Tech­ni­cal ben­e­fits not in­cluded in buy-to-let model

Finweek English Edition - - MARKETPLACE - Work­ing in the in­dus­try Tax ef­fi­ciency Undis­ci­plined savers Run­ning the ren­tal prop­erty as a busi­ness

The fol­low­ing po­ten­tial tech­ni­cal ben­e­fits were ex­cluded from the BTL in­vest­ment model and com­par­i­son to listed prop­erty:

– Be­ing in­volved (as a de­vel­oper, real es­tate agent or ren­o­va­tor) in the prop­erty in­dus­try could lead to in­vestors pick­ing up BTL prop­er­ties at bar­gain prices. It could also pro­vide in­side in­for­ma­tion about ar­eas or prop­er­ties that might surge in fu­ture due to cer­tain de­vel­op­ments. These ad­van­tages could make BTL a worth­while in­vest­ment.

– In­vestors with a mort­gage on their own home can bor­row from their BTL prop­erty and pay off their own home loan. By do­ing this they’re shift­ing their in­ter­est ex­pense de­duc­tion, which in turn re­duces the ren­tal in­come profit earned, thereby re­duc­ing their tax bur­den.

– The BTL in­vest­ment forces undis­ci­plined savers to save. It’s a fact that the bank will re­pos­sess your prop­erty if you do not pay ev­ery month. With this in mind, in­vestors will make sure they pay their mort­gages ev­ery month. A debit or­der on a listed prop­erty in­vest­ment can how­ever have the same ef­fect. – This com­par­i­son did not take into ac­count that investing in ren­tal prop­er­ties through a com­pany le­gal struc­ture could of­fer sig­nif­i­cant ben­e­fits from a tax and ex­pense write-off point of view.

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