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They should be seen as two different parts of the return. If you purchased 10% BMV and did a refurb to add 10% to the value that is your return in the say first 3 months you made 20% in 3 months. If house prices stay flat for the next 10 years you did not see a 20% return over 10 years you saw a 20% return over 3 months and a 0% return over the next 9 years and 9 months. Also as I stated before you need to not forget that you take a 5% hit due to stamp duty and transactions. So for most people they are paying 105% to get a 100% proerty they are not getting BMV they are effectively overpaying or OMV when transactions and stamp duty are added.I am still not convinced that a typical buyer can get a BMV property or add much value. I know its possible I have in mind mind two cases when I definitely purchased BMV and two cases when I in hindsight overpaid. I suspect in a rising market people fool themselves into believing that they are getting BMV deals. If the transaction takes 4 months and you were in London in 2015 by the time you got to completion it all looked like BMV compared to what was for sale as the market moved up 5% during transaction.
Either way I am out of the market now I wont be buying any more, but nor will I be selling as I believe prices in London will double in the next 20 years and that is sufficient just about to bear the very high marginal rental taxes.
I too believe prices will double in the next 20 years .
That`s good enough for me and I believe will be good enough for many to plump for property now rather than shares
Everything in the years inbetween is just noise
Jonathan Clarke. http://www.buytoletmk.com
I don't think S24 should be considered through the prism of possible capital appreciation model
Based on what you seem to indicate marginal taxation without such appreciation makes for a busted business model
It isn't guaranteed whereas rent is and I reckon low mortgage rates.
Quite frankly capital appreciation is a bonus
Of course every business likes to think it will appreciate in value.
But in the meantime it has to be viable!
So without capital appreciation what do you reckon the business model looks like with S24?
It seems to me you are suggesting it becomes somewhat tenuous and doubtful as a business model.
So it seems unless you can raise rents substantially it is gamevover for the mortgaged sole trader LL who can't escape via incorporation.
That is an awful lot of LL and tenants!
But is it an awful lot of landlords?
The majority of landlords have only minor leverage or are completely unencumbered, and probably still in the 20% tax bracket, so S24 will have no effect at all.
If over-leveraged landlords manage to skew the market and increase rents (unlikely) then unencumbered landlords could actually benefit (if they are mercenary enough)
I agree if you don't have a mortgage S24 has no effect
But for Landlords with Income other then BTL ie employment ,Self Employment ,Investment Income Or Pensions even being Mortgaged of any kind can have effect
The only true safe way is No Mortgage No Other Income if you are invested in personal name
I don't think the attack on us is NOT finished yet
HMO may have Business rates and more licencing
Part 2 of Sec 24 is possible
I am surprised rent control has not been mentioned yet
I always wanted a big business having one or two with the hassle of being a Landlord was never my thing
I always wanted it to be a family Business and that's what I am building here with in a company
I have never met two Landlords the same and that's what is so special about being a Landlord Its the challenge
I don't think the government expects Section 24 to push up rents and therefore no need for rent controls. If they expect only 20% of landlords to be affected by Section 24 then in theory market pressures should prevent rents from rising. There does seem to be signs that some of the leveraged landlords are reducing their borrowing thus a further indication that rents, generally, should not increase.
I agree that we are likely to see part 2 of Section 24 but I think the government will wait to see the affect of part 1. I also think that house prices are due a correction - I know the SE is different - and that will also impact on what the government does next.
Hi Essex happy new year
I have seen a lot of blogs saying Landlords will put up rents
and Generation Rent see it as a threat
I really don't see what oppression to rent control
Of course Landlords would not like it but who ever listens to our opinions
95% of the population would welcome it
This is where this topic of rent really becomes interesting ? Company Landlords will not have to raise rents But personal BTL Landlords will have to raise rent to pay for the income tax
The level playing field will be very uneven between the two landlord groups
Quite a remarkable situation for 2017
Happy new year to you.
i think the market drives rent levels and a landlord only needs to be 5% over market rents not to get viewings. It's more difficult to judge with existing tenants as they would need to balance increased rent against the cost of paying for referencing and moving costs.
For me rent controls are a form of price fixing and that goes against a free market. I am not convinced that loads of landlords will need to put up rents, I think we have seen a lot of posturing as part of trying to negiotate that Section 24 should be reformed but I don't expect all the landlords that have been saying they will put up rents will actually do so. Reduced profits due to Section 24 or a void due to being out of line with market rents - logic says to choose the former.
I know personally I intend to raise rents between 3% and 5% a year
And when I have a property void I will look at achieving the Market Rent 75% of my stock is lower than Market rent at present
I think its the perception that causes my concern
If you look at TAXI and Bus Rail Fairs they are regulated and it would not be hard for the Govt to bring in Rent Control
The amount of Data is at hand to them Now LHA rates are all about Data
I don't fear Rent Control as 99% of my rents are within the LHA rates now
Again the Govt have a huge bill from LHA is rent control was to come in just think of how much the Govt would save on LHA Rents
I think its a Gift Horse to the Govt and would have great support with voters
Of course I am old enough to remember rent control in the 1980s when I started
Don't forget tenants can already apply to the FTT to review their rent level. The problem with further rent controls is that landlords always have the option of asking a tenant to vacate at the end of a fixed term and relet at a higher rent. Yes it would be a popular political move but I think counter productive.