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  • Tax

    Landlord of 29 years faces up to Section 24



    Denise Naylor is a sole trader landlord of 29 years.  Like many other property investors, she has a career and other business interests, and Section 24 has been a major shock to her.

    Despite this, Denise has taken action to ensure she can survive the ravages of the new tax regime, and she shares what she has done in this interview.  We hope you find it inspiring:



    Denise is also co-founder of the "Women in Property and Business" Network Group on Facebook, and runs a monthly networking event in London for women.  It's a really supportive and friendly group and I recommend that ladies check it out.

    If you have any questions for Denise, she would be happy to answer them.

    *Denise mentioned in the interview that she reduced her insurance costs by opting for portfolio insurance.  This is a service offered by our insurance partner, Alan Boswell Group, and they would be delighted to quote for portfolio insurance for PT members.  Give them a call on 01603 649736.

    SEE ALSO  -        The impact of the PRA on landlords

    UP NEXT -            Section 24 - landlords must take action now

    DON'T MISS -      Changing landlord dynamics & rent rises

    NOW WATCH: 

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    What a lovely calm reflective lady and an excellent interview bringing a sense of perspective to the problem.

    And Denise shows a great deal of relevant knowledge and good common sense. When i got over the initial shock of S24 I too had a long hard look at my route forward. I self manage so couldn't really cut costs there.

    My insurances were all moved under one umbrella a few years ago so no cost savings to be made there either. Maintenance is well under control. Rents have and will rise.

    But I looked at my contingency fund. Did it really need to be so big ?

    Earning a pittance in the bank I too decided I knew my stuff well enough and knew my market and decided to go big and buy one for cash. It increased my yield return on that contingency cash sat wastefully in the bank by about 6000%. It felt good to go against the grain. I did that in 2009/10 as well.

    The money it generates can be put aside for the tax bill or used to pay down or indeed further invested like i did in the good ol days. Especially if prices do take a dip with possible Brexit / Sec24 sell ups. Being counter cyclical is tough but gets easier I find if you have done it before.

    Firemen run towards fires while the public run away. Be a firefighter

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    Jonathan Clarke. http://www.buytoletmk.com


    Dear Jonathan

    Thank you for your complimentary response. I'm currently looking at my contingency fund earning next to nothing, and less than nothing in real terms. In fact, I'm starting to wonder if I can run my contingency quite low and if an unexpected expense arises, with money so cheap I can borrow short-term to cover that. My banks are continually offering me personal loans at around 3%. If I had to pay that for a few months it would not dent my profits severely.

    It's hard when you are someone who has been trained to be careful and has a track record of making prudent investments to have the fruits of your labour taken from you. But it happens. And energy spent worrying about it is wasted.

    It's good to hear of the actions you have taken and continue to take. I'm happy to be in good company.

    Best wishes for your future,
    Denise

    [Thanks to all of you who have watched this video; to Vanessa for inviting me; and for all comments]

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    Great video, with lots of helpful advice.  Thank you

    Starting 2017 as a "firefighter" sounds like an interesting challenge, will all the southerners cause a mini "spike" in the north i wonder?

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    hi CJ

    I can't speak for 'all southerners' but I married into the Bradford Naylors; hence my (small) knowledge of my chosen area! LOL

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    Nice advice. The general message is to cut costs, raise rents, sell up London property that has a lot of equity and move the money into Northern higher yielding property and secured peer to peer loans. We are seeing this theme or parts of it in a lot of conversations we are having with other investors.

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    Thank you so much Denise for sharing your knowledge, experience and expertise. Your ideas are constructive and very helpful to all unincorporated landlords.

    Like Jonathan, I already have all my properties under one umbrella insurance policy and like you I have sold properties this year and taken initial steps to pay down other mortgages, but as a landlord using two letting agents I have never, during < 20 years, tried to obtain a discount for the amount of business I give them. I like the idea of passing on my increased cost at least to some extent in this way as opposed to simply increasing rents and your approach has given me the confidence now to raise the question with them. 

     >>

    It has been clear for some time that the tax measures taken against the PRS are not isolated nor are they designed to address or correct a particular, evident problem. I for one have no doubt at all they are part of an ongoing process where post truth statements by the government, eg to create a level playing field with private household mortgagees, the numbers of PRS landlords who will be affected by the changes to MIR, etc also play a vital part in propping up these radical, and frankly inequitable decisions.

     >>

    So in my view we can expect more of the same and one obvious opportunity open to any chancellor once the present four-year graduated change to MIR is in place is to remove the basic rate allowance altogether, just as it was for taxpayers with private mortgages, justified no doubt when the time comes, by the same level playing field argument.

     >>

    I realise that one can only try and respond to known facts but my question please is whether you have factored this sort of eventuality into your calculations and whether your proposed business model is robust enough to deal with further changes of this nature?

     >>

    Anthony    

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    hi Anthony

    Thank you for your response. My short answer would be: No, My business model would not survive as drastic a cut as full abolition of all tax relief.

    I built up my portfolio, as did many others, on the basis of existing law. The Courts have ruled that a taxpayer is entitled to arrange his affairs to minimise taxation (I paraphrase). It would not be possible for me to reduce down my debt in such a short space of time. As I am now of retirement age going back to full-time work is not an ideal option, due to family commitments. And I do not play the lottery!

    However I am not planning to give up. Currently, I am exploring joint ventures with people whose tax position is more advantageous than mine and who can absorb the tax hit, to see if I can continue investing, increasing my cash inflow and speeding up the process of paying down debt. It will be an odd consequence if a measure that I suspect was introduced partly to de-risk the PRS, leads to more and more of us taking on more risky projects.

    As long as people need housing, there will be a demand for what we do and I intend to try to find ways to stay in property.

    best wishes

    Denise

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    Has any LL investigated as to whether a co operative like structure could be a way of avoiding S24

    So lots of LL put their properties into a co op structure and then are paid a divvy monthly

    Isn't a co op a sort of mass joint venture!?

    Might this be a way of avoiding S24!?


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    hello Paul

    Just a thought - isn't this how Housing Associations started? Originally formed by groups of like-minded philanthropists (OK, not LLs) set up as non-profits, each founder purchased one share and all profits were reinvested in housing. So, it's a proven workable model.

    best wishes, Denise

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