Buying a second property a wise investment for your children?

Nice_guy

RayWolfe wrote: »

It's also illegal without court sanction.

Not techincally correct. You can make deductions to an employees pay if stipulated in the terms and conditions of their employment (an appendix to their contract of employment can easily be added)

Also if not in their terms and conditions, written approval from the employee can be sought. If it is agreed between both of us (which I see no reason why it wouldn't be) than a simple document can be drawn up whereby the staff member is officially giving me the right to deduct the rent from their pay.

jamesd

It's not a bad investment idea given the long term but you should prepare yourself for children not wanting to live in the place where you have the property. If they go to university they might instead want a BTL place of their own there and after that would want one wherever work takes them.

Your payroll thoughts read like an invitation for trouble, regardless of legality.

Nice_guy

Just realised I can multi quote! - sorry everyone!

jon3001

Nice_guy wrote: »

On pay day I will pay my employees as usual (cash) and then expect them to hand me over the rent.

What if they want to sort out the rent 'later'...? Are you going to withhold their pay? Are you going to pry into their finances?

Nice_guy wrote: »

I could always deduct the rent before giving them their pay (with their approval of course). I know the few staff members I have in mind to possibly rent out to will not have a problem with this is the slighest, we have a very good relationship which is built on trust and respect - it works both ways.

I think such an arrangement will muddy things. How long do you expect to have good relationships with them? You say it's built on trust but you want direct access to their pay and contractual enforcements. Don't you think they'll pay you? Then why rent out to then?

Nice_guy wrote: »

Not techincally correct. You can make deductions to an employees pay if stipulated in the terms and conditions of their employment (an appendix to their contract of employment can easily be added).

What has their housing arrangements got to do with the T&Cs of their employment?

Nice_guy wrote: »

Also if not in their terms and conditions, written approval from the employee can be sought.

And if they say no?

Nice_guy wrote: »

If it is agreed between both of us (which I see no reason why it wouldn't be) than a simple document can be drawn up whereby the staff member is officially giving me the right to deduct the rent from their pay.

Why would a tenant want their landlord to have direct access to their pay?

Nice_guy

Jon3001 - I bet you have a lovely relationship with your employer

I don't want this thread to go off topic, which is where I think you are going with your line of questioning. The thread is just meant to disucss the prospect of buying a second property as a long term investment.

The fact that I *could* rent out to my employees, is of obvious advantage to me, you'll just have to believe me on this one my friend. The main problem landlords have is finding good tennants, all I was stating is that I don't think I would have that much problem in that area as I could rent out to my staff members. It would be an advantage to my staff as well as I would make sure the property that they live in will be of a high standard internally compared to the state that some of them have to live in now. The benifit will be two fold, i'm not sure if you have got it into your head that i'm trying to rip my staff members off.

I'm not sure if you think i'm a dodgy kind of guy, or have got that impression, whichever way some of your questions are a little pointless when considering the subject of the thread.

I hope you don't take any of the above to heart, I would rather stay on topic. Feel free to PM me is you wish

opinions4u

Nice_guy wrote: »

I'm not sure I follow on some points regarding an 'all eggs in one basket approach' and suggestions that I should be investing in a more diverse investment that would allow more flexibility.

As far as having all eggs in one basket goes, I'm not sure this will be the case, as we will be mortgage free so if the investment has quiet periods we can always route funds to the second property if needed. I would think after a year or so of setting the second property up we hopefully will be in the position again to invest into another area.

A typical investment portfolio (if there is such thing) will be made up of a range of different funds. Amongst others, these could include:

- tracker funds that invest in 100+ companies
- property funds that invest in multiple property developments and ownerships (not just one on the street round the corner)
- European shares/property
- Worldwide shares/property
- Developing nation shares/property
- Far East shares/property
- North American shares/property
- UK small company share/property

Investments in thousands of companies and hundreds of property developments spreads the risk on your money. An investment of borrowed money and 38 Acacia Avenue piles all the risk in to one property that could take months or even years to sell if you wanted to access the cash value of the asset.

The vast majority of my shareholdings 3 years ago were in one share - a UK bank. I never quite got round to diversifying. Outcome: The loss of 98% of value. My own fault, but I was totally exposed to one investment only.

HBOS borrowed big on the money markets, lent to property developers, the market sank without trace and the bank effectively died.

Buy-to-let on one property is much the same. You are totally exposing yourself to:

- mortgage rates
- rental yields
- property market in a single location
- local authority planning issues
- tenant behaviour

If the LA decides to redevelop an area in xx years time, you could get absolutely murdered value wise by a compulsory purchase order. You have total exposure on one location.

It sounds like you want to go ahead with it, and if you do I wish you luck.

But exposing yourself to one asset within one asset class long term is an exceptionally high risk strategy.

Nice_guy

jamesd wrote: »

It's not a bad investment idea given the long term but you should prepare yourself for children not wanting to live in the place where you have the property. If they go to university they might instead want a BTL place of their own there and after that would want one wherever work takes them.

Your payroll thoughts read like an invitation for trouble, regardless of legality.

Good point there James, their career/work could take them anywhere. I suppose the property could always be sold and one bought where they would like to reside.

Regarding the payroll, perhaps I have portrayed myself in the wrong light. I see nothing wrong with what I have said - everything will be done with an employees consent. If they don't agree then I will rent to someone else. From what I know they are paying now, I would be charging them less, for a house in a better area, in as new condition. There is no point overcharging my own staff as it goes against the prinicple of looking after them. If I rent to my staff their quality of life would be better while also being financially better off too. A win win situation, I have tennants I can trust and their quality if life improves too.

Simply requesting that their rent is paid on pay day, is exactly the same as a landlord requesting their rent on or before a certain day - only difference is I will feel more secure about getting the rent on time because of who the property is rented to.

Nice_guy

Thanks for clearing that up opinions4u, I see the point your making - very valid it is too. I am by no means sold on the idea of buying another property, it's just an idea to which I wanted some feedback.

Appreicate the advice as always

exil

Explanation of all eggs in one basket

If you put all your eggs in one basket (one single property) and the basket drops - you lose all your eggs. Simple as that.

Better idea is to diversify. Invest in property indirectly through a commercial property fund. Also stocks, shares, gilts, gold, bonds, etc, etc.

If you've just won the lottery and want to risk 200k or whatever on buying a property as part of a mixed portfolio of investments - fine. Also if you're really interested in property, love the idea of spending time and energy doing up houses and selling them or letting them out - then it can become a lucrative hobby or even a second career. But there are risks.

jon3001

Nice_guy wrote: »

Jon3001 - I bet you have a lovely relationship with your employer

A bet you would win. I wouldn't let them take the p1ss though. Plenty of other places to take my skills.

Letting to your staff is one thing. But what you propose in terms of controlling their personal finances and employment contract to suit your personal investment goals is solely to your benefit and not theirs. Why would they rationally go for it unless they were being pressured?

Nice_guy wrote: »

Regarding the payroll, perhaps I have portrayed myself in the wrong light. I see nothing wrong with what I have said - everything will be done with an employees consent. If they don't agree then I will rent to someone else.

Presumably if you rent to someone who is not in your employ then you don't get to mess with their pay. Your employees are not on an equal footing compared to other potential tenants. They get pressured into extra concessions if they wish to rent. Maybe they'll agree anyway but that doesn't mean there won't be problems later.