Help with our investment

srcandas

If I was the HMRC I wouldn't put too much effort in chasing people making a profit out of Spanish property at the moment :rotfl:

But seriously OP I'd be interested to know if you had any hassle from the Spanish if you are one of the very few who has made a bit? Tax there on property can be a pain.

And certainly well done for getting out with more than you hoped at this time. Can't see Spanish property recovering until the peseta is back in place :beer:

seven-day-weekend

xylophone wrote: »

Was there a CGT liability?
tp://www.hmrc.gov.uk/cgt/intro/when-to-pay.htm
http://www.shelteroffshore.com/index.php/property/more/capital-gains-tax-rules-overseas-property-10295

No....we were able to set the value of improvements that we had done to the property, the buying/selling costs and updating of deeds against the sale. So we did not make enough paper gain to warrant any CGT (the updating of the deeds alone was about £6k and took eight months!). There may be a little more 'plusvalia' tax to pay (a tax on the increase in value of the land), but the lawyer gave us an estimate for that and we have paid it. If by any chance it is any more (or indeed less!), he will let us know and we will pay or be re-imbursed accordingly. We were Spanish fiscally resident while living in Spain, so are treated differently to non-fiscal residents for tax purposes.

I would thoroughly recommend anyone selling in Spain to get a really good, straight down the line, unbendable, bilingual solicitor (it is not a requirement to have a solicitor in Spanish property transactions, only a notary, in front of whom to sign the documents ). Ours guided us every step of the way and explained all the taxes to us.He wasn't the cheapest, but we know without a doubt that our house sale was totally legal.

Now, has anyone any comments about our proposed investment?

srcandas

seven-day-weekend wrote: »

Now, has anyone any comments about our proposed investment?

I think buy to let needs careful consideration. It is more a business than an investment. You can have bad tenants and no tenants. My friend has 9 properties. He says without the scalability and the fact he was a builder it would not be worthwhile.

He recently had a lady who managed not to pay for 6 months. The landlord association warned him to do nothing or he could open himself up to legal issues. Afterwards the house needed serious redecoration.

And 20 years is a long time so the thought of living there might well be a red herring.

I recon you could have a chat with an IFA and get a good handle on risk and return options. There are so many options and many with limited risk.

Just my thoughts as an amateur investor of course :beer:

mw2655

seven-day-weekend wrote: »

Just to say we got our money, it was over £80k in the end.

We paid the mortgage off (£29.5k), paid about £3k improving our home, spent £3.5 k on a rewire and new heating for our son's flat, put £10k in a one-year bond so have about £34k left.

We have seen a flat in the same development as our son's. It is up for £72k but has been for sale for ages and needs a lot of work doing ..................

Do people think this is a viable and sensible proposition?

hi congratulations on paying your mortgage off.

but do you think you will be paying a higher rate on the £40k or so you need to get the buy to let flat? it might have been better to keep the old mortgage??

you say.....

"I don't think we could put 40 grand in stocks and shares - much too risky for us! But thanks for your advice"


but you're prepared to borrow to invest in an illiquid BTL flat...

possibly all your eggs in one basket ??

remember being a landlord involves work...

i would seriously consider a S&S ISA.

now what you put in it, investment trusts, shares, funds, gold ETF's... that's a different matter


cheers matt

seven-day-weekend

The flat actually would be for us, for when we no longer wish to live in our three-storey house.

However, my husband wants to buy it now while A) we have the money and property is cheap. He reckons that when the time comes when we move to a ground floor flat, we won't want to be bothered with buying/selling then and the property also may be comparatively more expensiev. So until we are living in it, we will have to rent it out.

We have had an investment property before, and had tenants in our own house while we were living in Spain, so have some idea of what it entails.

However, I do take yoiur point about problem tenants!

My own feeling is either to keep our money and invest it in one of the ways suggested here, or to buy something like this

http://www.rightmove.co.uk/property-for-sale/property-32231524.html?utm_content=ealertspropertylink&utm_medium=email&utm_source=emailupdates&utm_campaign=emailupdatesjun11&utm_term=buying&sc_id=5985410&onetime_FromEmail=true

which would make a great student let and would purely be for investment. Then when the time came to move on, we could sell it (and maybe our family home too), and get something then for our old age. I have been a student landlady before, but they lived in our home as lodgers, we have never had a separate student house.

Thanks to everyone for your advice, we are willing to listen to all points of view!

jamesd

BTL can work and you've already realised one of the key secrets: much or most of the profit is made by buying at a good price and places that need refurbishment can help to get a good deal.

Next thing to know is that it's cheaper to borrow on your own residence than to get a BTL mortgage on the rental property. Provided the borrowing is for the BTL you can deduct mortgage interest equal to up to 100% of the property value at the time it entered the rental business from rental income.

Don't be tempted not to have a mortgage just because you may have the cash. For BTL it's good to have some diversification so if you're seriously interested you could consider a larger mortgage on your own place and buying several more properties that you may find good deals on.

I think that your reasons for buying the ground floor flat make sense. I do wonder why you wouldn't want to move sooner if the place is suitable. That would cut your ongoing expenses as well.

Your perspectives on risk are somewhat distorted, probably by your familiarity with property and unfamiliarity with other investments. BTL property is an illiquid leveraged investment and is a high risk transaction. Most funds using shares are lower risk than BTL property. This isn't saying you shouldn't do it, just saying that you're getting the risk comparison wrong.

It didn't make much sense to clear your previous mortgage when you could get interest rates tax free in ISAs that pay more than the mortgage was costing you and could do considerably better than that even with quite low risk investments within a S&S ISA. Probably your lack of familiarity with investments letting you down in part, but the cash ISA option was there and would have been fine and made you a profit on your mortgage - making more interest than you were paying. But many people like no mortgage, so it's also understandable even though it wasn't financially efficient.

seven-day-weekend

jamesd wrote: »

BTL can work and you've already realised one of the key secrets: much or most of the profit is made by buying at a good price and places that need refurbishment can help to get a good deal. Thanks, at least we've got that right!

Next thing to know is that it's cheaper to borrow on your own residence than to get a BTL mortgage on the rental property. Provided the borrowing is for the BTL you can deduct mortgage interest equal to up to 100% of the property value at the time it entered the rental business from rental income. We really don't want to risk our home if all goes pear-shaped.

Don't be tempted not to have a mortgage just because you may have the cash. For BTL it's good to have some diversification so if you're seriously interested you could consider a larger mortgage on your own place and buying several more properties that you may find good deals on. We will have a mortgage on the BTL, but don't want one on our own home for the reasons mentioned above.

I think that your reasons for buying the ground floor flat make sense. I do wonder why you wouldn't want to move sooner if the place is suitable. That would cut your ongoing expenses as well. We will miss the garden and quirkiness of our house and don't want to move from it until we no longer want the garden and quirkiness!

Your perspectives on risk are somewhat distorted, probably by your familiarity with property and unfamiliarity with other investments. BTL property is an illiquid leveraged investment and is a high risk transaction. Most funds using shares are lower risk than BTL property. This isn't saying you shouldn't do it, just saying that you're getting the risk comparison wrong. Probably, and for the reasons you say.

It didn't make much sense to clear your previous mortgage when you could get interest rates tax free in ISAs that pay more than the mortgage was costing you and could do considerably better than that even with quite low risk investments within a S&S ISA. Probably your lack of familiarity with investments letting you down in part, but the cash ISA option was there and would have been fine and made you a profit on your mortgage - making more interest than you were paying. We did understand this, but wanted our home to be mortgage-free. We don't mind a bit of a risk with other investments, but don't want to risk our home.

Thanks for this very informative and helpful post. Please see my comments in blue above.

jamesd

Both of you have or will have some good state pension options. For a man in normal good health it's optimal to defer for about 1-3 years and for a woman 2-5 years. 10.4% increase per year in the pension payment level for doing it, pro-rata for shorter periods. It's an excellent way of boosting your long term inflation-protected income. The 10.4% rate is far higher than any mortgage interest rate so it even makes sense to borrow on a mortgage to get money to live on while deferring, if necessary. You can defer once even if you have started to take the state pensions. When new pensions start can be a good time to do it.

Will either of you have a guaranteed income of at least £20,000 from state pensions plus work final salary pension combined?

jamesd

seven-day-weekend wrote: »

We really don't want to risk our home if all goes pear-shaped.

How is it more risk? Either way, you sell the BTL property. You're liable for any shortfall on the BTL property and liable for any shortfall on the residential property so your net position is the same. You're just making more money in the meantime if you use a mortgage on your own place. Try making a list of the risks and working out what happens in each case and see if you can find any that really are higher with a mortgage on your own place. You should find that none are higher.

But even though the risk is no different, you still may well not be comfortable with it. Just reality that people make financially inefficient decisions sometimes, for personal preference and comfort reasons. It's a natural part of investing.

seven-day-weekend wrote: »

We will miss the garden and quirkiness of our house and don't want to move from it until we no longer want the garden and quirkiness!

Makes sense.

seven-day-weekend

>>
Both of you have or will have some good state pension options. For a man in normal good health it's optimal to defer for about 1-3 years and for a woman 2-5 years. 10.2% increase per year in the pension payment level for doing it, pro-rata for shorter periods. It's an excellent way of boosting your long term inflation-protected income. The 10.2% rate is far higher than any mortgage interest rate so it even makes sense to borrow on a mortgage to get money to live on while deferring, if necessary. You can defer once even if you have started to take the state pensions. When new pensions start can be a good time to do it. I have taken my State Pension and get £115 a week. I have a Local Authority Pension to come in 2014, of about £55 per week with a £6k lump sum. My husband does not get his State Pension yet as he is not 65 until January 2014. He gets a Teachers Pension of about £9.5 k a year and a small annuity of £550 a year

Will either of you have a guaranteed income of at least £20,000 from state pensions plus work final salary pension combined ? My husband will have about £17.5k a year when he is getting all his pensions in 2014 and I will be getting around £11k, also in 2014. I earn about £2k a year from dogsitting (included in the total). <<

Just seen this later edit to your post! See my further comments in blue above!