A life of Poverty...

[The Negotiator]

Oh yeah, I forgot to mention, of course the buy to let culture really isn't helping...

 

[Stu DemonD]

For those who are determined to buy property in this country, the best bet is to hunt for something derelict and renovate. Due to the high prices, you can make a fortune, if you know what you are doing, but it is also very easy to lose money and get ripped off, if you don't. If you repeat that process three or more times per year, you will soon be in the position of being able to do more than one at a time and then living in one while doing another, etc. Unfortunately it does require knowledge of the building industry, planning offices, auction procedures, etc. as well as knowing good trust worthy tradesmen and suppliers.

And if you repeat that process more than once or twice, then you lose you Principal Private Residence relief, deemed to be property dealing, and pay 40% Tax on any gains you make - 2nd properties have this anyway....

 

[joecinq]

There was a watchdog type program on last year, about 'Self Assessment Mortgages', Anybody watch it?

Basically, there are quite a few lenders who offer this type of loan. You go to them tell them how much you earn, and they give you a 3, 4, or 5x loan on that. For self-employed people it is very easy to give them false information and get enormous loans. The thing is these lenders don't give a ****, as long as the person taking out the loan can afford the repayments. This allowed people to afford to buy these expensive houses even when they are on low/mid-range incomes.

I don't know if this still happens, but it was when the program went out.

 

[Neofolis]

It could very easily fall flat for all the people buying these second/third houses. When I bought my house it was much cheaper to buy than rent, it's now much cheaper to rent, so the people buying these houses are doing so for investment purposes as the rent will not cover their mortgages, at least not in this area. As such, if property prices do drop or we enter recession and there are less jobs about, these same people will be stuck with a negative equity property or unrentable that has been costing them money to keep without them even using it. Investment in property when the prices are already so high is a very optimistic thing to do, but for people who are in a sufficiently secure financial situation it is still fairly safe, because if they can stick it for the long term, they are almost guaranteed to get a return on their investment

 

[Citizen Smith]

Oh yeah, I forgot to mention, of course the buy to let culture really isn't helping...

... yes this also really f###s me off big time, as its such a popular idea in london.

 

[Neofolis]

And if you repeat that process more than once or twice, then you lose you Principal Private Residence relief, deemed to be property dealing, and pay 40% Tax on any gains you make - 2nd properties have this anyway....

The ways around this are stupidly easy Stu. Most small developers, either declare themselves bankrupt or start multiple businesses with different named directors, usually other family members, etc.

 

[Stu DemonD]

There was a watchdog type program on last year, about 'Self Assessment Mortgages', Anybody watch it?

Basically, there are quite a few lenders who offer this type of loan. You go to them tell them how much you earn, and they give you a 3, 4, or 5x loan on that. For self-employed people it is very easy to give them false information and get enormous loans. The thing is these lenders don't give a ****, as long as the person taking out the loan can afford the repayments. This allowed people to afford to buy these expensive houses even when they are on low/mid-range incomes.

I don't know if this still happens, but it was when the program went out.

There is nothing wrong with self-certification mortgages - I indeed have one now

The problem came because the lenders, or the people selling the mortgages, namely the link through the estate agents, wanted their Procuration fee - that meant they pushed the houses through to people who couldn't really afford it, and then winking at them saying 'see him, he will sort you out an increased loan'.

Self-certification mortgages are fine; without them, I would have been unable to remortgage - it was the abuse of them that made them have a bad press.

 

[Stu DemonD]

The ways around this are stupidly easy Stu. Most small developers, either declare themselves bankrupt or start multiple businesses with different named directors, usually other family members, etc.

Ah, so a company gets principal private resident relief

And aren't you aware Companies House can ban people from becoming directors? The Inland Revenue do speak to them, you know.

And bankruptcy not always the best option, although has its purposes.

IF you want people to toe the line, then fine, just don't be around when it goes tits up, as it invariably does. I would rather sleep easy at night, than have the fear of someone banging at my door

 

[joecinq]

Thats it stu, also called self certificated mortgage

There is a problem with it though, like you say, the abuse of them. People were/are able to purchase houses that they couldn't afford. This meant that demand for houses rised. Obviously, where there is an increase in demand there is an increase in house prices. Also the amount of people who are put into serious debt because of it.

 

[Stu DemonD]

Also the amount of people who are put into serious debt because of it.

Then those people shouldn't have been so greedy to begin with - sorry, no sympathy from me..

I also feel the same way about mis-selling of endowments - what would have happened if they had come good - people giving money back to the providers, saying 'thank you, I got more than expected, have some cash-back' - I think not

 

[Neofolis]

Ah, so a company gets principal private resident relief

And aren't you aware Companies House can ban people from becoming directors? The Inland Revenue do speak to them, you know.

And bankruptcy not always the best option, although has its purposes.

IF you want people to toe the line, then fine, just don't be around when it goes tits up, as it invariably does. I would rather sleep easy at night, than have the fear of someone banging at my door

Sorry the company bit was more aimed at the avoidance of capital gains tax, but people still get around PPRR by having different names on the property deeds and mortgage, etc. My boss has a second house in his wife's name, although he is now regretting that, because he wants to sell it and she won't let him.

As far as banning directors is concerned, yes I know, which is why they use other people as directors. The other problem is that the ban is not permanent.

 

[Stu DemonD]

Sorry the company bit was more aimed at the avoidance of capital gains tax, but people still get around PPRR by having different names on the property deeds and mortgage, etc. My boss has a second house in his wife's name, although he is now regretting that, because he wants to sell it and she won't let him.
.

Really - :chin: - husband and wife can only have ONE elected Principal Private Residence, totally irrespective of what is on the deeds?! Therefore a second property scenario arises, and Capital Gains Tax will not be avoided...Maybe he has been mis-advised

This is of course different if you are not married

 

[Steven]

I always find that it's best to avoid arguements about money with chartered accountants.

 

[Stu DemonD]

I always find that it's best to avoid arguements about money with chartered accountants.

So do I Steve

 

[Neofolis]

Actually I don't know if they were married at the time, but as you say even if they weren't the marriage would have nullified it. Still easily done using other identities, be it false or friends, etc., although a risky proposal either way.

 

[Stu DemonD]

A risky proposal indeed, more so now that the Revenue are starting to employ qualified professionals, to catch out this sort of behaviour.

I would rather sleep easy at night, pay my taxes, and be done with. Unless of course the tax is 50% and not 41%

 

[Dr_Pepper]

I'm always so Jealous of my parents, when I was 8 we moved into a small house with big garden which cost £100k, having sold the previous one for twice that. They spent 4 years knocking it down and building another, turning a two up-two down into a 5 bedroom massive house. It's now been valued at £600k and their mortgage, which they will pay off in 2 years, is just for the £100k. I'd love to eventually do something similar, my dad did all of that on his own (no builders or tradesmen) and all at evenings and weekends while he held down his job!!!

When they retire - well who cares about a pension when you've got a house like that to sell.

I wouldn't have a car on finance, personally I'd rather have a banger than do that but it just depends on your circumstances. I only own "half" a car right now but fortunately I was able to pay for it outright.

 

[James M]

Buy to let is getting such a problem, that developers of starter homes are now actually taking action to prevent it happening, at the end of the day the don't want one of their new estates - which ultimately represents them - turning it a mass hotel!


As for doing houses up to make money, surely the best way, if you can afford two, is to live in one, while you do up the other, then sell the original one and move into the one you've just done up while you start the next, and so on, as long as you live in each for six months you should be alright

 

[Stu DemonD]

As for doing houses up to make money, surely the best way, if you can afford two, is to live in one, while you do up the other, then sell the original one and move into the one you've just done up while you start the next, and so on, as long as you live in each for six months you should be alright

Treated as property developing, I am afraid - yes, you can do it, as long as you pay the taxes accordingly.

 

[James M]

I thought if you lived in it for six months it was regarded as your home?