Time to get out?

Very true Jonathan. Took words out of my mouth.

And they don't ruddy do it as good as me and u. But we just got to accept it.

Letting agent 3 weeks ago said Oh it will only be empty a few days.

A FEW DAYS? U what? Council tax. Damage. Lost rent! They just in no rush like me and u.

I have people waiting outside for the others to fill their van up, so they can get in

Reply to the comment left by "Jonathan Clarke" at "15/04/2017 - 03:35":

Prices I believe will double in 15 – 20 years
So in broad crude terms
Say your portfolio in 2017 is a million and your income is 100K……
Then imagine 2032 with a two million portfolio and an income of 80K

Prices will double but rents will stay the same? I don't think that is right.
Even at a modest 3% compound annual increase, rents double in 20 years. Probably they will increase a lot more than that in the near future due to the attacks on the sector.

Horses for courses but I reckon sell gradually to utilise joint CGT allowances (£22600) at a rate that keeps the same level of income.

£90K joint is taxed at basic rate.

If the portfolio is kept at or reduced to £1M joint, it is free of CGT.

– and no stress

IMHO even a good letting agent increases the stress level of a competent landlord. Better and less stressfull to keep the 10% commission and 10% incompetency fee as part of the selling off and maintaining income strategy.

Reply to the comment left by "Mark Alexander" at "13/04/2017 - 19:20":

Hi Mark

I can't see how Tom can wipe out his Capital Gains by incorporation. I intend to do it my dying. I bought properties around 1980 for 30-40 thousand pounds which are now worth £700,000. I had a small property in a Company which I passed on to my children. So I do have some notion of Companies and appreciate the tax advantages of combating S24 (but for how long I ask myself). As a small landlord I found incorporation a pain!!

Reply to the comment left by "Monty Bodkin" at "15/04/2017 - 09:07":

Houses will not so much go up in price but there will be a devaluation of sterling. The purchasing power of £ will decline.
Do not have money have assets.

Reply to the comment left by "Yvonne Francis" at "15/04/2017 - 11:21":

Hi Yvonne

I can assure you that capital gains can be 'washed out' with section 162 incorporation relief, assuming you qualify to obtain it of course.

I agree that incorporation is a pain, but nothing in life worth having is easy is it?

I totally understand your cynicism of the political system. However, if doing nothing for fear of what might be makes sense then we shouldn't have invested into property should we?
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Reply to the comment left by "Monty Bodkin" at "15/04/2017 - 09:07":

Yes you are right it was very crude and basic calculation ... I didn`t bother to adjust for inflation and rent increases so when you do that the figures look even better if you dont sell .

The point being for me i guess is that if you do all that hard work for 20 years to acquire assets then you almost automatically become a millionaire in the next 20 years solely because of that hard work you put in in the early years . You don`t actually have to physically do anything extra to become that millionaire. It seems such a shame to waste all that hard work by selling off albeit gradually . The kinetic energy built in and the extraordinary effort made by climbing up the mountain in the first place to build a portfolio is wasted somewhat I feel if you just then abseil down . Stay up there and enjoy the view

Yes I agree you could sell to utilise the CGT allowance but I sometimes think that is false economy and a false lure. If prices double then the CGT relief allowance doesn't look as attractive . Assuming you are on 28% CGT rate in 2032

so say 2012 Buy at 80K .

2017 Sell at 100K - No CGT to pay so 20K gain but thats all

or better me thinks

2017 Hold at 100K – 2032 Sell at 200K - CGT 33.6K but 86.4K gain

So by holding you are better off even with no CGT relief. You can always then follow your strategy just 15 / 20 years down the line.

I take your point about letting agents. I once handed over 15 of mine as a tester. Great people but it only lasted a year as i ended up as a mediator between them and the tenant. I took them back. But I saw that more as my problem in me not readily wanting to let go of the reins just yet rather than their incompetency. As a result of that experience I am more likely to use a more personalised property manager when i let go next time. They will deal with my quirky systems and individual management style rather than the traditional LA`s which are somewhat inflexible with their rigid systems
It wont no reduce the stress / workload 100% but I can offload 90% of the stress I reckon . The older you get the more you delegate.

Tom is 63 but if prices double in 15 years he is 78 years . These days we live much longer so in another 15 years he will be 93. That`s 3 million equity by then as his 2032 .2 mil portfolio turns to 4 mil in 2047 . My mum is 90 and still going strong. She would not want the day to day hassle at that age but could happily have a weekly review meeting for an hour with her very own property manager and just bark out instructions to them in her own inimitable manner!

3 million even at 2047 prices buys a helluva lot of managerial support to take the stress out of it to say nothing of a nice bonus to leave the kids and grandkids

Reply to the comment left by "Mark Alexander" at "15/04/2017 - 13:05":

Hi Mark
The nitty-gritty of 'washing out' CGT is if you qualify but the problem is that most landlords don't. 162 incorporation relief is for businesses and not investment income under which category most Landlord's fall.

The case of Ramsay vs HMRC 2012 clearly show this.

There are also other pitfalls if you try to incorporate existing properties.

From what I can see, incorporation is only viable for new and future property purchases.

** MODERATED - LINKS TO COMPETITORS REMOVED see House Rules" **

Reply to the comment left by "Yvonne Francis" at "15/04/2017 - 15:13":

Hi Yvonne

Given that most landlords only own one buy-to-let property and don't even operate a business bank account I think your assertion that "most landlords" do not qualify for incorporation relief is probably correct.

However, rather than linking to opinion pieces written on competing websites (which contravenes "House Rules") I have provided below links to a far more authoritative, non-competing website, specifically HMRC manuals PIM1030 and sdltm34050.

PIM1030 https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1030

SDLTm34050 https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm34050

Regular readers of Property118 are far more likely to be in the "business" of private housing provision and should ideally educate themselves via source information and pay for fully insured professional advice prior to implementation.

It is quite clear from Tom's question that he has been in the "business" of private housing provision for 22 years. I would be extremely surprised if he didn't qualify for section 162 incorporation relief.
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Reply to the comment left by "Mark Alexander" at "15/04/2017 - 16:04":

My apologies for breaking house rules but I was not aware of them.

When a landlord posts a question I always find it difficult to assess, as I'm sure you do, as they often leave out very important information. Your assumption that Tom did run his properties as a business, based on the fact he has been doing it for 22 years, while it could be correct could also be incorrect and yet in your first post your suggested incorporation without mentioning any qualifying criteria. I've been a landlord for 40 years and I would not qualify and my turnover is far greater than most of the landlords who have disclosed their financial position so it does not appear to me, that most of the landlords using this site are in the "business".

In my first post I did not put the issue of pain over incorporation correctly. I meant it's a pain as a small landlord being a company. I created a company in 1978 to avoid being in the 98% tax bracket. From around 1980 it became a property company and passed on to my children in 2009. My main properties I hold as an individual. I certainly believe in pain if at some time it means gain or I would not have been in the great financial position I am today.

Thank you for the links.

Reply to the comment left by "Yvonne Francis" at "15/04/2017 - 18:15":

In my first post I asked Tom whether he had considered incorporation and linked to our Landlord Tax Tutorials.

I never give advice without a Fact Find and always point to legislation and recommend landlords to obtain a second opinion from their accountants, and where appropriate, to seek advance clearance from HMRC.
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