Which way is best to go - need advice

lesta1980

been really lucky over the last few years and earned and saved some really good dough. managed to buy my dream house outright and have kept my 3 bed semi to rent out, with about £80k left on the mortgage. since buying my house i have managed to save another £100k which i was going to use to buy another house to rent out.
now I have been told the best thing to do is get 3 mortgages with £30k down on each and that would be more worthwhile.

first thing I think is that way im paying interest I dont need to and surely the difference between the mortgage payment and the rental income would probably be less than one rent coming in with no mortgage payment, if that makes sense.

my plan is to buy this one outright, then hopefully earn enough to buy another, and fingers crosssed, so on. have i got the wrong idea?

AlanP_2

I have no experience with BTL properties so can't comment on that but would just suggest that you consider alternatives.

We don't know what other savings / investments / pensions you have, what your age and family / dependants situation is (or may be in a few years time) so this are only generic comments for you to consider - if you want to.

IF you have all your money tied up in UK residential property what happens if the housing market drops just as you want to "cash in" one or more of those assets and use the cash for something else (wedding, retirement or whatever)?

It is not very easy to sell a "bit" of a house to raise say £10k for that dream holiday or new car.

Having a range of investments types (Cash, Stock Market, BTL etc.) gives you greater flexibility and helps to spread the risk.

lesta1980

thanks for the reply. im 35 and married but no kids yet

the only other savings i have is about £3k worth of shares in one company which i bought a few years back for £800. and only a very small pension i had at my old work, although I do plan to start paying into that again.

my ideal scenario is to get 4-5 houses and rent them all out so I have a back up wage if what im doing now ends.

Drp8713

I agree with the above.

Two houses and next to no pension or investments means you are lacking diversity and not very tax efficient.

You could put £15240 into a stocks and shares ISA this year, which means you pay no tax on the income or capital gains. Then repeat every year.

You can max out your pension up to the annual allowance limits and I assume based on yout earnings make 40%+ instantly with tax relief. You also pay no CGT and will get 25% on retirement tax free and your personal allowance to use assuming you have stopped working when you take it

Do you have a cash emergency fund also?

SilverArrowUK

Here’s a new one for you Salix homes in Salford

About 4 years ago when my late mother was still alive our boiler blew up and flooded the kitchen downstairs, it caused a lot of damage and took all the paper off the walls and also made a mess of the ceiling, I have been on at them now to keep their promise since it happened of repairing the ceiling which they have done but now the cleaning looks like a lunar moon landing site and they also said they would redecorate it all.

I would ring up constantly and they kept saying they are dealing with it but just recently I threatened to go to my MP over it and they took some action, they sent a guy out to fix the ceiling if you can call it that but he said really you need a new ceiling not patching it up. And while all this was going on because Salix have just bought these off the local council they sent round for an asbestos check, now this was done about 8 years ago as they did the houses up. New kitchen moved the boiler upstairs well put a new one in, put new heating in ect I am sure you know the scheme of things.

I had the guy come round how looked at the heating and he said you pipes are warm and your heating is on its very hot outside I said yes isn’t it, if you notice the panel it says off but it’s on by the pipes he said omg that’s very odd. He said I will get someone out to have a look at that (still waiting for that one)

So the asbestos check, they came out and then drill holes in the walls ect i said to them so when are they redoing these again, they said once we have set the check in they will upgrade them, err nope in about 2 years they will. So back to the inspector calls.

He said when this burst happened I said yes he said did you have insurance? I said no we didn’t why, he said well there’s nothing we can do, I said why? He said you would have had to claimed of your own insurance, I said I don’t think so if i would have made a claim the first question they would have asked was are you the owner and when i would have said no I’m not and what it was they would have sent me back to you. The buildings insurance is down to you and the pipes he said it’s down to the tenant.
He said OK look at it this way you have a laptop in the kitchen i said yes, and then the water comes down the wall and your laptops blows up, I said yes he said well you would claim then wouldn’t you? I said yes off you, he said no because that’s your household stuff I said yes but the cause of it blowing up would have been the water for the leak. He said well then you would be out of luck because we would not pay for that.

It was like talking to someone that’s been given a job to do and makes the rules up as they go along. He said all I can offer you is 20. To get some cheap paper or put to it but we won’t decorate this i said well Reg Grundy said you would, he said he didn’t have the right to say that. He then said to me you can write to your MP and the Queen and they won’t do anything either its 20.00 or noting. And i will fix your cellaring and get the holes filled in and your heating fixed but anything else its down to you.

What I want to know ifs and I have housing insurance this burst happened when my mum was still alive and at that time was wasn’t required to have it, but this guy said we advised everyone to have and it’s also in your tenancy agreement. I said so your telling me that although i have house contains I have to have building and pipes insurance as well he said yes. I said well in that case how come this doesn’t reflect this in my rent.
He said the rents are not up to me and also the money you pay us we reinvest this to make better living you would not want you rent being used for things that don’t matter, i said is that so, so et me ask you a question then, i said when you took these housing over you did and asbestos check he said yes i said when you bought these of Salford council i said did you get all the reports and paperwork with tem he said yes, i said well you would have got the asbestos check from when they did it 8 years ago he said yes we did and they never found any then, he then said but they might now, i said well if it wasn’t there the first time how can it be there now. And you talk about wasting money?

Cisco001

I suggest you pay off the mortgage.

Since the government change the rules, you will no longer able to offset BTL interest with rental income.

While with spare cash, as suggested with AlanP, you would probably need to consider other form of investment which give you a bit of flexibility if you need cash in urgent just in case.

Also, I assume you are high earner? I would suggest you consider put more money in pension fund instead of taking hard cash home as you don't pay tax for money putting to pension.

marathonic

Cisco001 wrote: »

Since the government change the rules, you will no longer able to offset BTL interest with rental income.

Not entirely true... For a basic rate tax payer, the new rules have no impact. For a higher rate tax payer, they are no longer able to offset at the higher rate, i.e. They can only offset at 20% as opposed to previously being able to offset at their marginal rate.

jimjames

marathonic wrote: »

Not entirely true... For a basic rate tax payer, the new rules have no impact. For a higher rate tax payer, they are no longer able to offset at the higher rate, i.e. They can only offset at 20% as opposed to previously being able to offset at their marginal rate.

There seems to be a lot of misinformation going around about the changes to BTL tax status, thanks for highlighting one of them. I don't think will make too much difference to the economics of it for most people who are relying on capital value increase rather than rent.

lesta1980

Thanks for all the posts so far. Agree at the moment I'm not being the most tax efficient but me and my accountant are looking at a few options including pensions and although I know Isa's are tax free but just couldn't see the point in starting at the low level (I know I know). Also always liked having my savings in easy access monthly pay interest accounts so it seems to grow each month. Also find it all a bit overwhelming as I'm not from money at all and just been lucky with what I do