Farmer Andrew

I'm not an expert, but whilst there may be a directors guarantee, does the existence of the corporate veil create potential additional legal risks for the lender which may warrant a premium?

Im not sure, but i think you need to be careful with this from a tax perspective. It will have implications for stamp duty, income tax etc...

GDPR went live just over a year ago and i was wondering how it has gone for everyone and whether anyone has any learning points worth sharing. Are you registered? Might have to be a bit careful here, but anyone experienced any data breaches that they can share? Has anyone experienced anyone (tenant or landlord) exercising their rights?

@debbie franklin apologies if this sounds a bit geeky / nerdy, but do you know what the rationale behind this exception is? It seems an odd one given that nowadays I would imagine that probate properties go for a premium because of the renovation / development potential.

I think you are preaching to the converted here. I think it would be better to consider the opposite: Reasons not to buy a rental property: 1. yields are so low that an increase in interest rates cause your cash flow to become negative 2. A (new) government establishes rent controls and house price inflation targets and property values depreciate 3. The government continues to target individual landlords to raise more tax revenue to fund long term care costs etc Stay in and protect your money!

I think it is clear that the government want to increase the state pension age (from 65 to eventually 70/75?) to reduce the ongoing cost of providing pensions. When this happens, i think lenders will have to amend their policies to be in line with this. So at 50 plus young you should still have plenty of borrowing years ahead of you.

Never really considered this particular scenario, but isn't the grant of representation essentially the authority to administer the deceased's estate? if so, wouldn't the personal representatives (or official solicitor and public trustee) be unable to pay rents / receive / serve notices etc before obtaining grant of representation? As this could be quite a long process, isn't there a risk that the landlord ends up stuck between a rock and a hard place with no rent coming in and not being able to serve notices to someone with authority?

I think this applies to, as you say, "any property developers or speculative builders, erecting and altering buildings in order to make a profit". For landlords, i think there is quite a high threshold - £1m over three years? Debbie, correct me if I am wrong here.

Hi Barry, I think you have a very good point in that the interest rate risk is also a factor of the types property in your portfolio. I can imagine the terraced property that you are referring to. They are not the most attractive or appealing in the world but they are good at generating cash. It is unlikely that you will be making significant capital gains but it is also likely that in any financial meltdown, the price of the property is going to be relatively more stable than other more appealing properties. Rental demand is also likely to be relatively stable - people still have to live somewhere and they have to get on with their lives... So from an interest rate perspective, the risk should be lower and this is reflected in the 12.5% that you mentioned. I think the risks of this type of portfolio are more to do with the tenant. Badly managed you could end up with tenants that don't pay rent and lots of damage to the place. Costly to evict (made more difficult with the abolition of s21?) and costly to repair the damage (maybe wiping out a year or two years worth of profits from the property if you are unlucky to get one of these), so this is what you are getting a higher return for. So you need to be either hands on with managing the tenant or pay for a very good lettings agent, and i think the former of these is more of a lifestyle choice and i'm not too sure whether the latter exists. Agreed. It is so very tempting. I think that if i were in your position, i would also be tempted to gear up, but i think i would need to be happy that the process that i had in place for managing the 'tenant risk' in my terraced properties was effective and wasn't going to suddenly throw up a series of bad outcomes (especially with s21 changes). I would look at higher LTV (up to 75% or what ever was reasonably cost effective) and longer fixed periods (i might even be tempted out to 10 yr). Conversely, i would also consider moving to variable rates if the differential between fixed and variable was reasonable. (You are paying higher rates on longer fixes to reduce / defer interest rate risk. With your portfolio of terraces, where interest rate risk is less of an issue, it might not be worth paying for this. Hence variable rates might actually be better but only if there is a worthwhile differential between fixed and variable rates) This would give you some capital to develop the plot of land and if there is any left over to acquire more terraced properties.

So essentially whether you are an individual or a company doing development (construction) work, if you pay for labour (not direct employees) and the amount is above the de minimus limits, you need to operate CIS? I had a separate thread on this a short while back, but i am still a little surprised - I just hadn't come across CIS at all before.

Thanks, Debbie. Say I have a portfolio of furnished holiday lets (FHLs) which is registered for VAT because the turnover is >85k. If the FHLs fail the criteria for FHL (for whatever reason), do the FHLs become ordinary residential lets? If so, can I deregister from VAT immediately even if the rent / turnover is greater than the deregistration limit? TIA

I'm sure that before the interest rates spiked at 17.9% there were people who said that they would not get that high. More recently i remember a time when people said that rates could never go as low as they have been (i even remember some base rate minus tracker mortgages with no floors!) or for as long as they have been. I remember people saying that interest rates could never go negative. its probably unwise to rule anything out... As Julia says you need to try to plan to cope with interest rates higher than they are now. I don't think relying on upping rents in line with interest rates is the solution. Will you be able to do this in your time of need? If you can do this at whim, why dont you do this now? Because you would be pricing yourself out of the market. In a time when interest rates are high and landlords are fighting desperately for tenants to avoid voids, I think it is unlikely that you will be able to rely on increasing your rents. Having a 60-70% LTV across the portfolio provides a buffer, but is not a comprehensive solution. If prices drop by 10/20/30%, your buffer will be eroded and you may be forced into a fire sale (when other landlords are doing the same thing), forced onto higher rate products (because the LTV has gone up and because interest rates generally have gone up), or forced on to lenders higher standard variable rates. Having longer fixed rate periods (e.g. 5yr / 10yr) defers any hit, but doesn't eliminate the risk if interest rates increase and remain high for a long period of time. And you might be unlucky that when your rate period ends is when the spike in interest rates occur. Longer fixed rate periods mean higher rates which lower your returns. Having some unencumbered properties should provide more flexibility, allowing you to choose the LTV, rates, fixed rate period and term etc...in your time of need, but this will also lower your returns. Having a cash contingency fund could provide even more flexibility, but will lower your returns even more. You could try some sort of hedge with derivatives, but you could lose a lot more if you don't know what you are doing. The only true way to eliminate your risk is to have no gearing (doesn't eliminate the risk totally - still exposed through prices) or get out of the market totally. You need to balance the risk that you are taking on with the returns that you are getting and make sure that the combination is acceptable to you. The issue is that people are continuing to invest (maybe somewhat blindly) at a time when returns are ridiculously low and investors are not being properly compensated for the risks that they are taking on.

No need to apologize re the timing of your response, Wesley. Which other market do you have some experience in? And why did you choose the UK? Just out of curiosity, what is the property market like in Mauritius? Are properties relatively expensive? Is there a residential BTL market? What is demand and supply like? What level of gross rental yields would be typical? Is financing easy to obtain? What are typical rates and LTV? How does the tax environment compare with here? Is it favourable to inward investment? Are there any issues with security of title? Sorry for all the questions. Just looking for a new country for investing in property if Brexit goes pear shaped!

I'm looking at a portfolio of furnished holiday lets. Some of the properties are short leaseholds <50yrs. I guess my overall question is are these properties treated as residential or commercial for tax purposes? The portfolio turnover is >85k so it should be registered for VAT. If this is the case, would I need to pay VAT on the total portfolio price if I bought the portfolio? In other words, is the portfolio treated as a commercial property portfolio where the vendor has opted to tax or is it treated as a residential portfolio where no VAT is payable? Would I need to register for VAT before purchase to transfer it as a going concern in order to avoid paying VAT on the portfolio price? If the furnished holiday lets meet certain criteria, I understand that they should be registered for business rates, which seems to suggest that they are commercial properties? What stamp duty will I need to pay to buy the portfolio - the residential (including additional) or commercial? What happens if one of the properties fails the furnished holiday let criteria at the time of transfer? Does that then just become a residential purchase?

Yes, they are average gross yields, with all the inherent issues associated with averages. It will be possible to get properties that yield more, but my guess is that there will be issues with these. They aren't likely to be 3 bedders close to outstanding / good schools etc... and then we are talking about a different strategy. Is there then an inconsistency in your posts? You say that you "...see the income being achieved with roughly 20 properties (in the 2/3 bed region 70-130k)...". I have assumed that the income is the same as @jadm74, so ~£5,000 gross per month, which equates to £60k pa from a portfolio of £2m (20*~100k), which gives a gross yield of 3%, which is consistent with the my average gross rental yield data, but is inconsistent with your second post where you are achieving >10% yield. If you are talking about ~£5k net per month I think this would make more sense (but i haven't crunched the numbers), but it is a significantly different strategy to the one proposed by the OP.