Confused! Just how do you make money from property?

thesmiths21

I'm 42 and my husband is 47. We have two properties and NO pension worth mentioning. First prop we live in - mortgage £90K - value £230K Second prop, which is let for £460 pcm, mortgage (interest only) £80K - val of prop £110K.

We need to provide for our retirement (incidentally - we have no kids/no pension).

We are prepared to:

1) - sell our existing property, buy something cheaper that needs work, then sell and so on...... and also free up capital to buy more property to let

2) - sell our second property, to release the cash to buy more.

Trouble is, we are confused as to the best way to end up with a prop that has no mortgage, and an income (OK,we're not asking to be Rockerfella's!) for when we would like to retire at 60 - 65.

Capital gains tax also confounds us.

Can anybody advise:

A - how to do it

B - do we need an accountant, a financial advisor or a tax accountant?

We are not scared of risk - just unsure as to how to make the best of what we have got and unsure as to who we should talk to for the best advice.

Financially we are not that savvy (especially about tax etc - so any tips would be very gratefully received.

Big thanks

Doozergirl

Developing property is a job, not a pension unfortunately

If you sell your rental property you will have to pay CGT on the difference between the value when you bought and the value now. If it is joint names you can both use your exemptions. If you're planning to sell, I'd have tried to do complete before the tax year ends as you can start afresh in April. As it's tenanted you can only sell to investors.

If you redevelop, sell and move on you need to spend a significant time with the property as your main residence to avoid CGT.

There's so many holes: living in and doing up costs more and takes longer while you're living there; you'll rarely find a bargain that doesn't need a complete overhaul - the price people seem to pay for 'wrecks' is usually market value minue cost of work = pointless.

clutton_2

it is getting more and more difficult to make money in property - have a good read of https://www.singingpig.co.uk - the best property forum around for the uk market .

david29dpo

it can be done, with hard work and common sense. like doz says, the hardest part is finding suitable houses these days. i have bought and sold 2 flats and 1 house this tax year, yes my CGT bill will be high be its a living. my tip is give the buyer what they want, and it will sell. hasn't failed me yet.

Doozergirl

Houses at the bottom of the market sell better but are even harder to find!

Mrs_pbradley936

I know a little bit about this and I will tell you what we do. First of all I want to say that we have owned our rental properties for several years and paid around 60k for them (two bedroom flats in a newly built block) if you bought them now they would be about 140k. They rent very easily for £650 a month. We do have a mortgage, interest free and offset with Barclays on our own house.

We have an accountant and he advised us to own them as individuals rather that via a company. By doing that we cannot claim back any VAT but our accounting bill is far less so we think it is better.

Can I just add that when the flats were 60k the rent they brought in was around £550. So while the cost of buying has doubled the rent has not. That is what people mean when they say the Buy to let bubble has burst.

barnaby-bear

thesmiths21 wrote:

I'm 42 and my husband is 47.

Capital gains tax also confounds us.

Can anybody advise:

A - how to do it

B - do we need an accountant, a financial advisor or a tax accountant?

If you are using husband as a loose term it might help to know that if you aren't technically married - you can both declare a principle residence, kick the tenant out one of you 'live there' for a few months whilst the other stays in the other house and bingo no CGT. Of course if you did get married you are liable for tax. So much for government and family values :rolleyes:

prudryden

You might want to see an IFA. Sounds like you need to diversify and get some professional financial planning work done. For a start, organize a self invested pension.

TTMCMschine

Buy to let is dead. Using pbradleys example:

£550 rent from a £60K property = 9.1% return
£650 rent from a £140K property = 4.6% return

You can get that from a bank account, assuming you have the cash, & there is another downfall. The percentage returns above would only hold true if you paid cash - if you borrow you need to subtract the interest costs of the loan as well as the fees, bills, voids, etc. In real terms that equates to a loss.

The only hope is for capital appreciation, but with prices so high & FTBs borrowing a whopping 6 times salary for a basic property it isn't realistically likely to go much higher, if not to fall back to more sane levels.

prudryden

TTMCMschine wrote:

Buy to let is dead. Using pbradleys example:

£550 rent from a £60K property = 9.1% return
£650 rent from a £140K property = 4.6% return

You can get that from a bank account, assuming you have the cash, & there is another downfall. The percentage returns above would only hold true if you paid cash - if you borrow you need to subtract the interest costs of the loan as well as the fees, bills, voids, etc. In real terms that equates to a loss.

The only hope is for capital appreciation, but with prices so high & FTBs borrowing a whopping 6 times salary for a basic property it isn't realistically likely to go much higher, if not to fall back to more sane levels.

It's not dead for professional investors. Owning property is just a diversification of their assets, along with fixed income e.g. gilts, equities, gold, hedge funds etc. Rental income is more of a plus, than a necessity.

Amateur BTL is a relatively very small portion of the letting market.

Mrs_pbradley936

prudryden wrote:

It's not dead for professional investors. Owning property is just a diversification of their assets, along with fixed income e.g. gilts, equities, gold, hedge funds etc. Rental income is more of a plus, than a necessity.

Amateur BTL is a relatively very small portion of the letting market.

Well I don’t know too much about investments in terms of gilts, equities and all the rest so I will take your word for it. If giving money to M & G and letting them decide what to do with it is a bad idea please don’t tell me!