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There are many LL in your position not that the LL haters would believe you.
To them every LL is rolling in money and making enormous profits out of poor hard done by tenants.
Such tenants would be truly horrified if they actually knew the financial position of their particular rental property.
I believe that S24 has been the final straw for those LL especially those more recently in the game to realise that to continue with certain properties is just not worth the hassle anymore.
CG on these properties is unlikely in the near future and with S24 plus the other recent cost burdens LL are looking just to get rid of these dud properties.
Such properties are just a drag on a LL time for no appreciable benefit.
Most of these LL want a payoff in about 10 years time.
These properties are unlikely to achieve that so LL are deciding to cut their losses and sell these dud properties.
It is just a crying shame that these properties are not being snapped up by FTB.
I would love there to be a resurgence in FTB buying.
But we all know this won't be occurring the same as we know S24 was never about 'levelling the playing field' for them.
S24 was only ever political and an opportunistic tax grab.
It is pointless LL bothering to just keep things breaking even.
Just isn't worth the hassle anymore.
S24 has been the final straw.
The hilarious thing is, the op's numbers look amazingly good in one sense. £550pm on an £85k property. Where I live you might get £650pm on a £200k studio.
To me, they look pretty good but not amazing. My most recent purchase gets £525pm and cost £90k. I get £545pm from one that cost £85k in 2015. Those are 2 bed terraced houses.
I used to but 3bed Tce on end Peter but with s24 I find its just not worth the effort
I used to spend 25k a time with 75% mortgage and with 3% Stamp duty now I would need to invest around 28K for a profit of around £285 a month at best with no repairs Voids ect
and a tax rate at 40% its just not worth the effort
stick it in a good ISA fund and I will get 8% £186 tax free its just not worth doing
I don't think Capital Growth on a 95k house will make a lot of money in the next 10 year
and If I were to invest I would use Capital and repayment too
Learn Change and Adapt ?????
When taking small sums of income you have to look at the big picture as you say. A boiler or anything similarly large is just going to blow away any profit and even put you into the red. As part of a portfolio, if efficiently run, it can be different, but there will still be costs involved in running a project of say 20 of these compared to 2 or 3 larger investments. Its one of the reasons why I stopped with residential, particularly the lower income end, since the time I saved could be used constructively elsewhere. You have to start somewhere, but this of course doesnt mitigate the risk and you do need a bit of luck initially to get the ball rolling and get you to a place where you have a bit of a buffer.
I would agree with you
I have made a lot of money from this sort of deal with no regrets
But today with Taxation I just don't think its worth the effort
If the 85K house fell to under 60k I would consider buying again but anything more and I would walk away
Borrowing is risky ?? why take risk with an 85K house for a profit at best of 3K and taxed at 40%
I agree that at 40% they might not be worth it, but I am not paying that.
The 85k property bringing in £545pm was unmortgagable due to the area it is in. But the job centre across the road has closed and the major regeneration project 5 mins away is well underway, so there is a decent chance of capital growth.
The 90k property bringing in £525 was bought through my company. A similar house on the same street has sold for £105k so I am pretty certain of growth there. I think my seller undervalued the difference the nearby tram station makes. It is renting for £50pm more than he had let it for.
Both properties had boilers less than 1 year old when I bought them.
If you can stay a 20% tax payer BTL on your own name works
If it puts someone in higher rate Tax I'm not sure it can work that well for the effort and the risk involved
I would opt for ISA and Pension Investments just because of the Tax Brakes
If I am not too late to the party I have some simple advice to getting started: Now more than ever you need a way to generate equity from your first property if you want to grow a buy to let business. To do this and to make good cash-flow you need to:
Be patient - you have to get a great deal on a property. We have had a long cycle without a crash. The odds are not at their best for future growth
Create equity - the first property is the hardest, and you will wait a long time to expand. You need to find a property you can add value to.
Create more equity - find a location that's going to outstrip others in terms of house price growth (buy an ugly house on a good street, near a new school, a new train station etc)
You need to get a good yield. How do you eek out all possible income from you purchase? Forget flats - the charges kill your returns. Manage everything yourself - letting agents eat your profits and don't look after your customers like you would. Provide great customer service and your tenants will help you minimise your voids - less work to do in changeover and will help 'sell' your flat to next tenants looking round.
Re-invest your profits - put any money you make in an index tracker or mutual fund - compounding your returns.