Updating post from Reddit.
I'm in the middle of purchasing my first BTL and I got slapped with this news yesterday:
https://scottishlandlords.com/news-and-campaigns/news/scottish-budget-2-increase-in-ads/
8% additional... This has doubled from 4% since Dec 2022. The rest of the UK I believe had just recently been bumped up to 5%.
Having read this post earlier in the week, I'm surprised to read so many are turning to S&S ISAs instead of BTL (this is a landlord Subreddit after all): https://www.reddit.com/r/uklandlords/s/M6aksnUEcb
It's really messing with my judgement right now. The only sane reason for me to continue with this is I keep telling myself that using leverage will still give better returns in the long-term, and that interest rates will continue to decline, although maybe not quite as fast as some may have first anticipated. Now I'm seconding guessing my decision in BTL.
If new investors like myself are deterred from investing in the PRS, won't this cause an even greater shortage in rental stock? What's the Scottish Government's logic here??
The government increasing tax on landlords is the easiest short term for fix for increasing tax revenues. It’s politically expedient because people generally dislike landlords.
I would love to see how much revenue this raises vs the ever increasing housing benefits bill. At the margin I would be staggered if this raises even 100 million yet the HB bill can go up by billions in a single year
Lol not to mention the reduced transactions which will directly reudce the amount of revenue they are able to raise. Its economic madness.
With regard to what devolved and eve national governments are thinking - Cooling down the landlord market will temporarily cause issues - yes. But in the long run, provided they truly meet this house building target, it will help ensure a ‘cooler’ more stable market. The problem is and are landlords that buy in bulk and take up a lot of stock, typically the corporate landlords.
But this is all a moot point when the real elephant in the room is low wage caused by our inherent need as a society for cheap goods (they aren’t cheap anymore), hence our historical high immigration statistics for cheap labour, and reluctance to demand better pay across sectors. We need to increase productivity and pay, and understand we have to pay more for goods. Do that, wage growth increases, and income to house price ratio improves, resolving a lot of the wider UKs issues, imo. Building more houses is also fine, we shouldn’t pull the ladder up under us. We should strive to help everyone up it as we climb up.
With regard to it being a good investment, run the numbers. I’m struggling to make sense out of mine being worth it, I don’t think I need it for retirement. However, they are collateral for cheap debt which I can currently make more with GIAs and ISAs when I draw money out on standard cash accounts alone, but I could invest that into a well diversified portfolio to bet on an even better return and pocket the difference while that debt devalues. Versus, second rate loans and unsecured debts which are both smaller and more costly.
If you’re doing BRR it’s also good, or HOA. Really depends, if just not standard BTL then you have to run the numbers yourself mate. See if it’s worth it, might be depending on how much it costs and what the going rental is for the area you’re interested in and the capital appreciation rate, plus if you suspect the area will be hot in future as per local market indicators and upcoming cultural shifts, new jobs created etc
With regard to what devolved and eve national governments are thinking - Cooling down the landlord market will temporarily cause issues - yes. But in the long run, provided they truly meet this house building target, it will help ensure a ‘cooler’ more stable market. The problem is and are landlords that buy in bulk and take up a lot of stock, typically the corporate landlords.
This presupposes that those living in rented accommodation want to buy... this is certainly not the case for many.
No, the point is that it takes up stock from others who want to buy first time, and thus raises the value by keeping supply lower. It’s not specifically targeted at renters. Although, given it’s a cultural phenomenon in the UK that having a house is a milestone, it probably is more the case than you realise. I’d need statistical polling data to verify, though.
this argument ism often made, I am less convinced. I dont know when LLs and FTB looked to buy the same property.
In fact I would say they look for completely different things, certainly now. The LLs who bought the nicer FTB property dont by these days, their money goes to S&S ISAs.
The MASSIVE increase in rental costs has made it far harder for FTBs to buy, the rent increase is largely down to costs and risks forced on LLs who pass this on the tenants.
We can’t comment without the data, though anecdotally my first residential house was certainly a LL house. I didn’t go for new builds, as I do note many young folk do. But then again I am more willing to DIY and fix things and I like to get value for my £££!
I recently ran the numbers. I'm going to struggle to get anything that is in a sensible area for me that will take less than 10 years to break even relative to the stock market.
Add that to all the extra risk, time & effort associated... Yeh no thanks.
Presuming the stock market always increases which it doesn’t.
Presuming that historical trends over several decades can be used as a base line, as nothing has materially changed.
Like you would be assuming certain things with a rental. Rent increases, void periods, maintenance etc.
And the worst of all, non paying tenants sitting in your house for 12 months without paying rent .
One positive is demand will be through the roof so if you do buy you won’t be short of tenants.
Equity has always been a better investment than property.
Buy to let relies upon leveraged returns. Even then you’re just accepting higher risk, often hidden to the investor, they don’t recognise the risk.
Someone in buy to let is often supported by a very well paid job. e.g. they are subsidising their property investments.
I respectfully disagree. At the end of the mortgage, other people have bought you a house, And you’ve had 20 years of rental income. No equities I own have increased one tenth as much, and dividends average about 4% Of course you get hit with Capital Gains Tax when you sell
Not quite right. If the property has increased in value over 20 years, and you sell it and after you paid off the mortgage fair enough. But it a interest only mortgage and the tenants don’t buy you the house.
If you haven’t put money aside to pay it off, you’re probably not doing it right. Though many argue you should just leverage debt and never pay it off. £40k 20 years ago would buy you a house. Now it gets you a Tesla. Average rents would more than cover a £40k mortgage these days
Exactly, that’s why the BTL model is dead. You don’t put money aside to pay it off.
Leverage equals higher risk, and in BTL being ignorant of the risks.
40k 20 years ago is 200k if invested in equity.
It’s too risky. Risky because it can take ages to get back the property if a tenant stops paying the rent. Risky because of more cost and regulation in the future
Most of the legislation is just fire regs. That’s a good thing. On the other hand. Our council has introduced a £700 ‘registration’ fee for every rented property. Another rent rise for tenants.
Welcome to the club. I have been paying that selective licence fee since 2015, Newham was the first council to introduce it then Waltham forest followed shortly after . Now every council is jumping on the bandwagon, it just so happens that my portfolio is located in those two boroughs. In 9, years , I only had 1 visit from the council? I thought the money was going to be used to increase inspections of rental properties (which I don't mind ,it's always good to have inspections from third parties). Where is all that money going ?
The logic is that with a housing cost emergency we can no longer afford to subsidise the profits of BTL landlords. It pushes up both rents and house prices in general making it harder for everyone to get a home. The ability of everyone to get a decent home has to take greater precedence over the ability to extract profit.
They are setting up for a catastrophe down the line when people won't be able to find rented accommodation.
It’s already the case. You only need to visit any of the main Scottish subs to see people ranting about the price and competition to try to rent
Also the loss of letting agents, gas safety checks as it is mainly landlords that do these yearly, all the other services that rely on rental markets also the taxes all these services provided. I though gov had a shortfall which they stumped up quickly via taxing the landlord but it will obviously wipe out a whole load of industry, jobs and taxes. What can they tax next? Probably raise sdlt for homebuyers to fill that deficit.