Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Mark Alexander" at "21/09/2015 - 18:02":

"Time to start investing into cardboard box manufacturers perhaps? After all, that’s going to be the only accommodation available if half of the private rented stock gets sold to owner occupiers."

Mark you are undermining my park bench business, although I will admit there is a possibility of making cardboard boxes tailored to fit on park benches.

And now for a serious comment, I have received a reply to my Freedom of Information request.

"I refer to your request, which was received on 6 September 2015 for the following information:

FOI 2612/15: How many incorporated businesses let residential properties? And how many properties do these businesses own?

Following a search of our paper and electronic records, I have established that HMRC does not hold the information you requested. Incorporated businesses are not required to detail whether the properties they receive income on are residential or commercial properties; nor are they required to detail the number of properties that they own."

Now Mr Osborne how have you calculated that only one in five landlords will be affected?

Reply to the comment left by "Manchester Landlord" at "21/09/2015 - 22:58":

Yes I agreed, there will be some very rich pickings for ltd company and cash landlords but hey "we are all in this together" not!

Reply to the comment left by "Roger Rabbit" at "22/09/2015 - 00:01":

I find this interesting about the landlords with one property,

The government say that they want to make the BTL market more professional, but every report I have read says that this group of landlords have

less understanding of rules and deposits
less professional

I'm not agreeing with this, but these are the landlords the government think will remain. The bigger sole trader landlords who they refer to as being more professional and likely to keep abreast of legistration are the ones they believe they are attacking.

But it will impact on even the one property landlords if they have a good job or pension, so they have that wrong to.
Maybe its because pension monies have gone into them.

Does anyone have the amount of pension monies transferred into property since the pensions was altered?

Hi there is nothing to stop any Landlord no matter how small, buying a future purchase inside a Limited company.

MOVING TO A LIMITED COMPANY It has to be considered when one thinks about moving property you own into a limited company, you will have to close your existing loan and the Limited company take out a new Loan. There will be legal and valuation fees in that and possiably a hike in your intrest rate charged to the company.

Reply to the comment left by "Graham Chilvers" at "22/09/2015 - 08:30":

Not necessarily Graham.

I am aware of at least two structures whereby the legal ownership is retained by the individual (and hence the mortgages) and the rental income moves to a corporate structure along with the responsibility for the landlords costs.

It's complex to set up and requires advice from both a barrister and a specialist accountant and may also require HMRC advance clearance, however, I can assure you it is possible. It is not worthwhile for smaller operators as the minimum fee is £50,000 but if you have a portfolio worth 5 million + then you're only looking at 1% fee for a solution. See http://www.property118.com/tax-efficient-incorporation-landlords/77519/
.

Reply to the comment left by "Graham Chilvers" at "22/09/2015 - 08:30":

Yes Graham you are correct, there is nothing stopping anyone buying a property within a limited company. But if you want any semblance of fair finance costs you have to go to a proper bank which will not charge reversionary rates of LIBOR + 5% (e.g. shawbrook, aldermore, and other challenger banks)

Proper banks such as Lloyds Commercial, Barclays etc. are very circumspect about which deals they get involved in. They will almost certainly not look at 2 up 2 downs in rough parts of cities. They want good properties that they can sell on again easily in the event of default. They also want repayment mortgages, and most will offer a term of around 15 years. PG's are also required unless you are below 30% LTV. The valuations are usually based on 3 month forced sales to another investor, so invariably they are down valued. Lastly, they are not interested in one deal, they want multiple deals as its not worth the business development manager filling in the paper work.

I have absolutely no doubt that there will be some amazing deals on very good yields to buy as a result of forced sales due to this tax. But unless you are flush with cash you are not going to be able to take advantage of it.

Personally, I'm looking for JV partners in anticipation of another correction and / or lack of buyers in the market - which of course will be within a limited co.

Reply to the comment left by "Roger Rabbit" at "21/09/2015 - 22:04":

What I think will happen is existing landlords will spend the next 4 years plowing any profits back into deleveraging and then after that buy via limited company. I've just set up a limited company to purchase my second property....The variable rate is 4.29%....and product fee of 4k.....The fee is a bit steep but I've budgeted for rates up to 6.5% and don't expect us hitting that for a good while, so it should be a good few years before I pay that again. I am not sorry worried about interest rates but more so about any tax changes for limited companies. ...but I can only deal with things as they stand today.

Reply to the comment left by "David Price" at "22/09/2015 - 06:40":

Well, another stunning admission from the Treasury, David. As you say, if they have no idea of the ratio of incorporated to non-incorporated landlords how can they know how many 'individual' landlords are affected? They don't know how many individual landlords there are! I suppose a better idea can be got from BTL mortgages held.
I did read a figure somewhere of about a 7:3 ratio of non-incorporated:incorporated - don't know if that's true. It was in one of the recent reports - maybe Kathy put it on here? So once more, we have more of an idea than the Treasury has.
It makes a complete nonsense of HMRC's impact assessment. In truth, they have only vague ideas of possible consequences in some respects and no idea with regard to other aspects. Even if they manage to dig out information now for FoI requests it is clear that the decision was made in a vacuum of knowledge.

Reply to the comment left by "Costas Tzanos" at "22/09/2015 - 09:14":

Well Costas, George Osborne explicitly discussed the possibility of making this attack on residential properties held in limited companies in 2010. So he's already considered it - which to my mind means he will consider it again. Why shouldn't he implement this in the next few years?
I don't know much about the 'pensions freedoms' issue, but believe that this led to retired people putting their money into BTLs just recently only to have this impending theft of their hard-earned cash pulled out of the bag with this measure. This shows how GO would have no scruples about encouraging everyone to incorporate and then introducing the same kind of punitive tax change on incorporated landlords. Any confidence in the Government to be fair or in act in the interests of justice has long gone.