Hi I'm trying to find a way of meeting financial requirements,I own (I have mortgages on them) 5 properties that I rent out,where the income is more than the £18,600 however I can't find anywhere where it says I have to disclose what I pay out in mortgages etc for same properties,I can't imagine it's hat easy because if I include what I pay out then I'd be back to square one where hardly any income left ,cananyone help Ray
Was thinking of investing myself. found this http://www.telegraph.co.uk/investing/buy-to-let/nine-ways-to-increase-your-buy-to-let-profits/
From that article...... In a nutshell, landlords will no longer be able to deduct the cost of their mortgage interest from their rental income when they calculate a profit on which to pay tax. In other words, tax will be applied to the rent received – rather than what is left of the rent after the mortgage interest has been paid. So tax rates will, for some, exceed 100pc: landlords will have to pay all of their profit in tax, and then pay more tax still. Doesn't sound like a very wise investment. I had a couple of apartments in London that I bought as an investment, a few years back, that I rented out. With all the management fees and expenses that the tenants claimed almost monthly, I don't think I ever had a single month where the profit paid for the mortgage.
having been a tenant in several properties--and a managing agent years ago---and knowing people who were landlords--i can honestly say i wouldnt touch a buy to rent deal with a bargepole.
The tax changes will affect the higher rate tax payers hardest but for those paying 20% tax there won't be a hugely significant change. Currently 40% and 45% tax payers can reclaim costs at those rates but this is being reduced to 20 %. Corporation tax is currently 20% so it does seem odd that higher rate tax payers can offset costs at such a high rate. The change at the lower level as where you only get a tax credit rather than being able to offset the outgoings against income. Also it could push some tax payers into the higher level. I have three investment properties which do very well for me but I have been careful with my chosen properties and markets. A lot of planning went into it in advance and I have never regretted doing it for a moment. If I could afford to take on more properties I would do but my plan was to pay off the mortgages by the time I retire so that I can enjoy a comfortable lifestyle from the rental income along with my pensions - and I am sticking to that plan. Across my three properties I achieve over 6% return on investment which is more than I could get in a bank account. Also the values have risen by approx. £75k since I first ventured into it - although that is secondary consideration as the rental return is key for me. I have also paid down £75k off the mortgages in the last 3 years so my (paper) gain from this venture is roughly £150k. Not bad considering that this is all borrowed money. There are plenty of opportunities to make good money from buy/borrow-to-let but you need to look at areas where the return will yield a minimum of 5% against the purchase price - plenty of opportunities to do this in the Midlands and North of England. Properties allow you the chance to be flexible with your finances and plan for tax minimisation (all within the law of course). My ultimate objective is to pass my properties to my children upon my death, thus avoiding Capital Gains Tax, but releasing equity from them and passing it on to my dependants which will minimise Inheritance Tax.
Welcome to the forum Tony, you appear to know your stuff and obviously have put a lot of time in researching the buy to let market etc.
My friend has a business thats manages and helps people invest. He always says avoid any vanity purchases. The returns come with targetting the lower tax band tenants and what they can afford. I'm tempted to try when the marital home sells. Just depends how it balances against my own rental costs but I would have no mortgages and could probably afford a couple of places.
Tony,what would your ROI have been had you owned the rentals out right from the word go? Personally,I`m not happy with 6 or 7% and we do far better than that with our investments over here... 10 years ago I was getting 7.5% tax free from a IOM savings account but that all went pear shaped after the "credit crunch" and so we reinvested! I think your general strategy is about the best one can hope for in regards long term income returns in the UK so well done..Keep on truckin!
Hi Boots, I'm sorry but I don't understand your question. How would I own the rental properties from the outset? They have to be purchased, built or possibly inherited I guess but to get a ROI there has to be I in the first place. There are different ways of looking at the percentage return but the accepted one is to take the annual rental income against the purchase price (plus the cost of any improvements). I could look at it this way that, as all of the money was initially borrowed, I am achieving a net monthly income currently of approaching £1k (rental income after interest and agents fees have been deducted) without putting any of my own money into the investment. That's effectively free money - although there is an element of risk, which sits just fine with me. On top of that is the capital gain of the properties, which as previously mentioned, for me, is just a paper gain. However if I was to re-mortgage the properties I could release that gain tax free. This is one way to reduce my Inheritance Tax liability in the future. In my early 20's I was considering becoming a financial advisor and knew a few people in that role. One thing that stuck in my mind was the advice to make your money work for you rather than work for your money. It's taken me a few years but now I understand how it can be done.
i'm sure if it was that easy everyone would be doing it. ive seen enough tv programmes showing people getting into buy to let opportunities only to find difficulties in finding tenants--or even worse non-paying tenants--all the while paying those buy to let mortgages. and its proved all to easy to suffer capital losses rather than gains.
That was the scenario that I went through with my Buy To Let properties in London. Management fees, tenant not paying, tenants always claiming something was broken or not working meaning I was always calling in electrician, plumber etc, periods of no tenant plus income tax, I was barely making the mortgage repayments and of course the appreciation on the property was never as expected. Time you include the fees for buying and selling the properties, it was not a great investment. Most financial advisors I have ever spoken to say the same thing, that property is not an ideal investment, especially when considering the fact that the money is tied up pretty solid and not easily retrievable should you choose to switch your investments around. Im happy with my 13% ROI tax free in Dubai.
Very informative this, especially as I've been making a loss on letting for the last few years and now trying to sell
My question is simple Tony.. If you had paid for your three properties in cash 100% (no mortgage`s) how many years would it have taken to double your original investment after ALL expenses,taxes etc? Property prices in the U.K can go up and they can go down so lets leave any property price gain or loss out of the ROI equation for now.. I`m only interested in learning about an average generated monthly income % in real terms for now.. Cheers.
In my case Boots I don't think I would ever have been able to double my investment. It would have taken 25 years, assuming 100% occupancy and without taking expenses and income tax into account to have recovered my investment, i.e. the purchase price.
It's not for everyone. To get into that position you have to have the finance available to make the purchases. There are TV programmes such as Homes Under The Hammer that have many successful landlords, some of whom have no other jobs. I spent many months researching before taking the plunge and then 'risk assessed' every potential property before making an offer. The properties I bought are modern and therefore shouldn't incur serious maintenance costs (yet). I wouldn't touch flats or apartments or anything that is leasehold or has communal or service charges. I also wouldn't go anywhere near student accommodation. That is high risk - high reward, whilst I'm not that greedy or crazy. I target the professional, middle class families market and ensure that the catchment area schools are either rated Good or Exceptional. Families will tend to stay longer as they don't like to change schools. Transport links are also very important and all of my properties are close enough to main roads, bus routes and even rail/tram stations. All the properties have garages and off road parking. All are also relatively close to major employment areas whilst being located in pleasant suburbia. Crime statistics were checked along with how that area tends to vote in local and national elections (blue). My agent fees are 6% and no VAT. This is for a fully managed service so that I do not have to deal with any headaches should they arise. Fortunately I haven't had any of the issues you mention and haven't had any voids of longer than 2 days. All properties look really nice and I would be happy living in any of them. If they are desirable to me then they should also appeal to others. All financial advisors that I know have several buy-to-let properties. Maybe they advise against properties as they make more money from other forms of investment. If you wish to source money quickly you could re-mortgage rather than sell. If you had to sell shares, gold etc. quickly you could find yourself at a time when the market is poor so there are no guarantees with other investments. After management fees, insurance, gas checks, boiler servicing etc. the return on investment is about 5.4%
Thank you for your kind words Joshua. They tend to be nicer areas, better neighbourhoods, lower crime (white collar crimes don't appear on Police databases ).
Doesn't that also mean that your purchase price will be considerably higher along with running costs, rates, council taxes (or whatever they're called these days) etc.
