come into some money - BTL to secure my future?

Pimperne1

92203 wrote: »

Just had a further conversation with my uncle. He's advised that if you split your capital between multiple properties (and have the rest of their value covered by a buy to let mortgage), you can get tax relief on the rental income you make from them. One of his most recent purchases (repo)has a 70% mortgage on it, and he gets to keep a good 10% of the rent even after paying the mortgage.

As I mentioned earlier, splitting houses into bed sit or house share type arrangements is the best way to maximise yield and minimise the risk or impact of void periods.

If you want a tenancy contract with the Home Office/Probation Service, let me know and I'll forward you their details. The only stipulation they have when leasing properties is that they must not have windows over looking any playgrounds or schools in the area.

To be honest, I envy your position. My uncle says that property prices only ever go up, and that in years to come, due to low levels of house building etc and immigration/population increases, demand for accommodation will drive prices so much that in the next 10-15 years, the average man on the street will only be able to afford to live in a bed sit. Family homes will be a thing of the past, couples (and their children) will have to share with other families to split the rent.

Not sure if this is meant to be antagonistic but I will add a response anyway.

Furnished properties allow you to keep 10% of the rent before you start thinking about tax.
There are plenty of good tenants out there looking for property without resorting to taking in the type of people your uncle seems content to have.
You need to be aware of the Homes with Multiple Occupancy rules if you are thinking of going beyond a small number of people living there (I don't do this so don't know the precise rules).
Splitting your capital between multiple properties - I think you should see how you get on with one first.
The last paragraph is going to annoy people (but I suspect you know that).

getmore4less

The-mouth-of-the-south wrote: »

the kinds of houses i would be looking at would fetch around £750 - £1000 a month or so. I could live off that without to much of a problem (as long as I have someone living there)

What's the gross yield that's your starting point

Generali

Pros:
1. Reasonably easy to understand as a business
2. Predictable income stream
3. You seem to be looking at an income rather than capital growth so an illiquid selling market probably doesn't bother you.

Cons:
1. All your eggs are in one basket
2. Massively illiquid investment.

Personally, I'd be happier with a BTL on a small mortgage and then a range of other investments than a BTL owned outright only.

RenovationMan

Generali wrote: »

Pros:
1. Reasonably easy to understand as a business
2. Predictable income stream
3. You seem to be looking at an income rather than capital growth so an illiquid selling market probably doesn't bother you.

Cons:
1. All your eggs are in one basket
2. Massively illiquid investment.

Personally, I'd be happier with a BTL on a small mortgage and then a range of other investments than a BTL owned outright only.

isnt it more tax efficient to have a mortgage on a BTL, anyway?

I would be inclined to put down a decent deposit with some of my capital, in order to secure the best BTL mortgage deal, and then I would put the rest of the money into other investments, with a float left in cash to cover you for void rental periods.

You then engineer the finances so that the rental income just about covers your mortgage and allowable expenses, so that you dont have to worry about tax, meanwhile your tenants pay the mortgage off and you reach retirement with one or more paid off properties. Not a bad position to be in, though BTL sounds like way too much hassle of an investment for me personally.

Generali

RenovationMan wrote: »

BTL sounds like way too much hassle of an investment for me personally.

Me too. Lousy investment IMO. The Chairman of BP doesn't ring you up complaining the roof is leaking on Christmas Eve if you buy shares in BP. Shell doesn't do a runner owing you 6 months dividends.

Can be a very good business though IMO.

chucknorris

Generali wrote: »

Me too. Lousy investment IMO. The Chairman of BP doesn't ring you up complaining the roof is leaking on Christmas Eve if you buy shares in BP. Shell doesn't do a runner owing you 6 months dividends.

Can be a very good business though IMO.

I'm coming up to 20 years as a LL now and although it's been great financially I can't disagree with your comments. I will of course suffer on until a much better time to sell up (probably about 10 years)

getmore4less

isnt it more tax efficient to have a mortgage on a BTL, anyway?

Not on it's own, it depends what you do with the capital that you have freed up by getting the debt

The tax relief is only on the interest payments not the full mortgage

If your capital generates income as rent or another source it is taxable so it makes little difference.

Dividends and ISA can protect some of the tax burdon.

JonnyBravo

Generali wrote: »

The Chairman of BP doesn't ring you up complaining the roof is leaking on Christmas Eve if you buy shares in BP.

:rotfl:

No, they have slightly larger worries.
My tenant doesn't ring me up asking me how to clean up an international environemntal disaster.

Large unforeseen problems with a property are usually the result of poor maintenance.
Sure we get the odd, "felt coming off the shed", "how do I reset the boiler?", "can I decorate?" but I'm yet to have a "I've blown up the kitchen", "we've got a flooded the lounge", "the roof is leaking".

Clearly, it will happen at some point but on one well maintained property, (we lived in it only 5 years ago), it really isn't a daily grind of maintenance.

LisbonLaura

It is a crazy idea. Both property & the currency it is priced in will be in decline for at least one decade & probably two.
DYO (thorough) R & see for yourself.

Please Note:- An IFA (they don't know much) will only recommend something he can earn off so I doubt he will mention commodities

wotsthat

LisbonLaura wrote: »

Both property & the currency it is priced in will be in decline for at least one decade & probably two.

..and the OP thought that cash windfall was good news.