How do I build a property portfolio?

rugby_fan_22

bris wrote: »

Sorry, you don't have the income or savings to generate 3k per month in the rental business.


You have enough savings for a deposit on 1 more property but the mortgage will be almost as much as the rent.


Sorry to be so blunt.

I appreciate that I am being nieve on my dream figure, thank you for taking the time to post.

rugby_fan_22

DAN1 wrote: »

It all depends on the location, i am slowly building up a long way from £3,000 a month net income but will get there in the end.

I bought a 77,000 1 bed flat with 20% deposit, rental is £550 mortgage is £306 so with £30,000 there is room to create a portfolio providing that each property needs work so you can gear up towards your eventual target.

Thank you Dan, you have given me a ray of hope in achieving my dream figure, the other posters have made some very valid and indeed correct points that I must consider but live in hope and will keep plugging away at it. Thank you for taking the time to post.

El_Torro

Not only will you need various properties, with a lot of money tied up in deposits and mortgage repayments, but buy to let is also not the most tax efficient way to generate an income for yourself.

Pension savings have strong tax incentives, though of course you'll only be able to access the money when you're 55 or above. Also investing in funds that focus on income from dividends (preferably in a Stocks & Shares ISA) will give you income that is non-taxable and also a lot less hassle than being a landlord.

Of course there are risks in investing in shares, though the potential risks in being a landlord are also very real. The value of the house could fall due to the area becoming less desirable, you could have troublesome tenants that wreck the place and refuse to pay rent, or you could be lumbered with a big maintenance bill.

Ultimately diversity is the key. Since you already own your own home and also own a buy to let property it may be wise to now diversify into other sectors.

rugby_fan_22

El_Torro wrote: »

Not only will you need various properties, with a lot of money tied up in deposits and mortgage repayments, but buy to let is also not the most tax efficient way to generate an income for yourself.

Pension savings have strong tax incentives, though of course you'll only be able to access the money when you're 55 or above. Also investing in funds that focus on income from dividends (preferably in a Stocks & Shares ISA) will give you income that is non-taxable and also a lot less hassle than being a landlord.

Of course there are risks in investing in shares, though the potential risks in being a landlord are also very real. The value of the house could fall due to the area becoming less desirable, you could have troublesome tenants that wreck the place and refuse to pay rent, or you could be lumbered with a big maintenance bill.

Ultimately diversity is the key. Since you already own your own home and also own a buy to let property it may be wise to now diversify into other sectors.

Thank you very much, you have given me something else to think about, I had never previously considered stocks and shares as the idea scares me as there is nothing visable, sounds a bit silly i am sure.

Stocks and shares ISA's could be given some thought, and I will look into it as another string to my bow so to speak.

What did you mean by tax incentives from the pension? sorry for my lack of knowledge in this area, I am looking long term for my final figure so 55 would not be an issue.

Thank you for your reply it is very much appreciated.

Pixie5740

Are you currently a member of a landlords association? If not it might be worth joining as 1) the membership fees are tax deductible, 2) you'll get help and advice for your current BTL property, 3) you'll learn about other local and national landlords' experiences which could help you put together a business plan. As FF says, learn from other people's mistakes.

El_Torro

rugby_fan_22 wrote: »

What did you mean by tax incentives from the pension? sorry for my lack of knowledge in this area, I am looking long term for my final figure so 55 would not be an issue.

When you invest in a pension you get the income tax back. You will get 20% added automatically, provided your investment for the year is not higher than your income. I believe you also only get tax relief on the first £40k invested per year. If you're a higher rate tax payer (i.e. you pay 40% income tax) you will also get an additional 20% relief if you claim it back by self assessment. So for every 60 pence you put in, your pension will actually have £1.

The best way to invest in a pension is to join your employer's scheme and pay in by salary sacrifice. Salary sacrifice also means you'll be paying less National Insurance contributions. You will also benefit from your employer's contribution.

When you start withdrawing money from your pension it will be taxable, that is why some might prefer an ISA, especially since you can take money out of your ISA at any age.

rugby_fan_22

Pixie5740 wrote: »

Are you currently a member of a landlords association? If not it might be worth joining as 1) the membership fees are tax deductible, 2) you'll get help and advice for your current BTL property, 3) you'll learn about other local and national landlords' experiences which could help you put together a business plan. As FF says, learn from other people's mistakes.

I did not know that such a thing existed, its sounds very good, thank you very much once again,

rugby_fan_22

El_Torro wrote: »

When you invest in a pension you get the income tax back. You will get 20% added automatically, provided your investment for the year is not higher than your income. I believe you also only get tax relief on the first £40k invested per year. If you're a higher rate tax payer (i.e. you pay 40% income tax) you will also get an additional 20% relief if you claim it back by self assessment. So for every 60 pence you put in, your pension will actually have £1.

The best way to invest in a pension is to join your employer's scheme and pay in by salary sacrifice. Salary sacrifice also means you'll be paying less National Insurance contributions. You will also benefit from your employer's contribution.

When you start withdrawing money from your pension it will be taxable, that is why some might prefer an ISA, especially since you can take money out of your ISA at any age.

That makes sense, once again you have given me some food for thought, thank you for your advice