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I’m not sure if I’m missing something here but the figures aren’t working for me. Please excuse the rubbish copy pasted spreadsheet but would really welcome your experience. Am looking at a flat costing £85k with a tenant in situ paying £550 per month. Not sure if I will hit the 40% tax rate so have included calculations for both but with set up fees I still wouldn’t make any money for a few years. Do you just count on the capital gains over time for profit or am I missing a trick here.?
Property costs 85k and would put a deposit of 25k
Mortage interest only fixed for two years includes arrangement fee spread over 24 months. Monthly amount
buildings insurance and rent guarantee cover (annual costs £157
agent fees for full management @ approx 10%
Total outgoings per month with full management service
profit per annum
with one months void
profit with one months void
If I understand your spreadsheet correctly, your tax charge is on your £242 per month profit, not £550
Full time Landlord in WestYorkshire, mentor and property education to new and inexperienced PRS investors. 25+ years of working knowledge. RLA member http://www.landlordgeoff.co.uk [color=#800080]
I worked out the tax on the whole £550 at 20% and 40%. Am I right that with S24 the whole £550 would be taxable?
With respect, I don't think you understand what S24 is. It is a tax relief (or lack of), not a tax in the true sense of the word.
My advice would be to do a Feasibility Business Plan for your first 3 years projections, and consider all the other aspects of a BTL purchase rather than just the financial, because these will impact on the financial.
Hi - am completely new to this so I freely admit I don’t understand S24 - am learning lots from the folk here who kindly and freely share their expertise. Are my calculations on tax incorrect - what should they be?
Also not sure what you mean “ consider all the other aspects of a BTL purchase rather than just the financial’. Sorry if I’m being dense - could you explain?
Don't forget the Lettings Agency fee will be + VAT, so £55+VAT.
And in answer to your original question, based on that deal, you won't make (hardly any) profit.
My first couple of BTL were similar deals but were houses so no ground rent etc. With a couple of interest rate rises and items to fix you can kiss goodbye to that 'profit'.
So do you think it isn’t worth considering even as a long term investment that might increase in value? It’s right by the seafront in Weymouth so wondering whether holiday let might be better. Feel another spreadsheet coming on.I would really love to get into property investing but struggling to see how to make it work. Is it better to flip one first?
Now factor in just one eviction which could take 10 months.
Your alleged investment becomes a liability! !
Unfortunately the LL haters don't understand the sensible figures you have provided
With S24 and LA fees and inability to source tenants who qualify for RGI your alleged investment becomes not so! !
Let me give you another view
with 25K invested in good Managed funds you could invest in a ISA free of all taxes and draw an income of say 5% tax free £1250 a year or £104.00
If your a Higher rate tax payer your net yield will go down
Have you factored in voids Non Payers and Repairs say a Boiler
I have archived 8% without all the hassle of being a Landlord
I have returned over 40% in the past 3 years and that works out on a 25k investment of around £10000 or £5000 a year which works out at £416 free of all uk Taxes
the figs you show here are the very reason I don't invest in BTL in the old fashioned way of 25%/75%
Of course others will say different and they will say you have growth on 100% of the investment which is possibly true
But when you look at BTL as an Investment in 2017 its taxed so high I just don't think its worth the effort or the risk
I know you will not want to have my views but its what I see today in BTL
the game has changed leveraged Landlords are taking a huge risk in my opinion
Learn Change and Adapt ?????
Thank you - very interesting points about managed funds and worth exploring. The plus side for me of property is that you have something to show for it if it all goes wrong e.g. a property, but with higher risk stocks and shares you could end up with nothing to show for it.
I don't do high risk ?? I pick fund managers who have long track records
I am not a speculator I'm an investor
My advice would be seek advice from a good IFA before you buy a property
BTL is not without risk prices can fall Interest rates can wipe out profits and the Big one is the Tenant may not pay you
If your leveraged and don't pay your mortgage you can lose it all
I have been a Landlord for over 30 years and I have seen a number of crashes and its not nice believe me
Property prices in the NE are still 20% lower than they were in 2007
BTL is not a dead cert
Don't put all your eggs in one basket The Govt in general are now against Landlords
That's why they are taxing BTL as much as they can and I believe more will come.