yes, no doubt there are.
And you say these are people with empty homes advertising for tenants?
It must be winter.
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Smart meter / off-peak electricity question
- Thread starter Mottie
- Start date
yes, no doubt there are.
And you say these are people with empty homes advertising for tenants?
It must be winter.
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Beware that just looking at a snapshot of what is on right move at any particular time is biased towards flats that (a) take longer to let and (b) where tenants don't stay for long.
You may be right, though. I'm just encouraging you to think about it.
Yes, you can discriminate against poor people. This used to be done by asking for a bank reference, where the bank would be asked "is this person good for this much rent?" or an employer's reference, where the employer would be asked "does this person earn what they say they earn?". More recently, I've seen landlords just ask for the last few bank statements. This is obviously a huge privacy issue but potential tenants seem to put up with it, if it means they can have a decent shower.
You can always set the rent low so that poor people can afford it more easily.
I would go as far as saying that if you have to raise a mortgage to pay for your building then it may not be worth doing.
I would go as far as saying that if you have to raise a mortgage to pay for your building then it may not be worth doing.
I'm not a charity so not interested in helping the poor. That's what social security's for isn't it? Or perhaps I'll leave that to you. The build will be entirely funded from savings that are not earning much in the way of interest.
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You think you are an island entire of itself? You are wrong.
My reply was sarcasm.
It was you who asked if it was allowed to discriminate in favour of the better off.
Fair enough. That may work, then.
So was mine. I thought it was a bloody good idea! Something to consider when looking for a tenant. Don't want to end up featuring on 'Can't pay, we'll take it away' as the poor sod who gets no rent, takes a year to get bad tenants out and recovers a part-demolished house!
I misunderstood. Apologies.
No man is.
But TBF it isn't his job to provide low cost housing subsidised out of his own pocket.
He could give, say, 10% of his profits to a housing charity, but you can't "expect" that, let alone more.
Sadly there often are.
That does not surprise me - it follows from the comments earlier which come down to "it's only for renting, no need to build something nice" which seems to be too common in the industry.
Put simply, why should someone be expected to put up with something "inferior" because they are renting ? On the other hand, it all depends on your target market - are you going to for those tenants who can pick and choose (ie the ones with the disposable income to select a "quality" property), or the ones who have to make do with the properties that other group don't want to rent ?
Personally, I take the attitude that if it's not good enough for me then it's not good enough for a tenant. I have few and short voids
Yes. There are things landlords can't discriminate on, this isn't one of them.
Part of deciding whether a tenant is acceptable is determining if they are going to be able (and willing) to pay the rent. You didn't say which property, but you've mentioned rents going to over £16k/year - if you aren't earning in the order of £34k and up then you might find the rent a bit of a problem.
Even with no increases ever that's over £800,000 in 50 years.
What's that as a rate of return on capital employed?
Yes it's easy to make numbers look big by doing that. But if we take a rent of (say) £16k/yr, and say this is (I assume) in London where property prices are "high" (lets say it's something valued at £480k, not hard if it's a half decent flat in some parts of London), then ROCE is 16/480 = 3.33%. If the flat is only worth £320k then the ROCE is 16/320 = 5%.
Except that this is the classic approach used by "landlord bashers" - simply take the gross rent and ignore any costs. After taking business costs off the rent, then the ROCE goes down. Even if there are negligible costs, the profit is taxable - quite possibly at the higher rate of 40% depending on the landlord's other income. So that 5% is immediately cut down to 3%. Thanks to ill-informed* tax changes that start to come in next month, some landlords will actually start to see a negative ROCE where they pay more tax than they make profits.
And don't forget that, unlike home owners, if the landlord wants to cash in any capital gains then they'll be hit with capital gains tax - it's not hard to imagine that if a flat currently worth £300k-£400k has been held for a long time, then CGT could take £100k of your sale price
So, lets just settle on some arbitrary number - so lets say the landlord is making 3%. That's not actually a lot - even with the low interest rates around you can get that on savings if you shop around. In return for that income, you have to maintain the property - if the roof "wears out" you have to repair/replace it; as the carpets wear out, you have to replace them; as the kitchen gets old and worn out, you have to replace it; and so on. All those costs that the tenant doesn't have to pay (at least directly) which in part is behind the "why pay X in rent when I could pay X on a mortgage" people - some of whom try it and suddenly find they can't afford all the other bills they'd overlooked (there are studies on this, quantifying the difference between rent and the actual costs of running a property).
And this also assumes that the tenant actually pays the rent. While plenty of stories make the news of how "evil landlords" are ripping off vulnerable tenants with high rents for uninhabitable hovels - it rarely makes the news when a tenant doesn't pay the rent, works the system so the landlord has to spend 6 months or more working through the court system to get them out, and when they do get the tenants out finds that the property has been completely trashed. While rare, there are cases of properties being turned into (for example) cannabis farms with major damage (eg floors and walls removed and electrics completely screwed up). That could easily costs many years rent to repair - as well as leaving you with no rent for as long as it takes to put right.
BTW - 3% is at the high end, a very large proportion of landlords make much less than that.
* (In the UK, this isn't Greece) Name one other business type where interest on a business loan is not considered a cost to be deducted before calculating profits. Or put another way, name one other business type where the business is taxed on turnover regardless of profit ? The treasury has so far failed to put forward any evidence to support it's claims that these changes won't affect tenants - and pretty well everyone but the likes of Shelter (well known for ill informed landlord bashing) is telling them that it'll put up rents (and it already is putting up rents).
EDIT:
Just to add, ignore any preconceptions you might have about cheap mortgages. In the BTL market, once you get past the headlines and look at the small print, you'll be doing well to pay less than around 4-5% interest on a loan. If you have to borrow to (in part) fund the property purchase, then your 3% ROCE is gone right there. That's assuming you don't find yourself as a higher rate tax payer and actually paying more than 100% tax rate on profits.
And you'll have to pay an extra 3% SDLT on the whole of the purchase price. So lets say the above property actually cost £320k, and you have a 50% mortgage at 4.5%.
For SDLT you'll pay £6,000 just like everyone else - PLUS another £9,600 "landlord tax".
Your mortgage interest will be £7,200/yr. So tax and interest alone will more than swallow your first year's rent. But under the new regime, that £7,200 isn't allowable as a business cost. If you are a higher rate taxpayer, you'll pay 40% of (part of) the rent in profits, but be allowed only 20% off your tax - so there's £1,440 in tax even though you made a loss
Except that this is the classic approach used by "landlord bashers" - simply take the gross rent and ignore any costs. After taking business costs off the rent, then the ROCE goes down. Even if there are negligible costs, the profit is taxable - quite possibly at the higher rate of 40% depending on the landlord's other income. So that 5% is immediately cut down to 3%. Thanks to ill-informed* tax changes that start to come in next month, some landlords will actually start to see a negative ROCE where they pay more tax than they make profits.
And don't forget that, unlike home owners, if the landlord wants to cash in any capital gains then they'll be hit with capital gains tax - it's not hard to imagine that if a flat currently worth £300k-£400k has been held for a long time, then CGT could take £100k of your sale price
So, lets just settle on some arbitrary number - so lets say the landlord is making 3%. That's not actually a lot - even with the low interest rates around you can get that on savings if you shop around. In return for that income, you have to maintain the property - if the roof "wears out" you have to repair/replace it; as the carpets wear out, you have to replace them; as the kitchen gets old and worn out, you have to replace it; and so on. All those costs that the tenant doesn't have to pay (at least directly) which in part is behind the "why pay X in rent when I could pay X on a mortgage" people - some of whom try it and suddenly find they can't afford all the other bills they'd overlooked (there are studies on this, quantifying the difference between rent and the actual costs of running a property).
And this also assumes that the tenant actually pays the rent. While plenty of stories make the news of how "evil landlords" are ripping off vulnerable tenants with high rents for uninhabitable hovels - it rarely makes the news when a tenant doesn't pay the rent, works the system so the landlord has to spend 6 months or more working through the court system to get them out, and when they do get the tenants out finds that the property has been completely trashed. While rare, there are cases of properties being turned into (for example) cannabis farms with major damage (eg floors and walls removed and electrics completely screwed up). That could easily costs many years rent to repair - as well as leaving you with no rent for as long as it takes to put right.
BTW - 3% is at the high end, a very large proportion of landlords make much less than that.
* (In the UK, this isn't Greece) Name one other business type where interest on a business loan is not considered a cost to be deducted before calculating profits. Or put another way, name one other business type where the business is taxed on turnover regardless of profit ? The treasury has so far failed to put forward any evidence to support it's claims that these changes won't affect tenants - and pretty well everyone but the likes of Shelter (well known for ill informed landlord bashing) is telling them that it'll put up rents (and it already is putting up rents).
EDIT:
Just to add, ignore any preconceptions you might have about cheap mortgages. In the BTL market, once you get past the headlines and look at the small print, you'll be doing well to pay less than around 4-5% interest on a loan. If you have to borrow to (in part) fund the property purchase, then your 3% ROCE is gone right there. That's assuming you don't find yourself as a higher rate tax payer and actually paying more than 100% tax rate on profits.
And you'll have to pay an extra 3% SDLT on the whole of the purchase price. So lets say the above property actually cost £320k, and you have a 50% mortgage at 4.5%.
For SDLT you'll pay £6,000 just like everyone else - PLUS another £9,600 "landlord tax".
Your mortgage interest will be £7,200/yr. So tax and interest alone will more than swallow your first year's rent. But under the new regime, that £7,200 isn't allowable as a business cost. If you are a higher rate taxpayer, you'll pay 40% of (part of) the rent in profits, but be allowed only 20% off your tax - so there's £1,440 in tax even though you made a loss
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I'm not bashing landlords - I agree that the finances are akin to a house of cards, but all that does is to show that the whole way the rental property market is structured is wrong.
The asset has a life measured in several decades, quite possibly centuries, and it usually appreciates in value. Individual ownership of such assets and trying to exploit them to make profits over a short timeframe makes just as much economic sense as individual ownership and short ROI durations of railways, bridges, ports, roads etc.
Individuals funding the ownership of the assets via BTL mortgages doesn't work - the assets should be owned by companies who can take a much more long term view in their ROI calculations and who are governed by different taxation regimes.
The asset has a life measured in several decades, quite possibly centuries, and it usually appreciates in value. Individual ownership of such assets and trying to exploit them to make profits over a short timeframe makes just as much economic sense as individual ownership and short ROI durations of railways, bridges, ports, roads etc.
Individuals funding the ownership of the assets via BTL mortgages doesn't work - the assets should be owned by companies who can take a much more long term view in their ROI calculations and who are governed by different taxation regimes.
Indeed they can.
Why do so many other European countries manage to do it so much better than us, though?
Why do so many other European countries manage to do it so much better than us, though?
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