Early-retirement wannabe

settingsun

bigadaj wrote: »

It might be difficult realising the capital from the buy to let house without paying significant capital gains.

People have tried moving back in and claiming residency again but hmrc have challenged this over relatively short time periods and I believe won their case resulting in large tax payments, you might need to look into this in quite a lot of detail.

I did live in the house for 10 years, and then rented out for 10 years. There are various online calculators which when we deduct the capital spend, and use our CGT allowance across both of us along with letting relief and relief for having lived in it takes it to a manageable level. But yeah i need proper advice on this.

settingsun

I've had no rent increases for ten years in the place I'm renting

Thats not you living in my house is it?!:D

Be sure that you know and understand the use of a residential mortgage secured on your own home rather than the BTL property for this. It'll probably be significantly cheaper with the interest still deductible to the extent permitted by the upcoming changes in law. Many people don't know that this is possible but it can be a big deal in terms of saving money.

I am struggling to understand this. What would I google to find out more?

Good luck with the knee too.

jamesd

settingsun wrote: »

I don’t have P2P at all. Mostly in shares Isas, and some short term funds in Santander. Right I will look at P2P, if I can really get 6 -10% it does change my approach.

Easy enough for the patient to get 12% before bad debt, after bad debt not knowable at present, the places paying that are too new, though the security is reasonable so losses should be quite modest when the inevitable happens. Blended approach using five platforms should be over 10% or so.

However, you shouldn't assume that this will be available beyond five to ten years because it is entirely possible that rates will drop over time to levels more consistent with other investments. At the moment we're still in a growing market situation and rates may well be reflecting that. So nice medium term boost to both income and reduced volatility but for long term planning you should use conventional investment assumptions, not what P2P can deliver today.

settingsun wrote: »

I am not familiar at all with the VCT approach you mentioned.

Try an advanced search for my user name and VCT to learn more.

settingsun wrote: »

Applying the above approach (cash btl / P2P / dont finish paying mortgage till 75) gets me about 80% success on firecalc, which is a little scary. What this does not take into account is the reduction in income from about 75 and that I have my Florida home and family home to downsize if required.

You might try taking a look at cFIREsim. It offers the Guyton and Klinger drawdown rules that seem to be a good choice and those should increase success rate and income, at the cost of that income dropping if there are sustained poor market results, but maybe not to below the 4% rule level except at the extreme end.

jamesd

settingsun wrote: »

I am struggling to understand this. What would I google to find out more?

Start by reading BIM45685 - Specific deductions - interest: Security for the funds. Then use an advanced search here for my name in the saving tax section and also for BTL or secured key words and you should find some extensive discussions of this, including the vital aspect that it must be clear that there is additional or new borrowing, and this would be clear where you increase the residential mortgage and drop the BTL one.

kidmugsy

settingsun wrote: »

I think my strategy is clear now. Refinance the BTL for 2 more years then give them notice in about 18 months after that. That would give me 6 months to sell. I would then pay off a little off my main mortgage (and maybe covert to repayment) to get the best possible deal on that and invest the rest. If i can get 6 or 7% on p2p I am clear.

Are you really going to plan on changing from over-invested in property to being over-invested in P2P? There's good reason why people advocate diversification in investing. It reduces risk for the same level of return. Or so history suggests.

jamesd

kidmugsy wrote: »

Are you really going to plan on changing from over-invested in property to being over-invested in P2P? There's good reason why people advocate diversification in investing. It reduces risk for the same level of return. Or so history suggests.

Worth remembering that "P2P" is a term equivalent to "shares" and includes a wide range of security types for secured lending as well as unsecured lending. A good deal of the diversification benefit comes from different P2P platforms and security or unsecured lending types.

Unfortunately it's unlikely to be true at present that diversifying out of P2P will offer comparable returns for the same level of risk. That's because we're currently seeing high P2P returns and traditional investments don't seem to come close to them. Roughly twice the equity return available, but for secured lending, for example, so both higher return and lower volatility, the opposite of what traditional investments and the efficient market hypothesis expect. Longer term I expect this to gradually fade but for now it's looking hard to even match, let alone beat.

Still, I agree with you that there should be some non-P2P component even though my own personal target its likely to see me with over 70-80% P2P with various security types and platforms. That's too high for most people but it works for me.

settingsun

kidmugsy wrote: »

Are you really going to plan on changing from over-invested in property to being over-invested in P2P? There's good reason why people advocate diversification in investing. It reduces risk for the same level of return. Or so history suggests.

Excluding my home, my pension pots /sipp would be about 60%, isas about 10%, florida property 10%. This leaves about 20% for p2p. If the p2p was diversified across different platforms as Jamesd suggests that should be a starting point for a plan.

What to do with the pension pots is a bigger concern. Currently a mixture of funds as originally set up by default and low cost trackers.. The isas are mostly fts100 shares with a focus on dividends. Hey but that's another story altogether.

gfplux

I have been interested in P2P for some years however as I live outside the UK that form of investment is not easily available to me.
I have in the past invested in a fund operating in the micro loan market.
I have read a couple of recent financial articles (no links I am afraid) suggesting that the returns on P2P are good but there might be some losses in the future and to be very careful.

jamesd

gfplux wrote: »

I have read a couple of recent financial articles (no links I am afraid) suggesting that the returns on P2P are good but there might be some losses in the future and to be very careful.

You probably read the reports about Lord Turner saying something negative about P2P. What really happened there is that the BBC edited out a major part of what he said in their initial interview, presumably because they didn't understand it. Here's a more full version of what he said:

"Lord Turner: I strongly suspect that the losses on peer-to-peer lending [breathe in] which will emerge within the next five to ten years [breathe in] will make the worst bankers look like absolute lending geniuses. Because I think a group of people are going into a lending process on a technical platform without anybody really doing go out and kick the tires credit analysis. You [emphatic]cannot lend money[end emphatic] to small and medium enterprises in particular [breathe in] without somebody going and doing good credit underwriting which is understanding you know where are these premises that the guy says he's got, you know what are the machines he's got, you know, does he really know or she know what they're doing? This idea that you can just automate that onto a platform I think it has a role to play but I think it will end up producing big losses.

Interviewer: Does that mean the Financial Conduct Authority - the replacement organisation for the body you used to head - is asleep at the wheel on this?

Lord Turner: Well. I think there is to a degree an element of conduct where there has to be a bit of you know buyer beware caveat emptor and you know obviously if people are mis-selling in the sense of if there are people who are running peer-to-peer lending platforms who are pretending that as it were the sponsor is doing a degree of credit underwriting credit analysis which isn't there then that has to be constrained. But if it is absolutely clear to people that they are meant to be making their own credit decisions by looking at the information available, then you know life has to have some toughness to it. If you do crazy things you do have to sometimes face the consequences.

Interviewer: Because ...not intelligible... this is not sophisticated investors there are adverts on the tube for this stuff. There are adverts on bus stops.

Lord Turner: Well again I think we should be very careful of the advertisement for it, we should make sure that there is clear warnings within it. I think we need to encourage people only to participate in this if they have money which they can afford to lose. This should not be any core part of the investment strategy of somebody who needs to be certain and able to conserve capital and we need warnings of that."

The only significant P2P firm in the UK that I know of which might do that automated underwriting without lots of other checks including human checks is Funding Circle, so it might be their method that concerned him. Or not, since he didn't specify a firm. It's more common in the US and he might be warning against that spreading to the UK. I don't think I've ever suggested using Funding circle here.

That interview was cut down to this in the original BBC story version:

"The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses"

After I sent them a factual correction message early in the day they modified that to add a missing word "worst":

"The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the worst bankers look like lending geniuses"

and also added the content now there about underwriting. The newspapers and other channels seem mostly to have picked up the earlier BBC version without listening to the interview and getting what he was really talking about right. What he actually said in full makes Lord Turner look well informed, what the first BBC version did was make it look as though he had little idea how UK P2P firms really work. You can listen to the fuller version that has the transcript words above at 1:17:25 here.

jamesd

gfplux wrote: »

I have been interested in P2P for some years however as I live outside the UK that form of investment is not easily available to me.

Some of the UK firms won't want to do business but many will, particularly if you are in the Euro zone. In Euros there's also Mintos that seems to have quite a good offering on the security front or many of their loans. I think that Ablrate and Moneything that I mention a fair bit here will take people from just about anywhere, not sure about SavingStream.