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A new analysis of the private rental sector suggests the typical buy to let investor will be lucky to generate annual returns above 2.5 per cent before 2021.
The latest BondMason index says the issue is down to the familiar cocktail of higher costs and restricted fiscal benefits.
BondMason says the effective tax rate facing landlords has ratcheted up from eight per cent of their rental income at the start of 2015 to 47 per cent today.
It will go up further to an effective rate as high as 56 per cent next year, when counting the non-deductibility of mortgage interest. Full/source articleSEE ALSO - Number of private landlords in declineUP NEXT - Create and turbo-charge your "income engine"DON'T MISS - If you have a salary, S24 is a killer!NOW WATCH:
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
I think this is spot on
This is why I set my min yield of 8%
others will say it can be done for less I think when you take every thing into consideration 8% is worth doing any thing less is not
Others will say yes but you have to factor in capital growth ?? but you have to keep the investment going 365days of the year to get the capital growth.
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
"Others will say yes but you have to factor in capital growth ?? but you have to keep the investment going 365days of the year to get the capital growth."
Agree with this approach.
I use a simple calculation
of purchase price and the yield
ie 100k value and 8% Yield £8000 a year rent
I know others use other methods but i keep it simple
Works for a vanilla model. But if you have lots of other costs, it's not a good comparison. For instance in an HMO, you might pay for broadband, a cleaner, council tax, gas, electric, water, tv licence. On top of the mortgage and repair costs. I much prefer ROI. % profit on money invested (deposit, renovation costs & fees/taxes) created by rental income, after all running costs.
Do you rebase the purchase cost annually (to reflect current capital value) via a rent increase?
some think this is greedy but i want to cover the costs of purchase ,which are not recoverable on eventual sale
Why do you think this? The simple government leaflet says you can deduct the cost of buying and selling the property from your gain and the relevant act allows you to deduct:
the amount or value of the consideration, in money or money’s worth, given by him or on his behalf wholly and exclusively for the acquisition of the asset, together with the incidental costs to him of the acquisition
with the definition:
the incidental costs to the person making the disposal of the acquisition of the asset or of its disposal shall consist of expenditure wholly and exclusively incurred by him for the purposes of the acquisition or, as the case may be, the disposal, being fees, commission or remuneration paid for the professional services of any surveyor or valuer, or auctioneer, or accountant, or agent or legal adviser and costs of transfer or conveyance (including stamp duty)
Has this been superseded by a new act?