What to do with £130k?!

jonnygee2

Can I realistically expect 8% rental yield in areas like Nottingham as data suggests?

You need to find a particular house to answer this question. Averages are of little use to calculating returns on property investments, because you are only buying one house.

In your situation, buying a BTL property is pretty gutsy, and you are taking a big risk of losing a significant chunk of the initial investment.

sandyk01

i would most certainly invest in a buy to let. My husband got 40k from his parents- we got a 3bed semi buy to let and it's gone up 50k in price over 3 years. There is no way we would have saved 50k in that time.

Your deposit would be substantial so you will get a mortgage. Research and buy in good place. We're down South so that's were we brought but I heard up norths good. My mum's friend recently got a 4bed in Birmingham to rent out for 280k and she's getting £1200pm rent.

Don't buy a newbuild and don't buy a flat/apartment the ground rent maintenance and eventual lease extension will be money out of your pocket!

If it's a long term investment - you will make gains

Good luck!

Cliffhanger_2

What's the experience of your partner that you mention? Have they got any BTL properties and experience?

When you buy property you're in it for the longer term. Look for the right infrastructure (schools, amenities, etc.). Do people want to live there? Is there demand for a certain type of houses/flats, i.e. 2 bed houses are popular for young families as a local school has a good reputation.
Don't only rely on capital appreciation as your only means of making money. You don't want to gamble on something you can't influence. Look for cashflow positive properties that provide you with an income while the property appreciates in value.

However, you need to do your sums right, as the newly introduced mortgage interest relief eats away a good amount of your profits if you leverage with debt. Alternatively, incorporate a Ltd to circumvent, but for 2 BTLs it wouldn't add up.
Look for yields of 7%+ in good areas, so you're also protected against an increase in interest rates in the coming years.
You don't want to buy and make lots of mistakes along the way that cost you more money than you actually make.

BTL, if done right (and in a Ltd), can still give you good returns.

I've bought 7 properties last year, good luck with yours.

jazzfriend100

Cliffhanger wrote: »

What's the experience of your partner that you mention? Have they got any BTL properties and experience?

When you buy property you're in it for the longer term. Look for the right infrastructure (schools, amenities, etc.). Do people want to live there? Is there demand for a certain type of houses/flats, i.e. 2 bed houses are popular for young families as a local school has a good reputation.
Don't only rely on capital appreciation as your only means of making money. You don't want to gamble on something you can't influence. Look for cashflow positive properties that provide you with an income while the property appreciates in value.

However, you need to do your sums right, as the newly introduced mortgage interest relief eats away a good amount of your profits if you leverage with debt. Alternatively, incorporate a Ltd to circumvent, but for 2 BTLs it wouldn't add up.
Look for yields of 7%+ in good areas, so you're also protected against an increase in interest rates in the coming years.
You don't want to buy and make lots of mistakes along the way that cost you more money than you actually make.

BTL, if done right (and in a Ltd), can still give you good returns.

I've bought 7 properties last year, good luck with yours.

thank you for this, gives me some hope! Can you explain the theory behind using a Ltd, or direct me towards the relevant information. I'm not sure quite what you mean here!

Firegirl

Hi,

I’m thinking of BTL too...see info below:


1 – Tax on rental profits – the tax on rental profits is likely to be lower in a company as opposed to personally owned property, with CT (corporation tax) rates currently 19% and for a higher rate tax payer, income tax rates at 40%/45% depending on circumstances. Currently there is no restriction on tax relief given on mortgage interest in companies as there will be personally.

2 – Disposal of the property – if the property is owned by a company and subsequently sold, the company pays tax on any gain made on the property but the balance of any cash is locked in the company until subsequently taken normally by way of a dividend, and an income tax charge would be payable in the normal way. If the property is owned personally, the gain is chargeable to Capital Gains Tax but the balance of the cash is then yours to use as you wish.

3 – Plan for subsequent properties – one of the more important factors to consider is what the ultimate plan is for the property investment. If you are likely to have a single investment property for a short period before selling it and using the funds elsewhere it may be that a company structure is not the most appropriate, however if the plan is to invest in one property now and build up a portfolio of multiple properties in the future then the corporate structure could well be more beneficial – mainly because gains made in the company are reinvested as opposed to coming out to yourself by way of a dividend.

4 – Others – other considerations are, admin costs of running a limited company will be higher than not having one; there may be different insurance/mortgage products available based on the structure you choose; is the property likely to make a rental profit each year, and how much is this likely to be.

Grumpelstiltskin

If you do consider a BTL don't just go on the postcode.

If you do know Nottingham you will know NG7 covers a wide area. The Park for instance, you wouldn't get a garage for £100.000 there, yet some parts of NG7 you wouldn't want to go there after dark.

latte19

Give to me. Problem solved :rotfl:

tlc678910

Another vote for one property rather than two. You mention having a low income and needing income so things could be very strained if you had to pay both mortgages and any maintenance as the properties were between tenants or had non paying tenants.

If you can I would go for a well maintained family home in a sought after area. I don't mean hugely expensive - just your average suburbia. In lots of places there are many flats available but family homes are more sought after and once you have a tenant with a child in school they are less likely to move. By looking at rentals in your area you will spot if there is a surplus of properties.

Tlc

Cliffhanger_2

jazzfriend100 wrote: »

thank you for this, gives me some hope! Can you explain the theory behind using a Ltd, or direct me towards the relevant information. I'm not sure quite what you mean here!

See info from Firegirl.
Best to ask for professional advice from an accountant, which route is more suitable for your personal circumstances. It often works out to be similarly costly (or profitable) as long as you are a lower rate tax payer.
Differences are costs in BTL rates (personal vs Ltd), taxation (interest mortgage relief doesn't apply to Ltd, but fully to personal owed properties by 2020/21), running costs (accountant costs higher for Ltd) and how profits are taxed (dividends or reinvested, etc.).
These are the main points I can think of just now, but preparation is key when you rely on the income from BTL, rather than having it besides a full time job.

Have you thought about your responsibilities as a landlord when getting into BTL? How would you deal with everything while traveling? Think about proper management for repairs, tenant changeover, complaints, etc.
Have you clarified your situation for getting BTL mortgages? Most lenders only consider you when you have a yearly income of £25k. The no-income lenders might not be a scam, but I would check with their terms, fees, etc.

It sounds like you are looking for a good couple of years of traveling without having to worry about responsibilities at home.
Have you considered teaming up with someone experienced, who takes over all responsibilites and you receive a fixed and regular income on your savings over the next few years that finances your travels?

agrinnall

csgohan4 wrote: »

Why not save the money to buy your house in future and put in a cash isa for the time being

Two good reasons why not:

1. Most ISAs don't pay particularly good rates, particularly if you want access to the money
2. You can only invest £20K in one year so that still leaves £110K to deal with

I'd probably put £85K in a Marcus account and find other homes, including current accounts, for the other £45K.