Summer Budget 2015 – Landlords Reactions

Reply to the comment left by “Appalled Landlord” at “01/12/2015 – 12:45“:

That should be Lunatic.

Reply to the comment left by “Appalled Landlord” at “01/12/2015 – 12:45“:

NB This calculation assumes that all the properties are owned by one person. If there is shared ownership, each person would need to download the spreadsheet and enter his or her share of the figures, along with any other income, to find the effect of the new levy.

The government has attacked us because the BoE say we are a risk if the economy slides and house prices reduce…. Ummm what about these guys?

http://www.bbc.co.uk/newsbeat/article/34804311/im-20-and-i-own-a-250000-four-bed-house

they have only £12.5k of equity in the property, of a new build help to buy property so effectively its probably worth a bit less now so they are probably already effectively in negative equity, 20% they are supposed to pay off in 5yrs and if rates increase they are screwed. Its madness to attack us and then allow this kind of thing..

I also think there is a small error in the spreadsheet – although I am not an accountant so could be wrong! The tax band in cell D14 seems to be too large. I think it needs to be £107615 so that 45% band starts at £150000. At he moment it starts at about £160000. This has no affect on the current calculation for Natalie, but it does affect the 2020 calcs. The sheet calculates the tax about £4000 too high.

In any case, its still a gloomy outlook for Natalie’s portfolio.

Mike

Reply to the comment left by “Mike Smith” at “01/12/2015 – 14:38“:

Hi Mike

The difference between your figure and cell D14 is the personal allowance, currently £10,600.

You start to lose this allowance when your income exceeds £100,000, at the rate of £1 lost for every £2 extra income. After £121,200 you lose it completely.

From that point the nil rate band is not used in the calculation. So cell D14 is the difference between the basic rate ceiling and the higher rate ceiling of £150,000.

Alex Caravello’s spreadsheet is accurate and reliable. The same cannot be said for many other tax calculators available on the internet.

The main problem here is the low yield and the interest only loans.

The calculated pre-budget income is only 0.68% of the value of the portfolio, you could get better in a bank account. You don’t have any safety margin, any event, for example a few percent interest rate rise would put you into negative right now.

Now they’ve been giving you clear warning for years that interest rates will rise, so I don’t understand how you could be in that situation right now.

A pretty easy solution would be to repay the outstanding mortgages and sell a few properties, then your portfolio would look like:

Current market value – 10.5m
Loans outstanding – 0
Gross rental income – 350
Expenses – 57K
Loan interest – 0
Net Rental income – 293K

You would be instantly better off repaying all your loans and having a smaller portfolio.

Reply to the comment left by “Natalie Wilmot” at “01/12/2015 – 11:17“:

In other words you pay an average 4% interest yearly on your mortgages, but the yearly gross rental income after expenses is just 2.7%, so the mortgaged properties are actually making you a 1.3% loss.

You’d need to get rid of these mortgages anyway as they are costing you money.

Reply to the comment left by “Joe Galvin” at “01/12/2015 – 16:15“:

Have you taken into account possible mortgage redemption charges and the CGT bill?

Reply to the comment left by “Mark Alexander” at “01/12/2015 – 11:21“:

Excellent analysis Mark.

Reply to the comment left by “Joe Galvin” at “01/12/2015 – 16:06“:

what you need to factor in is the CGT on the sale – esp if your base cost was low the CGT would be quite high!