Summer Budget 2015 – Landlords Reactions

Hey ho. I expect I will still manage to sleep tonight, rather than lie awake worrying about how I might find a way to impress you.

Ros and Jon
May I pls call for a truce.
Let us pls concentrate on what we all need to do to find mitigations to these draconian legislations.
Writing letters to the people making these new rules as we go along, like Ros and others have been doing, is definitely one thing to do. If Jon is not happy with some of the wordings, he could, certainly, avail us of his own version. And if there are tangible things that unincorporated Landlords should be doing right now, I, for one, would be very grateful for his advise.

I'm not sure I understand why housing the poor, or stating that that is an economically and socially useful activity, is a problem. Indeed, I'm not sure I can think of a better way to remind politicians just how important our role is.

> the long & short of it Ahmad is this (imo)

S24 may or may not be withdrawn. Whether it is or it isn't, the government has set out it's stall very clearly and the prudent move is to take heed and use the next few years to adjust to the 'anti high leverage property business' regime that is coming.

If S24 is reversed, the direction of travel will not change: UK governments prefer homeowners. Couple that with the growing negative light being shone on housing benefit going to private landlords, the PRA tightening of btl finance etc etc. & it is clear that what happened re btl since the late '90s has suddenly spooked the government & it is desperate to undo as much of it as it can.

Take note that even amongst the favoured corporate BTR players such as Grainger, recent developments have mostly been about reducing leverage.

Incorporating might help some people to stave off the worst of the impact of S24, but it is likely that those most affected by S24 are the least able to incorporate due to prohibitive sdlt / cgt / remortgage fees.

Running an incorporated portfolio that is highly leveraged at a profit to the shareholders is hard, if not impossible, too (due to the costs of finance and costs of getting money out of the company).

The only sensible option is to follow the lead of the big players in the business and reduce leverage as much as possible in the time available.

The other option, that has been quickly & neatly implemented by this site's very own Mark Alexander, is to leave the country. Whilst that might seem drastic, I view it as a proportionate response to a drastic change of direction by the government to his business.

If lobbying to reverse S24 appeals, then do so. But keep half an eye on the bigger picture that S24 is just a small part of and act accordingly. Getting to a position where S24 being reversed is a nice bonus, rather than it being necessary to stay solvent feels like a sensible plan.

Reply to the comment left by "James Fraser" at "08/09/2016 - 20:41":

> James Fraser

Again imo, but because the government has already - as part of its anti high leverage individual property investor campaign - staked out a very strong position on that which is being lapped up by the media: "private landlords taking billions in housing benefit by preying on the poor..."

> Jon Pipllman.

Of course we should plan and make our BTL business as sound as possible. By raising rents by 35% an unincorporated landlord can do just that. It is the finance costs deductible that has been removed not the right to run a business. The fact that George ignored is that people (voters) live in our rental properties and it is their home. Taking thei home to give it to a home owner is not going to be a popular thing. Making a renter feel 2nd class to a home owner is not a nice thing. Making a renter pay higher rent so the government can lend it to a home owner is s stupid thing! Renters will be squeezed and eventually there will be a massive rupture.

I am not sure if i am more staggered that Dave and George dreamt it up or if Thereas and Phil are that stupid they they haven't already repealed it. The can can not be kicked down the road much further before it explodes...and it will!

SO, i believe lobbying is absolutely right thing for now as we have a new team that hate Dave and George almost as much as i do. I believe Theresa and Phil like power very much and so will do the things that undo George and keep them in position - Lobby Hard! as well as making plans!

Reply to the comment left by "Jon Pipllman" at "08/09/2016 - 21:02":

Thanks Jon

I am very grateful for such a succinct summary of the situation. It confirms all I have been learning over the past year. Emigration is not an option for me because of my earned income as a Surgeon with significant private practice. Because of CGT, SDLT and remortgage costs, incorporation of my 47 properties will not be economically viable. I have raised rents, remortgaged high SVR products, reduced rental agency management fees and taken steps to eliminate voids and will continue to do this as and when possible. The recent reduction in BOE base rates has provided additional cushion. All these savings are being redirected to reducing leverage on other higher SVR mortgages. Of course, I have stopped buying. Is there anything further that anyone could advise. I am not convinced about some of the complicated schemes being discussed / proposed.

If S24 gets reversed, that would come as a nice bonus. Hopefully, BOE base rates will remain low for longer and the differential that mortgage providers charge will continue to go down as business slows and competition increases - thereby providing further opportunity to remortgage to lower rates as S24 begins to bite over the years.

You are right markb, increasing rents is indeed a way to mitigate S24's impact, should it not be reversed

On the voter thing, I rather think George & Dave (and maybe Theresa & Phil) believe a homeowner is more likely to vote Tory and a renter more likely to vote Labour. That is why Tory governments since Thatcher's version of rtb proved so successful in getting her re-elected have been almost obsessed by enabling & encouraging home ownership.

Reply to the comment left by "Ahmad Jibril" at "08/09/2016 - 21:34":

>Ahmed

I'm in a remarkably similar position to you with exactly the same experience (although not a surgeon!).

I have spent months, and much money, being told what I already know - there isn't a realistic opportunity to escape. SDLT (over £220k in my case), possible CGT or refinance costs, or future difficulties with regulation/legislation/interference etc mean there is no realistic escape.

My plan now is either a) carry on as before using substantial rent rises to mitigate the tax and see how well I can weather the storm, or b) to form a partnership with my girlfriend, incorporate in 3 yrs, most likely with the BICT. I'll make a final decision by the end of this year.

A couple of other points with me though is that 1. I'm the luckiest sod in the world in terms of mortgage products - all of them tiny fractions over base. And 2. At current market value, I'm around 50% LTV. These facts make things a little easier for me, although I still get buggered on the tax front as I get pushed into 'additional rate'. I'm also considering buying more through a limited company but am reluctant to start this as we've no certainty they won't be hit next!

Reply to the comment left by "Jon Pipllman" at "08/09/2016 - 21:49":

Jon I get it... but what a croc! is anyone really falling for it still.

I have to confess that I stole another two properties form first time buyers this week. You know, the first time buyers who don't need a mortgage because the properties I bought were not mortgageable - Shame on me i know - gosh i hate myself!. I shall have to add the 3% SDLT surcharge to the rent and recoup it over the first year - I know how mean and greedy am I? I shall do the maths and add the Tenant Tax to the rent and work on my acceptable margin and it will rent because there are not enough homes for people.

As much as i know you want to thank me for bring two derelict properties back into use as their intended purpose "homes" you'll have to get behind the haters who cant miss a chance hate a parasitical landlord. I am just happy to be providing homes and collecting the Tenant Tax for our dear government!

The first time buyers the Tories image, are in line for their free handout of a mortgage and deposit that they can't afford and will default on. and they are behind the queue of benefits renters that in line for their hand out of rent who are behind the MPs waiting to collect their fiddled expenses... Who said there is nothing for nothing

Again everyone is entitled to their own opinion but they are not entitled to their own facts! Rents will rise and the renters will rise up and the Tories will be history. wish, dream, want, aspire, and hope are not based on facts and the facts here are that people rent for a reason. If you want to stop renters then look to the reason not the house they rent or landlord. They will come home to roost so I say, do not waste time on a "get incorporate quick scheme" that HMRC will undo!

Pray and lobby my friend! Pray and lobby!