As for S24 increasing rents, it may for those landlords who want increased voids and voids in BTL destroy returns very very rapidly...
              MIRAS was abolished in 2000, so it was previously the case that home owners could offset mortgage interest against income. Clearly the government removed this 'perk' for one simple reason: to increase tax-take from a trapped group.

              The reasoning and implementation of S24 is the problem. It is retrospective, it will impact people who have invested prudently many years ago and those who are accidental landlords and those for who it is a long-term investment or a side income.... though perhaps as contractors we should not so surprised by the government using their time machine. It will lead to tax due on losses, and many will ask how that makes sense.... at least zero-rate that scenario!

              I disagree strongly with your comment about voids and 'destroy returns'. Rental demand will remain until building supply is increased, so tenants will suffer the initial fallout. The disconnect in government thinking is as always present - their initial greed, slaying of the apparent 'golden goose' rather than nurturing a growing economy - will again lead to greater discord in society.

              Anyway good luck to you. Hopefully perhaps prices will fall, allowing many to buy to live in or again invest for the long time. Or maybe the falsely propped up stock market will collapse, allowing us to buying dividend yielding stocks for the long term. Any way you look at it, it's a Ponzi scheme but we all need to do something to take care of ourselves in the long term - because sure as hell the government isn't going to be there for you save for a 'heating' allowance when you're in your old age.

              Comment


                #27
                Originally posted by ChimpMaster View Post
                MIRAS was abolished in 2000, so it was previously the case that home owners could offset mortgage interest against income. Clearly the government removed this 'perk' for one simple reason: to increase tax-take from a trapped group.

                The reasoning and implementation of S24 is the problem. It is retrospective, it will impact people who have invested prudently many years ago and those who are accidental landlords and those for who it is a long-term investment or a side income.... though perhaps as contractors we should not so surprised by the government using their time machine. It will lead to tax due on losses, and many will ask how that makes sense.... at least zero-rate that scenario!

                I disagree strongly with your comment about voids and 'destroy returns'. Rental demand will remain until building supply is increased, so tenants will suffer the initial fallout. The disconnect in government thinking is as always present - their initial greed, slaying of the apparent 'golden goose' rather than nurturing a growing economy - will again lead to greater discord in society.

                Anyway good luck to you. Hopefully perhaps prices will fall, allowing many to buy to live in or again invest for the long time. Or maybe the falsely propped up stock market will collapse, allowing us to buying dividend yielding stocks for the long term. Any way you look at it, it's a Ponzi scheme but we all need to do something to take care of ourselves in the long term - because sure as hell the government isn't going to be there for you save for a 'heating' allowance when you're in your old age.
                You need to check your history. Miras really disappeared well before 2000 it was worth peanuts well before then, in fact it was the changes to make it per property back in 1988 that was one cause of the house price boom in 88 and the crash in late 89...

                As for voids how much profit do you lose on a property if its empty for a month. If you are getting a £1000 a month rent, 1 month empty is going to cost you £1000. Voids are what kills landlords with loans more than anything else (been there done that in the past)... That's not a problem if you own the flat outright, its a big issue if you have a maxed out loan costing £600 a month.
                Last edited by eek; 8 November 2016, 20:01.
                merely at clientco for the entertainment

                Comment


                  #28
                  Originally posted by eek View Post
                  You need to check your history. Miras really disappeared well before 2000 it was worth peanuts well before then, in fact it was the changes to make it per property back in 1988 that was one cause of the house price boom in 88 and the crash in late 89...

                  As for voids how much profit do you lose on a property if its empty for a month. If you are getting a £1000 a month rent, 1 month empty is going to cost you £1000. Voids are what kills landlords with loans more than anything else (been there done that in the past)... That's not a problem if you own the flat outright, its a big issue if you have a maxed out loan costing £600 a month.
                  I suppose there are those that do and those that talk about doing. I'm happy with where I am. As always things could have been better and challenges have been faced but we have learned and evolved and grown. A month's void won't impact us much because unlike greedy & foolish investors we choose not to over-leverage and tend to be prudent in our assessment of situations. No one knows what the future brings but you have to do your best to prepare for it and not be reliant on anyone else.

                  Talking about learning from history, you might want to read up on the 'rental boom' in Ireland caused by their equivalent of S24 - a devastating tax policy that is now being reversed by the Irish government because of the impact it had on tenants and on the economy as a whole. Learn from history, move on and prepare for the future.

                  Comment


                    #29
                    Originally posted by ChimpMaster View Post
                    I suppose there are those that do and those that talk about doing. I'm happy with where I am. As always things could have been better and challenges have been faced but we have learned and evolved and grown. A month's void won't impact us much because unlike greedy & foolish investors we choose not to over-leverage and tend to be prudent in our assessment of situations. No one knows what the future brings but you have to do your best to prepare for it and not be reliant on anyone else.

                    Talking about learning from history, you might want to read up on the 'rental boom' in Ireland caused by their equivalent of S24 - a devastating tax policy that is now being reversed by the Irish government because of the impact it had on tenants and on the economy as a whole. Learn from history, move on and prepare for the future.
                    Sorry but your Ireland information is wrong (details are important I bet you don't have them). When S24 arrived there it resulted in rents dropping, its being reintroduced alongside a new MIRAS scheme to try and get some demand to remove some of the excess supply in their market... But thanks for proving my point that asset classes should treat the entire market equally...

                    As I really can't be bothered to discuss this here and bore everyone head over to Housepricecrash we've not had a landlord there for a while....
                    merely at clientco for the entertainment

                    Comment


                      #30
                      Originally posted by eek View Post
                      Sorry but your Ireland information is wrong (details are important I bet you don't have them). When S24 arrived there it resulted in rents dropping, its being reintroduced alongside a new MIRAS scheme to try and get some demand to remove some of the excess supply in their market... But thanks for proving my point that asset classes should treat the entire market equally...

                      As I really can't be bothered to discuss this here and bore everyone head over to Housepricecrash we've not had a landlord there for a while....
                      Even popular media is coming around to the impact of flawed Osborne policy: Ireland's scrapping of buy-to-let tax is 'warning to Britain'

                      I suppose people believe what they read/see but education is available all around us from those that have real life experience. It took me a while to learn to learn this but so many people are willing to help.

                      The fact that you peruse the pages of Housepricecrash speaks volumes; it is the equivalent of Leap2020 for stock market investors and one must be wary of such extreme viewpoints. I won't say any more because I feel for you, I really do, and I wish you all the best as a fellow contractor.

                      Comment

                      Working...
                      X