Mortgage Free - so good they'll do it twice! Wynnvegas aiming for the big house

wynnvegas

Thanks Tiggger,

Excellent. This guy seems to know what he's doing with the mortgage / tax sides of the plan and somewhere along the lines we'll have to just open ourselves up to trusting folk and just hope we gauge the right ones to trust. Sad to (nearly) have a mortgage again but already looking forward to the overpayments!

Cheers,

Billy

wynnvegas

Evening All,

and breathe...

I've just read through the last few pages and it seems strange that the week has been quite as busy as it clearly has. We've got a few hours now to have dinner, catch up a bit on the planner and try to work out what the hell we've gotten ourselves into!

The offer we've put in and had accepted isn't the best deal we've seen in monetary terms but what we're getting is a 3 bedroom semi-detached ex-council house worth £95k for £75k. Other than a staircase that's necessary to sort out (we'll come to that part later), there isn't much needed with the property at all. We should hopefully complete in the next 6 weeks and have it ready for letting within 7 weeks. I'm still not brilliantly keen on the interest only mortgage option but we'll be looking to go capital repayment if we can with a shortish term to reduce the tax implications. In essence, this will cost us money in the short term as the mortgage will not be covered by the rent but we'll be chucking a couple of hundred quid to the BTL mortgage every month - the Financial Advisor may well change that once he gets hold of my plans though!

Our Home Improvement Specialist, Colin, is on the case with us. We're both utterly useless with all DIY so he's our man for that type of stuff. He's looking to work with us to gain an equity share in the project going forward. There's a lot of potential trouble there but I trust this lad implicitly so I'll be happy to open myself up to the risk of it all going wrong - particularly as he is bearing the brunt of the risk in the first instance. We'll need to run the numbers so that it's fair all round (ethical landlordying at it's best!) but he's going to do all the work needed without any labour cost but then take a percentage share of every fifth house or so. One for us to agree on and then the necessary lawyers to draw up just in case but we're at an embryonic stage with that one as well.

Cheers,

Billy

SomersetSaver

Hi Billy

Just coming out of lurking (love your diary!) to comment on something you said. I probably misread what you said, but you can't offset the capital repayments against tax, only the interest payments.

I didn't want your sums to be messed up so thought I'd point it out in case you didn't know!

And reducing your term will only increase the capital payments not reduce the interest payable (and again will not be offsetable).

Also, regarding handy man Colin. I can see what you're trying to do but you might need to look at how you do that. Any costs of repairs/maintenance can be offset against tax. So I don't know if there is a way, or even if it's allowed, for you to be invoiced by him for the work (so you can offset that against income) but for him to be paid in equity.

Anyway, sorry if I'm teaching grandmother (father) to suck eggs but would hate for your plans to go wrong.

HTH
SS

wynnvegas

Morning SS,

Thanks for popping in. I knew the first bit (just makes me feel better seeing the balance come down) although I don't suppose it makes a massive difference in the long run as long as we're not stupid with the money if we do go interest only. I hadn't properly thought through the reduced term piece though so thank you very much for that (back to the spreadsheet...).

I appreciate the sentiment but my naivety in relation to this stuff is already becoming clear (and expensive) so the more information people throw at me, I'll be so much more informed and happier. It's likely time that we sat down with the Financial Advisor to see just how that would work as we'll likely be a few thousand per property (with this first one being a nice exception) on renovating and updating (striking the balance between nice to live in so attractive to tenants and doing as little as possible for fear folk will wreck the place isn't as easy as I'd thought) which may well give us a decent tax break. We're going to stick the houses, where possible, in Moyra's name as she attracts the lower tax hit. The major impact of that is that she is refusing point blank to sign up to the "Billy Street" idea, suggesting instead Bilmo Drive which I don't like at all!

Cheers,

Billy

wynnvegas

Morning All,

It's already a hell of a day. It's particularly rubbish outside so my efforts to take advantage of Martin's email to pop into Edinburgh for a couple of freebie TM Lewin ties may fall by the wayside. We have a free pass for Edinburgh Castle (which I've never been to) so it would be worth the jaunt in but it's nice and warm in here and I've been tasked with both finishing the bookcase at the second attempt and, very excitingly, bringing down the Christmas stuff as Moyra's tradition is that everything goes up on the first of December - today will see the testing of the lights to avoid a repeat of the great depression of '09 when they didn't work and things weren't rocking until the 2nd!

Had an email from the letting agent advising us that the property finders are now looking for £2,500 per property plus £700 legal fees per property so we'll need to build that in. This isn't as big a deal on the first one as it doesn't need much work but taking a 25-30% discount then eating into that with finders fees, legal fees, mortgage arrangement fees, initial updating and renovation etc starts to diminish that profit margin very early in. There are some people I trust in this process and others that are already seeming a bit shady and a lot harried. I've said I won't be rushed into things but we'll expedite things by increasing our scouting party to 4 as we've now got a friendly neighbourhood trainee surveyor on board to add to our Colin. If nothing else, they can crawl around the place writing things for us to negotiate harder on.

I'm not yet understanding the new offset mortgage as apparently we get charged interest on the whole £112k or thereabouts (whatever it will end up being) as soon as we dip into it but then the normal mortgage payment will balance it out and then act as an overpayment into the offset based on what is currently offset. It sounds like a long road for a short cut but seems that it will even out in much the same way as only paying interest on the outstanding mortgage amount. Another suck it and see scenario...

Needless to say, all this lack of clarity isn't doing my spreadsheet any good at all. I'll stick to putting some numbers down about Colin as I'm currently thinking about him keeping us updated with a record of his work via invoice and then giving him an equity share of every fifth house (once we get to enough properties, we may get to a position where we can sell one to him for next to nothing to offset some of our capital gains down the line as well). All these tax shenanigans seem really dodgy to me so we'll need to see what our IFA says to it.

Cheers,

Billy

Sepa74

If Colin invoices you but gets paid in an equity share, it means he will have to pay tax on the invoices out of money he hasn't received, so make sure he gets his own FA to check out any proposal.

The lack of "spreadsheetability" with an offset (especially where the offset account balances are constantly changing) is the biggest drawback of them!

wynnvegas

Hi Sepa,

Thanks for the advice. We'll get everything covered off as necessary to the benefit of all as far as is legally allowable. I've not even considered the issue of not having online access to the mortgage - some more questions to be asked on that front! I wouldn't be at all happy with annual statements as I expect to be moving money all over the shop on a daily basis.

Off out for dinner tonight with Investor 1 to see what his views are on life and everything that's going on. At the very least, I'll be able to point him to a few properties which are worth a wee look to kick off his own campaign.

Cheers,

Billy

wynnvegas

Evening All,

The planned trip to Edinburgh didn't materialise after all but tomorrow is a different day. Spent today instead at the gym, building Billy Bookcase 3 (not even a wee bit of drama either which is worrying - may end up ditching Colin after all this as my joinery skills are rapidly improving project by project!) and listening to the football whilst in the bath (anyone with iPads and the like 0 TUNEIN Radio is the very thing!).

Moyra is watching the end of frozen planet and aawing at the polar bear cups whilst quickly shifting to shouting at them not to eat the seals as they're cute too. I've never known anyone to take TV to quite the interactive lengths she manages. We've got some tidying to do tomorrow and it's the annual emergence of all the Christmas gear in preparation for Thursday's puttinguppery. I'm already unpopular as I'm in Bristol for the day so heaven help me if Easyjet suffer any delays in getting me home!

Hope everyone is having a grande olde weekend.

Cheers,

Billy

wynnvegas

Evening All,

We're trying to establish some hard rules for the BTL project. The revelation that we'll be an extra £2-3k for sourcing and legal fees for each property is something that we'll need to build in. However, having seen a particularly poor flat and seen everyone involved nearly try to rush us into the purchase of it, we need to be more careful - in that case, the second visit showed up a range of problems with it, including cracks in walls and sticking windows which are both (so I'm told) good indicators of movement in the property.

As such, we're now going to apply the following rules to the BTL project (although any advice of what else we should include is very welcome!):

1. We're only going to buy houses (preferably ex-council houses in the local areas) - flat come with a lot more trouble and risk.
2. We're only going to purchase houses that have a minimum of 20% discounted from the current market value.
3. We're only going to purchase houses where we've seen both the complete home report and sale schedule.
4. We're only going to purchase houses after the gang of 5* have seen it, approved it and given an estimate of what sort of remediation cost we'll be looking at.

*Gang of 5 being Me, Moyra, Colin (Home Improvements), Stacey (Surveyor), Lyndsay (Letting Agent).

Cheers,

Billy

Tilly_MFW_in_6_YRS

Hi Billy, I wonder given your resourcefulness whether you need to use a property finder. However, being one of those Englanders, it could just that that's how it works in Scotland? A friend of mine is a property developer and she uses word of mouth, normal search sites etc but does have over 20 B2Ls and handles it well. Everywhere she goes she looks, could be down the pub chatting with locals on one hand, having a manicure (pardon the pun) on the other. She reliably informs me that people are often interested as her buying saves them EA fees.

Looks like things are still moving quickly though so good luck.

Best wishes, Tilly