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  • Property-a-holics

    The hypocrisy of rental income vs. job income

    i have noticed from calling various mortgage institutions rental income as a source of income is treated as somewhat of a cautious thing. Normally you have to jump through more hoops to get institutions to give you a mortgage if you only claim to have rental and other sources of income than a job. However if you have a job earning the same amount that you get from rental income then institutions have much less issues.
    My accountant has stated to me the best way around this problem is basically to just hire myself and give myself a salary, just to please these institutions.

    Which brings me to why the hypocrisy in how rental income (also income from bonds and stocks) is viewed differently than job income.
    And how do BTL investors get to quit their jobs and buy more property after not having a "job to provide income" if the rental income is not looked up to such a high standard as job income.

    (NB by job i mean 9 to 5)
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    If the rental income is from unencumbered properties then lenders are far more accepting however if it's from mortgaged properties then most won't accept it and with good reason - you can't rely on it!

    Not only due to voids and maintenance which are unpredictable but mainly because your mortgages could and likely will rise at some point leaving your income lower.

    I know people feel the same way about job income but your boss isn't going to cut your wages if his mortgage goes up next month!

    I'd also add your accountant is completely wrong to advise you to take a salary from your rent; this will not fool lenders and will be ignored!

    Lisa
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com


    thanks for the reply, i think my accountant was being tongue and check about the turning the rent into salary but it still doesnt explain how a BTL investor can quit their day job and continue to buy more BTL properties, since they are now relying on rental income to finance the purchases of more property.

    It seems like you can earn all this additional money from rent but if you want more properties you still need to have a day job even if your rental income exceeds your job income.
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    Not at all there's a number of lenders who will accept rental income for B2L but not for resi. If you want to keep your options open then keep the job but it's by no means over if you pack it in.

    Lisa
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com

    I do this see as a bit of a conundrum for several reasons:

    1. First, as an employee, you are only a P45 away from being unemployed.

    However, if you have a number of BTL's, it's doubtful that they would all be void at the same time.

    So in some ways, BTL income is more secure than working income, because you can also become ill and not be able to work. If that happened with BTL, the rent would continue to come in because you are not exchanging your time for money.

    2. Much of the wealth creation industry marketing is based on becoming a property millionaire very quickly and giving up your day job. One particular company touted two doctors who had been on their course and bought 5 properties, so decided to give up their day job. When I asked the question about how they would get mortgages with only rental income, there was no answer to my question. (In that particular point, I also don't happen to believe that you can give up your job with only 5 properties).

    See Day job vs. property investor and Don't quit the day job and Can I quit my day job?

    3. It was recently reported that landlord's earn twice the average national wage. So, on paper, landlords look like a better bet than those exchanging their time for money. Landlords also hold assets that may have equity in them and the loan is secured against an income producing asset, so I see that as low risk to the lenders.
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    A number of lenders will accept income derived from letting property, including:

    - Aldermore
    - BM Solutions
    - Godiva
    - Hinckley & Rugby
    - Kent Reliance
    - Paragon
    - Saffron
    - Shawbrook Bank


    Tel: 029 2069 5480
    Web:www.propertytribesmortgages.co.uk
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    I agree with Property Tribes Mortgages and don't see what all the fuss is about.

    (22-10-2014 09:42 AM)Property Tribes Mortgages Wrote:  A number of lenders will accept income derived from letting property, including:

    - Aldermore
    - BM Solutions
    - Godiva
    - Hinckley & Rugby
    - Kent Reliance
    - Paragon
    - Saffron
    - Shawbrook Bank


    Tel: 029 2069 5480
    Web:www.propertytribesmortgages.co.uk

    In addition to some of the above, I also have mortgages with:

    - TMW
    - Virgin
    - Kensington
    - Woolwich
    - The Nottingham

    As well as MX naturally.

    All on the basis of our income being from buy to let.

    (We have a very small income from managing for others - about £20k gross between us - which I think is a tick-sheet item for one or two of them).

    Angela
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    Author of The Complete Guide to Property Strategies and The Complete Guide to Property Investing Success
    Learn more at http://www.completepropertysuccess.co.uk

    I also post property updates on my Facebook Page

    "It is the small decisions you and I make every day that shape our destiny" Anthony Robbins


    (23-10-2014 02:45 PM)Angela Bryant Wrote:  I agree with Property Tribes Mortgages and don't see what all the fuss is about.

    (22-10-2014 09:42 AM)Property Tribes Mortgages Wrote:  A number of lenders will accept income derived from letting property, including:

    - Aldermore
    - BM Solutions
    - Godiva
    - Hinckley & Rugby
    - Kent Reliance
    - Paragon
    - Saffron
    - Shawbrook Bank


    Tel: 029 2069 5480
    Web:www.propertytribesmortgages.co.uk

    In addition to some of the above, I also have mortgages with:

    - TMW
    - Virgin
    - Kensington
    - Woolwich
    - The Nottingham

    As well as MX naturally.

    All on the basis of our income being from buy to let.

    (We have a very small income from managing for others - about £20k gross between us - which I think is a tick-sheet item for one or two of them).

    Angela

    In addition to the list above, Handelsbanken will include BTL and investment income. They treat each client individually, based on an overall picture. In my experience they use a smaller multiple on the BTL/investment income than they do on salary.
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    It makes sense to me why lenders take this stance.

    All eggs in one basket?
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    (22-10-2014 11:09 AM)daniel_booth Wrote:  It makes sense to me why lenders take this stance.

    All eggs in one basket?

    is having a job not having all your eggs in one basket too ??
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    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.

    (23-10-2014 05:06 PM)dislexic_landlord Wrote:  
    (22-10-2014 11:09 AM)daniel_booth Wrote:  It makes sense to me why lenders take this stance.

    All eggs in one basket?

    is having a job not having all your eggs in one basket too ??

    Not if you have separate income producing investments/assets.
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