Podcast Summary
LinkedIn: A Valuable Resource for Small Businesses and Real Estate Landlords: Small businesses can find top talent on LinkedIn, while real estate landlords need to adapt to tax changes to maintain profitability
LinkedIn is an essential platform for small businesses looking to hire professionals, as over 70% of its users don't visit other leading job sites. This makes it an invaluable resource for finding top talent, even those not actively seeking new opportunities. Meanwhile, in the world of real estate investing, buy-to-let landlords are facing significant tax changes, which could significantly impact their cash flows. These changes include the gradual removal of tax relief on mortgage interest payments and the end of the wear and tear allowance. Landlords are starting to come to terms with these shifts, but the full impact is still being felt. It's crucial for landlords to understand these changes and adapt accordingly to maintain their investments' profitability.
Landlords face pressure to offset costs with rent increases, remortgaging, or selling properties: Landlords may increase rents, remortgage, sell low-yielding properties, or hold in corporate envelope to offset costs due to tax law changes and potential interest rate increases.
The recent changes in tax laws and potential increases in interest rates are putting pressure on landlords, leading them to consider various options to offset these costs. Some landlords may look to increase rents, while others may consider remortgaging to take advantage of low interest rates or selling low-yielding properties to invest in higher-yielding ones. Additionally, some landlords may consider holding their properties in a corporate envelope to continue getting interest relief on the full debt before corporation tax. These changes may lead to different regional variations in rent levels and property configurations, making it essential for landlords to focus on maximizing their income and minimizing their costs. Overall, these factors may result in a shift in the property market, with some landlords selling their properties or transferring them into limited companies.
Exploring Alternatives for Buy-to-Let Property Ownership: Landlords considering tax efficiency and long-term planning can explore company or trust ownership for buy-to-let properties, but it comes with added costs, complexity, and financing challenges. The majority of buy-to-let properties are still owned personally, and over 200 billion is in the market with 33 billion in current lending.
For landlords looking for long-term family planning and tax efficiency, incorporating their buy-to-let properties into limited companies or trusts can be an option. However, it comes with added complexity, higher costs, and potential financing challenges. The vast majority of buy-to-let properties are still owned in personal names, making this a significant issue for cash flows in the market. While two-thirds of the private rented sector has no mortgage debt, the buy-to-let market is worth over 200 billion, with 33 billion in current lending. The Ground Rents Income Fund, a UK-focused real estate investment trust, is a relatively new vehicle that invests in ground rents or freeholds, offering investors a low-risk, reliable asset class. For young people with little to no money, worrying about investing might seem unnecessary, but understanding personal finance basics is essential for future financial stability. Stay tuned for more insights on investing and personal finance.
Leasehold investments by pension funds in London: Pension funds invest in leasehold properties in London for low-risk credit returns, decent yields, and long-term premiums. Illiquid leasehold investments can outperform traditional open-ended funds.
Leasehold properties in London, largely owned by entities with Norman-sounding names, have been an investment class for pension funds for a long time. These investments involve paying a proportion of the overall rent on apartments, which acts as a low-risk credit investment since there's little reason for tenants to default on their leasehold payments. Leasehold investments can provide decent returns, especially in today's market where liquid assets like investment-grade bonds and equities offer low yields. The opportunity lies in illiquid assets, where investors can earn a premium for their patience by holding onto the assets for an extended period. However, it's important to note that traditional open-ended investment vehicles have faced challenges due to their requirement to adjust fund size based on redemptions. This can make illiquid leasehold investments more appealing for those willing to commit to longer investment horizons.
Participating in real estate market with fixed fund value: Investors can mitigate market volatility and selling share negotiations by investing in a closed-end permanent capital vehicle focused on UK northern properties, despite potential regulatory risks.
The closed-end permanent capital vehicle discussed in this conversation offers investors a way to participate in the real estate market with the understanding that the assets are illiquid and the fund value is fixed. This fund, which is based on grand rents and primarily focused on northern UK properties, can mitigate the risks of market volatility and negotiations for selling shares by allowing for orderly asset disposal in the event of mass sell-offs. However, investors should be aware of specific and regulatory risks, such as potential changes to leasehold regimes or unexpected government interventions. While these risks exist, the fund's potential rewards may outweigh them for those willing to accept the illiquidity and potential discounts. It is important to note that investing in residential underlying assets as a liquid investment vehicle is not recommended due to their inherent risks.
Prioritize saving for retirement and homeownership: Young adults should save 20% or more for retirement and potential homeownership to avoid financial hardships later.
Young adults in their twenties, despite facing high living expenses and low interest rates, should prioritize saving for both retirement and potential homeownership. This may require putting away a significant portion of their income, potentially up to 20% or more, depending on individual circumstances. Neglecting long-term savings can lead to financial hardships in retirement. Additionally, young adults should consider creative solutions for affording a home, such as getting a mortgage with a roommate or exploring alternative housing options. Common mistakes for young people organizing their finances include failing to consider long-term savings goals and not creating a budget. Seeking professional financial advice can help young adults make informed decisions and avoid costly mistakes.
Cautioning young people about debt for short-term expenses, Facebook tax controversy, and more: Young people should avoid debt for short-term expenses, consider timing for pension transfers, stay informed about tax controversies, and prioritize careful financial planning and giving.
Young people should be cautious about accumulating debt for short-term expenses like weddings or holidays as it can negatively impact their financial future. This was discussed on the latest episode of The Money Show featuring Alia Khan. Other topics covered included the importance of timing when deciding to transfer out of a defined benefit pension scheme, a Facebook controversy over UK corporation tax, and an entrepreneur's success story from pet shops. For those interested in finance, The Money Show's weekly podcast by the Feet Banking team can be found at ft.com/podcast every Tuesday. Additionally, listeners were introduced to cool facts such as a crocodile's inability to stick out its tongue and the availability of short-term health insurance for a month or less in some states through UnitedHealthcare's plans. Furthermore, 1800 Flowers was introduced as a gift-giving destination that puts heart into every occasion, ensuring a smile is delivered to friends and family. Overall, the episode emphasized the importance of careful financial planning, staying informed, and the joy of giving. Tune in next week for another insightful episode of The Money Show.
