Buy to let stamp duty surcharge and other related news

[Martin@AS Financial]

BTL isn't dead for newbies. 3% as a one off payment doesn't mean you can't still make a profit. For instance, you might simply write off any profits in year one.

Or, rental prices might just go up a bit as a function of overall house price.

It is going to be harder to get into with the stamp duty increases though. One of the main consequences is that BTL runs the risk of being only available to the very wealthy. Using an example of a £400,000 purchase price under the old rules you would have paid £10,000. Now you will have to stump up £22,000 which is not a small sum.


The flip side is that landlords have recently enjoyed historically low rates - Coventry Building Society currently for example have a 1.99% 2 year fixed rate.

The 15 property rule is interesting - maybe the government feel they can regulate the market better if it is run by corporates. I wouldn't hold my breath though. The difficulty that tenants will face is that if they rent through a company they will lose direct access to their landlord (I'm talking about the landlords that own a small portfolio of one or two properties and manage them themselves). Lets say for example your boiler blows up and you rent off a large company. It will be the same as when I phone say EE - your on hold for 30 minutes after getting passed from pillar to post with no one wanting to take any ownership. Of course there are rogue landlords within BTL. However companies will have to be even more profit driven and one way of doing this will be to link rents to annual inflation pushing prices up further.

My own opinion throughout the years is that BTL should always be a long term investment and not something you do simply for a couple of years.

[d000hg]

It is going to be harder to get into with the stamp duty increases though. One of the main consequences is that BTL runs the risk of being only available to the very wealthy. Using an example of a £400,000 purchase price under the old rules you would have paid £10,000. Now you will have to stump up £22,000 which is not a small sum.

Don't lenders normally tag the stamp duty onto the amount being borrowed, or at least allow you to do this? Or does this effectively increase the amount you need to stump up as deposit (or drive up the LTV)?

I rather feel that buying houses as an investment - chunks of property worth hundreds of thousands of pounds - should be for the wealthy. We're not entitled to be able to run a BTL as part of being middle class and having a half-decent salary. A house is a MAJOR asset to be responsible for. If you've just got £20k to invest, put it in the stock market or something else rather than having all your eggs leveraged in one basket.

But then as I've said before I wish you could buy shares in housing so e.g. 100 people own 10 houses between them, amortising risk and so on.

[Martin@AS Financial]

Don't lenders normally tag the stamp duty onto the amount being borrowed, or at least allow you to do this? Or does this effectively increase the amount you need to stump up as deposit (or drive up the LTV)?

I rather feel that buying houses as an investment - chunks of property worth hundreds of thousands of pounds - should be for the wealthy. We're not entitled to be able to run a BTL as part of being middle class and having a half-decent salary. A house is a MAJOR asset to be responsible for. If you've just got £20k to invest, put it in the stock market or something else rather than having all your eggs leveraged in one basket.

But then as I've said before I wish you could buy shares in housing so e.g. 100 people own 10 houses between them, amortising risk and so on.

From memory (and we are talking ten years ago) Bank of Scotland used to let you add the stamp duty on when you bought a residential home.

[MarillionFan]

Don't lenders normally tag the stamp duty onto the amount being borrowed, or at least allow you to do this? Or does this effectively increase the amount you need to stump up as deposit (or drive up the LTV)?

I rather feel that buying houses as an investment - chunks of property worth hundreds of thousands of pounds - should be for the wealthy. We're not entitled to be able to run a BTL as part of being middle class and having a half-decent salary. A house is a MAJOR asset to be responsible for. If you've just got £20k to invest, put it in the stock market or something else rather than having all your eggs leveraged in one basket.

But then as I've said before I wish you could buy shares in housing so e.g. 100 people own 10 houses between them, amortising risk and so on.

From memory (and we are talking ten years ago) Bank of Scotland used to let you add the stamp duty on when you bought a residential home.

Lenders don't add on stamp duty to the mortgage, they tend to add on the legal costs and any arrangement fees. I don't believe any lender has ever added on the stamp duty.

Buying property to rent isn't just for the wealthy, it is for the middle class and the changes are an attack on middle class Britain.

And finally, yes you can buy shares in housing, there are plenty of companies or funds that you can stick your 20k into for a return. Safe as houses.

[d000hg]

Buying property to rent isn't just for the wealthy, it is for the middle class and the changes are an attack on middle class Britain.

The last decade it's been the "done thing" for every middle class family to "get into BTL" but surely that's not traditionally been the case? Wasn't it a side-affect of the housing boom and/or the crazy interest rates?

And finally, yes you can buy shares in housing, there are plenty of companies or funds that you can stick your 20k into for a return. Safe as houses.

Interesting. Funds i.e. you can put them in your ISA, but the underlying asset is housing & rental income rather than stocks?

[ChimpMaster]

Don't lenders normally tag the stamp duty onto the amount being borrowed, or at least allow you to do this? Or does this effectively increase the amount you need to stump up as deposit (or drive up the LTV)?

I rather feel that buying houses as an investment - chunks of property worth hundreds of thousands of pounds - should be for the wealthy. We're not entitled to be able to run a BTL as part of being middle class and having a half-decent salary. A house is a MAJOR asset to be responsible for. If you've just got £20k to invest, put it in the stock market or something else rather than having all your eggs leveraged in one basket.

But then as I've said before I wish you could buy shares in housing so e.g. 100 people own 10 houses between them, amortising risk and so on.

Lenders won't allow you to add SDLT to the loan, not any more anyway. So it's effectively another lump sum that you need to have saved up front, hence why so many BTL investors are up in arms about it (see Martin's £22k example ).

BTW there are ways to buy shares of houses. I can't remember what these companies are called now but you can invest in 'shares' of rent-profitable houses. Not one for me, I might add.

You won't be surprised that I don't agree with your view on property as an investment for the middle classes. Yes, property has risen in price due to cheap printed money but there is a real underlying asset and the income from it.

The government has virtually decimated every single investment that the middle classes can make, and pensions aren't worth (or won't be worth) the pot you'll be left to p1ss in. The stock market is running on fumes, against propped up global intervention.

So how will anyone fund themselves in retirement? You've got to think of something right?

[MarillionFan]

The last decade it's been the "done thing" for every middle class family to "get into BTL" but surely that's not traditionally been the case? Wasn't it a side-affect of the housing boom and/or the crazy interest rates?

Interesting. Funds i.e. you can put them in your ISA, but the underlying asset is housing & rental income rather than stocks?

Not quite. There are a few companies and funds that buy properties to rent out. You get a dividend payment based on the profit they make and the shares can go up and down. Still quite traditional, it's just they specialise in rental property. It would be the same as you doing a Ltd company and sticking lots of BTLS in it.

[d000hg]

If you can buy shares in housing rather than having to buy a whole house that seems a good idea for the middle classes. Spread your risk over several properties and actually use your own money. As does the stock market with the much improved ISA rules in terms of what you can put in and what you can spend it on.

Funding your retirement by borrowing hundreds of thousands of quid just doesn't seem right to me. Besides which, all these people relying on their mortgaged BTL for their retirement are going to be screwed when interest rates rise.

You can still have a BTL, you just have to save up a bit more first. I think that's OK.

[MarillionFan]

Don't lenders normally tag the stamp duty onto the amount being borrowed, or at least allow you to do this? Or does this effectively increase the amount you need to stump up as deposit (or drive up the LTV)?

I rather feel that buying houses as an investment - chunks of property worth hundreds of thousands of pounds - should be for the wealthy. We're not entitled to be able to run a BTL as part of being middle class and having a half-decent salary. A house is a MAJOR asset to be responsible for. If you've just got £20k to invest, put it in the stock market or something else rather than having all your eggs leveraged in one basket.

But then as I've said before I wish you could buy shares in housing so e.g. 100 people own 10 houses between them, amortising risk and so on.

From memory (and we are talking ten years ago) Bank of Scotland used to let you add the stamp duty on when you bought a residential home.

Lenders won't allow you to add SDLT to the loan, not any more anyway. So it's effectively another lump sum that you need to have saved up front, hence why so many BTL investors are up in arms about it (see Martin's £22k example ).

BTW there are ways to buy shares of houses. I can't remember what these companies are called now but you can invest in 'shares' of rent-profitable houses. Not one for me, I might add.

You won't be surprised that I don't agree with your view on property as an investment for the middle classes. Yes, property has risen in price due to cheap printed money but there is a real underlying asset and the income from it.

The government has virtually decimated every single investment that the middle classes can make, and pensions aren't worth (or won't be worth) the pot you'll be left to p1ss in. The stock market is running on fumes, against propped up global intervention.

So how will anyone fund themselves in retirement? You've got to think of something right?

WHS

I think the pension hit is worse than the BTL.

George is actually making changes now that are going to have a major impact in 15-20 years from now.

Removing the 'benefit' of higher tax relief on pensions, while hitting the profitability of BTLS and allowing people on retirement to take out all of their money from their pension is a triple whammy.

People will now start saving less in their pensions because of the loss of tax relief & they won't be investing in BTLS. By default they'll probably start to spend a little more instead of saving. Government saves money on the tax relief and raises money on BTLS. They get additional receipts from taxes as people spend more and save less, and then on retirement the pension they have is worthless so they'll take the cash out and most likely spend it.

Ticking timebomb for people retiring in 15-20 years, you mark my words. Every pensioner will be skint.

[d000hg]

Not quite. There are a few companies and funds that buy properties to rent out. You get a dividend payment based on the profit they make and the shares can go up and down. Still quite traditional, it's just they specialise in rental property. It would be the same as you doing a Ltd company and sticking lots of BTLS in it.

I see. The thing I'd love to see is something more transparent, I don't know what this would be called - more like a cooperative or is that entirely different? e.g. the value of your 'shares' would directly be based on the value of the portfolio and the rental income in the bank. If a house is sold, the funds go in the collective 'pot', etc.

Maybe I should launch it as a plan B. Who wants to invest £30m seed money?