Buy to Let Advice: Don’t Trust Anyone
I have had a fairly interesting few months advising a very wide variety of clients who are either interested in improving their existing buy to let portfolios or who are stepping into residential investment and letting for the first time.
My advice is usually delivered in one-to-one sessions with the client (or sometimes one-to-two, as most people will have a partner with them). This is done usually at my office, on Skype or over the phone.
Buy to let Advice
Advising one entrepreneurial client who had been very successful in his own business, I said, “Of course property could be taxed more in the future, especially buy to let – and there could be yet more rules and regulations acting as hoops for us landlords to jump through.” (I have to tell people what the risks are, because risks do exist – that is the nature of any business).
In reply, he pointed out that most of his clients had been big financial service companies and as he knew the tricks that they got up to from the inside, he would not trust them with his cash nor with managing any funds in which he might invest.
And as regards, taxes and regulations changing, he did not trust the government either.
He did not trust them with his pension, he did not trust them with his funds, he just did not trust them not to go and change the rules. He said:
“The advantage of buying property to let over say buying a unit fund is that, with buy to let, it is me who is in control, not some anonymous fund manager in the city sucking on my wealth for a load of fees.”
Yes, he was sure the government might try to interfere more and change the rules on property investing, but he fully expected them to change the rules on all investments, so why worry over-much about it.
I could not agree more.
Indeed I say the very same thing in the opening chapter of my book, “Successful Property Letting – How to Make Money in Buy to Let”.
Buy to Let Rent Controls?
So now we have Jeremy Corbyn as leader of the Labour Party and the like of Diane “Rent Control” Abbott as a Minister, it is possible that things might get harder for landlords, one day.
But then again, in many ways they have they got much harder for all people already in all respects, even under the Conservatives who have hardly been the friends of the middle classes.
For example, the rate of stamp duty land tax for each pound that a house is worth over £1.5M is now 12%. That is not peanuts and not all people with houses worth over £1.5m are that well off – many will have big loans and other commitments.
And then there is the removing of the higher rate tax deduction for interest on loans used to buy property to let. And then there is the removal of all indexation on capital gains.
I could go on. And all this under the Conservatives. The Tories are hardly the party who have been over-kind to landlords or to anyone on a middle income who is trying to conserve their wealth.
Rent control will not work anyway, just as it did not work in the 1960s. And in about half a minute I could tell you a number of ways to get around such a stupid policy – and, no, it does not involve behaving like Peter Rachman and his ilk. (Rachman was the bully boy landlord of the type who flourished under rent control. Dear Diane may never have heard of him).
The fact is that the only way house prices and rents in London can be reined is to build more houses or curb the rising UK population. Silly price controls will achieve nothing – and I don’t think Mr Corbyn is so dumb as to try “full on” rent controls for real.
Financial Services and the Den of Thieves
As to the money men in financial services, there is much to say.
Years ago I used to work as a consultant and project manager in the financial services industry. I could not agree more with my client that the banks, building societies, fund managers and insurance companies are really ever so smart at taking your money.
I always thought it was particularly smart the way they sildenafil cheapest price take your money without you even realising your pocket had been picked.
When I was at one bank we made £6 million a year simply by charging a wide spread on credit cards when the cards were used abroad instead of charging the wholesale rate. Most punters did not even notice. Within a year all the other card issuing banks and building societies had followed our lead. (It was not my idea by the way!)
Later, at an insurance company the wheeze was every time someone changed some aspect of their circumstances – say they moved house or they added their kid onto their motor policy – the bank I worked for decided it would be great to whack the punter for at least a £6 charge for the “bother” of making the change. (Again, not my idea, I was just obeying zee orders!)
Brilliant! Again, no one noticed. And within a year, all insurance companies were doing it to.
And then there is the “suckers list” in insurance. In order to pay for all the mad marketing spend on motor and home insurance – all the stupid adverts with the nodding dogs, Russian meerkats, faux opera singers and all the rest of the crap – you have to make the cash back somewhere. This is known to be done using the “suckers list”.
To pay for all the marketing spend, lots of insurance companies and brokers on renewals jack up the insurance premium by, say 10%. If you accept it and are too dumb to shop around, then next year it goes up by 20%, the year after by 30% and so on.
Congratulations! You are now on the “suckers list”.
People investing in buy to let have to watch out for charlatans too. For example, folks selling overpriced oversupplied new build flats or duff second hand houses for “great yields” in druggy unemployment black spots that are full of bad tenants and no hope.
But the people we advise are told to steer well clear of this kind of duff property – keep it simple, invest in the right areas and right type of property – then you make money.
And don’t worry over-much about what the government are going to do next. Simply let time to do the work of eroding the mortgages and making you rich – slowly but surely.
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We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their services and products for private landlords. David Lawrenson, founder of LettingFocus, also writes for property portals, speaks at property events and is regularly quoted by the media.
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