Second Property Investments

Samsonite1

We currently own a London property (the house we live in), so not sure if that helps or hinders. The mortgage is low - ironically a property investor was trying to get rid of it a few years ago (after an aborted sale) so it was very cheap!

saver861

Samsonite1 wrote: »

One aspect is that - even if you are a high earner, your situation could change next year or in 5, 10 years etc. If you have some money in property, at least you can get at it potentially more easily before you retire if you lose your high income. If it was all in your pension, you might be in trouble?

Yes that's correct. Pension is 55 and going up. So you know the tie in time there for sure.

However, turning the property into liquid might have a certain time span also. You certainly would need to have at least 12 months, better 18 months contingency finance in place before you sell the property.

Being stuck and having to sell cheaply could end up taking a big hit.

Samsonite1

saver861 wrote: »

Yes that's correct. Pension is 55 and going up. So you know the tie in time there for sure.

However, turning the property into liquid might have a certain time span also. You certainly would need to have at least 12 months, better 18 months contingency finance in place before you sell the property.

Being stuck and having to sell cheaply could end up taking a big hit.

Yes, I agree. I mean, there is an order of priority - we have ISAs, we have pensions and we are paying as much off our London property as we can (without being penalised). We may not get a 2nd property at all - there are certainly difficulties that can arise. The long term plan depending on circumstances of the time was originally that we would have a second property in a cheaper area (e.g. not in London) for us to move into when we retire. We can then sell the family London home which would hopefully be worth quite a bit by then, but if the mortgage is paid off, it would probably be sensible to sell or do something with.

I suppose ultimately we do not know what will happen so far in the future, but I would like to have more options rather than less!

_CC_

If you're treating property as an investment then the only sound way to calculate the attractiveness of it is to look at the fundamentals, the same way you would for equities, bonds, or a stake in a business.

The underlying asset will most likely be at near record multiples to local incomes, and therefore expensive.

Generally speaking, rental yields don't tend to be particularly attractive either.

So, on a purely investment based decision it doesn't look too tempting, albeit the leverage nature of mortgaging may tempt some.

However, nearly all the posters on here who are either BTLers or looking to invest in property hardly ever make the above assessment. Instead it's usually a speculative endeavour based on the assumption that property prices will continue to increase and they often are willing to forget the rental income as long as it covers the mortgage repayments.

Who knows what will happen in the future. What you can safely say is a lot of BTLers are prone to higher borrowing costs and any falls in house prices. This is exactly why the BoE has flagged BTL as a risk to the wider economy as they'll likely exacerbate property prices falls, hence why the Treasury has gone down the path it has.

Samsonite1

Well as I say, I am not looking to borrow much if at all because borrowing is a debt!

System

Commercial property, held within a pension?
Income and capital gains on sale are tax-free.

joe_mcclaine

After listening to my brother boasting about his two rental properties I thought it would be Like free money.

After both his tenants left him without a pot to ... well, you know ... I have revised my opinion.