Property Portfolio

busybees101

Hello!
My partner and me own 2 properties. We live in a cheaper one (£500,000) because of work and schools. The other is let and would be worth a bit more, say £640,000, giving us £1800 rental income every month. Both of them are in a town which property growth is expected according to Barclays. We have mortgage for £200,000 on the rental properties. Having heard of tax relief restriction of financial cost for residential owners and learning of capital gain tax to buy-to-let properties, I feel we need to change the portfolio for better financial return in the future. Would it make sense to sell them and buy more expensive home and a cheaper rental property? like £850,000 home with £200,000 mortgage and a small house for £300,000 (with no or a very small loan)? We both have stable income and although we like having the rental income, we have no problem having less rental income or not at all.

Thanks
BB

anselld

One rental is hardly classed as a portfolio!
Anyway, do not let the tail wag the dog. Yes, there is some reduction in tax relief on mortgage interest, but there will still be relief at 20% as things stand and you are not highly mortgaged so will still make a decent profit. CGT has always been there but you only pay it if you gain and you still pocket over 72% of that gain.
So reducing the size of your rental "portfolio" will simply reduce your income in order to save tax. Would you want to take a pay cut in your job to save tax?

Hoploz

It depends if you're in it for monthly return or for capital growth.
It stands to reason that if a house is worth 800k a % growth will be larger in cash terms than a 200k property. But if this is your home there won't be a rental income for a large portion of the 'portfolio.'
If however you were in a position to use the cash differently then you could be better off investing 10k on several 100k properties which would all see growth in capital value in the long term (eg pension pot)
Everybody does things differently and you need to decide what your priorities are, as managing multiple btl properties is a full time job in itself.

Crashy_Time

https://abodeltd.co.uk/section-24/

busybees101

Your response opened my eye. It'd make more sense to grow capitals for future gains.

Crashy_Time

busybees101 wrote: »

Your response opened my eye. It'd make more sense to grow capitals for future gains.

Best wait for the property correction first then in that case. Money into property now is just money down the drain at possibly rising interest.