investing faff-please help

havingaball74

In purely financial terms, where else would I get £300 PM and potential for capital gains? (the house has increased in value 3x in the past 12 years).

bowlhead99

(the house has increased in value 3x in the past 12 years).

If you are a "low/medium risk" person as you've mentioned before, then surely you would appreciate that having your entire wealth in a single rental property in your newly-established fledgling property rentals business while holding down a teaching job and recognising that your partner has absolutely no interest in being a landlord, is quite a risk, especially if the house you are doing it with has recently shot up in price massively.

Over those 12 years its value increased to a much higher multiple of local salaries than it had been previously, fueled mostly by affordability as interest rates fell to the lowest level in all of human history making mortgages cheap.

For it to increase another 3x in value over the next 12 years you would need people's salaries to somehow triple and/or interest rates to go significantly negative, unless there is some amazing local factor you're not telling us about which means people are in a frenzy to move into your town from the outside world (not from outside the country though, as we're closing the borders apparently).

havingaball74 wrote: »

In purely financial terms, where else would I get £300 PM and potential for capital gains?

Stick it in a portfolio of S&S investment funds (gradually moving them into ISA wrappers over time each year that you get a new £20k allowance) .

On 'only' £65k invested, any dividend income or capital gains will be covered by the annual dividend and capital gains allowance until such time as the money is fully wrapped up in an ISA. If at some point later you become a higher rate taxpayer ,move some of the ISA funds into a pension to reduce the income tax you pay on your salary that year.

The income from £65k of investment funds is unlikely to be £300pm - more likely £200pm if you are going for funds that specifically focus on income, and less if you are not. But much of the return is delivered through capital growth over time.

Also when the investment funds decline in value temporarily (as markets go up and down all the time) you can just wait for them to recover. Whereas when a tenant stops paying you rent for a few months until you can evict them, and has trashed your house, your income dries up and you need to inject thousands of pounds of new capital and lots of time and effort to fix the house and be able to get it let out again.

Professional landlords de-risk themselves by having a portfolio of several properties on the go at once, but that does not seem to be in your game plan. If you want to set yourself up as a landlord you need a game plan and an appreciation of what can go wrong, rather than focussing on the 'but it's £300pm and the interest rates on my tens of thousands of borrowings are really low ...at the moment'

buglawton

havingaball74 wrote: »

Thanks all. Although I am a worrier (and incredibly indecisive as you can tell) I am quite logical (I am a teacher by trade). The reason I have left the house empty for so long is that I have been concerned about the things mentioned (maintenance, tenant issues etc) and really wanted to just sell and stick the money elsewhere to tick over. Now, days away from exchange and completion, I am having second thoughts. I would make £300 PM minimum by renting it out and over the long term on such a tiny BTL mortgage I would own the house outright and have the income for my partner and I. I have been trying to weigh up the pros and cons. I believe that BTL is the best financial thing to do. If I could go back in time I would try renting it out and see, but now is it fair to pull out so far into the process?

The Exchange date will be the last date you can change your mind. It'll annoy the buyer if you do of course. As you're a logical person you could have tried learning to be a landlord there's loads of advice online. Disasters do occur but when they do it's often due to ignoring loud warning signs. It's most risky of all in the current high house price situation to newbies who've got to get a new BTL mortgage to do it. From your 1st post, however, it looks like you already own the property. For many people it'd be a 'no brainer' to use that propery for at least a trial run at becoming a landlord.

havingaball74

buglawton wrote: »

The Exchange date will be the last date you can change your mind. It'll annoy the buyer if you do of course. As you're a logical person you could have tried learning to be a landlord there's loads of advice online. Disasters do occur but when they do it's often due to ignoring loud warning signs. It's most risky of all in the current high house price situation to newbies who've got to get a new BTL mortgage to do it. From your 1st post, however, it looks like you already own the property. For many people it'd be a 'no brainer' to use that propery for at least a trial run at becoming a landlord.

That's what I am thinking. With hindsight, I should have at least 'had a go'. As the property is owned outright, I would need to get a BTL mortgage to release the equity for the new house (tying me in for 2 years if i fix). I now feel I have made a mistake selling it, but am so far down the process I risk legal and estate agent fees, more time while the house is empty and needs renovating, as well as annoying the buyers/solicitors/estate agents. I feel like it is a huge mistake, but, so far down the process, should I just carry on (the house has been empty for 10 months and the offer was accepted 3.5 months ago). And there is still the concerns about maintenance etc. What would you do?

AnotherJoe

I don't know you but judging from what you've written, I feel you'd be better off getting rid of the house, the need to spend money, and all the hassle of being a landlord. I did it for a few years, rented to friends and family, it was problem free, amd I still wouldn't do it again because if the fact it basically doubled the hassle of owning any house. Two lots of everything to do with owning a house.

You also have a partner who I understand doesn't fancy getting involved in this, so even if they support you when there is an issue, every time you need to do something such a s deal with an awkward tenant, spend money on maintenance, deal with agents who are asking you if it's OK to spend money on fixing say the washing machine or the boiler, they will be huffing away in the background thinking (or saying?) "I could do without this"

As I said in this thread or another one of yours, investments don't call you up at 3am saying the boilers not working or there's a leak through the roof, nor do they need extra tax statements, . You can invest and forget, and as someone else posted, if they do decline, you just wait, you don't need to spend more money.

Finally, as I see you are now investigating, and given this is for a pension, extra investment in the teachers pension scheme, if possible, would be rock solid zero risk. The only downside would be the fixed nature, you won't be able to access that until you get to retirement age. If you become a landlord or buy investments, you can always sell up. In your case I'd probably do a mixture of teachers pension and investments (again, lowering the risk).

bowlhead99

You have admitted you are a "real worrier".

So, after you've halted your house sale and annoyed people and paid your agency fees and costs for the abortive sale, and then start to go through the process of preparing to let the place... then something, anything, goes wrong, even something minor- you will be in a flap and worrying again.

Then when something else goes wrong, which it will, because things will always go wrong in business, you will be worrying even more.

If you are already a long way down the easy path to getting a nice chunk of money that's all yours, and can be invested in a combination of your partner's property, s&s investments and pensions, and just left to tick over without you needing to become a business operator - then that would seem to be best for someone of your mindset.

There is a saying, better to regret something you did than something you didn't. Life can be more fun that way, especially if you seek risk and entertainment and entrepreneurship. But if you are a worrier then starting a risk filled new business venture might not be up your street, even though buglawton's comments are sensible that if you plan what you are doing carefully and put effort into it you can hopefully avoid most disasters.

redux

havingaball74 wrote: »

In purely financial terms, where else would I get £300 PM and potential for capital gains? (the house has increased in value 3x in the past 12 years).

I am not a tax specialist, but I think this needs thinking about, as there can be a capital gains tax liability on selling something that is not your main residence.

Several years ago I read a book about some ways of minimising tax. As it is some time ago, some of it will be out of date.

But amongst a myriad of subjects it discussed circumstances like yours, where a couple moved in to a new house together, and sold one or two properties. The gains on these former properties could be exempt from tax.

Now we get to speculation. I can't remember, and as I say things may well have changed anyway, but I wonder if there is a time limit for that rollover exemption, like maybe the same and one previous tax years. If you might leave it several years, I think some advice could be useful.

On the other hand, if you're going ahead with the sale anyway, this might at least help reduce the second thoughts you're having.

jimjames

havingaball74 wrote: »

I would make £300 PM minimum by renting it out

I'd be interested to know how you calculated that number? Is that gross or net? Maintenance costs will be a guess then factor in insurance, tax, agency fees and voids. It may not be as much income as you expect. In contrast, investments will not need as much looking after and inside an ISA are free of tax.

I also agree with bowlhead's comments. I hate the hassle of having to phone around to get trades to come to sort issues. I know it's part of the job of being a landlord but I don't like knowing tenants are waiting for something to be fixed. You can sub that out to an agency but you'll pay for that and pay higher costs to the trade too. In addition tax is being changed so if you have other jobs you'll also start paying more tax on rental income. Finally if I was your buyer and had committed money to surveys etc I'd be more than a bit unhappy if you pulled out after 3.5 months just before exchange.

havingaball74

buglawton wrote: »

The Exchange date will be the last date you can change your mind. It'll annoy the buyer if you do of course. As you're a logical person you could have tried learning to be a landlord there's loads of advice online. Disasters do occur but when they do it's often due to ignoring loud warning signs. It's most risky of all in the current high house price situation to newbies who've got to get a new BTL mortgage to do it. From your 1st post, however, it looks like you already own the property. For many people it'd be a 'no brainer' to use that propery for at least a trial run at becoming a landlord.

With hindsight, I should have remortgaged on a BTL and 'had a go'. Now I feel that I am so far down the selling process that, fees aside, I would be annoying the buyer (a BTL investor). I just hope that I don't regret selling it for years to come...

havingaball74

jimjames wrote: »

I'd be interested to know how you calculated that number? Is that gross or net? Maintenance costs will be a guess then factor in insurance, tax, agency fees and voids. It may not be as much income as you expect. In contrast, investments will not need as much looking after and inside an ISA are free of tax.

I also agree with bowlhead's comments. I hate the hassle of having to phone around to get trades to come to sort issues. I know it's part of the job of being a landlord but I don't like knowing tenants are waiting for something to be fixed. You can sub that out to an agency but you'll pay for that and pay higher costs to the trade too. In addition tax is being changed so if you have other jobs you'll also start paying more tax on rental income. Finally if I was your buyer and had committed money to surveys etc I'd be more than a bit unhappy if you pulled out after 3.5 months just before exchange.

I worked out the figures by the interest only mortgage being around £100, £50 letting fees, £30 insurance, £100 tax. This is all very rough and I may have overestimated the tax and insurance. The rental income would be £500-£525.

I know what you mean about upsetting the buyer. I am annoyed at myself for my change of heart and indecisiveness, but I also don't want to spend the rest of my life regretting selling it. If I could turn the clocks back, I would do this all very differently...