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Potential venture into the property market

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Hey Everyone,

Looking for some investment advice as I'm eventually now in a position to do this.

I'm in early 30's, earn around £60k a year (over £80k household), have a few grand savings and probably about £80k equity in my current property, 2 year fix ends later this year.

When doing some research into investments, it seems property and premium bonds stand out the most. Basically I'm looking at funding a 2nd property later this year/early next as a BTL by re-mortgaging and taking some equity from my own property, and I'll likely buy at an auction before doing a lot of the work myself. Properties I'd look at would be anywhere from £70k to £100k due to the BTL deposit requirements. Premium bonds would then be my 2nd investment further down the line.

Just reaching out to see if anyone has similar experience or guidance they could offer? Or whether my future investment would be worth placed somewhere else.

Thank you!
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Comments

  • OldMusicGuy
    OldMusicGuy Posts: 1,768 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper
    Without sounding too harsh, you need to do more research if you think premium bonds stand out as a good investment idea. Investing in well diversified low cost multi-asset funds through tax vehicles like ISAs or pensions is a much better idea for long-term growth. If you have already maxed out ISAs and pension contribution possibilities, then maybe some premium bonds for what's left over.

    BTL gets mixed reviews now due to changes in tax rules and stamp duty. I would suggest you post this question on the house buying, renting and selling part of this forum as you will get lots of feedback, both positive and negative. There are plenty of good threads in that part of the forum about people's real world experiences.
  • El_Torro
    El_Torro Posts: 1,851 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Since you earn £60k that means a significant amount of your income is taxed at 40% income tax. Paying more into your pension would be the most tax efficient thing you can do, especially if your employer allows you to do this via salary sacrifice.

    Are you employed or self employed? If you're employed do you pay into your employer's pension scheme? If not you're essentially taking a pay cut by not getting your employer's contribution.

    BTL is an option for investing (I do it myself), though it's not very tax efficient. As OldMusicGuy said if you think BTL and premium bonds are the best investment options open to you, you need to do more digging.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
    10,000 Posts Fifth Anniversary Name Dropper Photogenic
    Hey Everyone,

    Looking for some investment advice as I'm eventually now in a position to do this.

    I'm in early 30's, earn around £60k a year (over £80k household), have a few grand savings and probably about £80k equity in my current property, 2 year fix ends later this year.

    When doing some research into investments, it seems property and premium bonds stand out the most.

    Are you trying out a new script for your performance at the comedy store? Its a bit dry.

    Basically I'm looking at funding a 2nd property later this year/early next as a BTL by re-mortgaging and taking some equity from my own property, and I'll likely buy at an auction before doing a lot of the work myself. Properties I'd look at would be anywhere from £70k to £100k due to the BTL deposit requirements. Premium bonds would then be my 2nd investment further down the line.
    Is that the punchline? I did find it quite amusing, but not laugh out loud.

    Just reaching out to see if anyone has similar experience or guidance they could offer? Or whether my future investment would be worth placed somewhere else.

    Thank you!


    Have you heard of the stock market ? Funds, ETFs, IT's, shares?

    Pensions? ISAs? Any of those ringing a bell ?
  • Shashy
    Shashy Posts: 139 Forumite
    If I may try and add a less condescending tone to proceedings; it's often suggested that before you begin to 'invest' your hard-earned money, you'd first:

    - Pay off all non-secured debt (credit cards, overdraft and so on)
    - Build a small (£1k) emergency fund to cover those one-off expected bills (broken washing machine) that would otherwise go on credit
    - Maximise your employer pension contributions, and if a higher rate taxpayer (as you are) consider making additional voluntary contributions. This is an often overlooked, and very lucrative, thing to do. Your employer contributions are free money, and your AVCs get an additional 40% 'return' since they're not taxed.
    - Ensure you have a disaster recovery fund in place. This is usually between 3-6 months' household outgoings to ensure you can survive a major event such as redundancy without incurring debt

    Then you might consider investments via tax-efficient means such as a stocks and shares ISA.

    In my opinion you'd be very very far down the list before you'd find a buy-to-let property being a good idea. They are incredibly risky and increasing non-tax efficient.

    Hope that is of some help :)
  • Shashy wrote: »
    If I may try and add a less condescending tone to proceedings; it's often suggested that before you begin to 'invest' your hard-earned money, you'd first:

    - Pay off all non-secured debt (credit cards, overdraft and so on)
    - Build a small (£1k) emergency fund to cover those one-off expected bills (broken washing machine) that would otherwise go on credit
    - Maximise your employer pension contributions, and if a higher rate taxpayer (as you are) consider making additional voluntary contributions. This is an often overlooked, and very lucrative, thing to do. Your employer contributions are free money, and your AVCs get an additional 40% 'return' since they're not taxed.
    - Ensure you have a disaster recovery fund in place. This is usually between 3-6 months' household outgoings to ensure you can survive a major event such as redundancy without incurring debt

    Then you might consider investments via tax-efficient means such as a stocks and shares ISA.

    In my opinion you'd be very very far down the list before you'd find a buy-to-let property being a good idea. They are incredibly risky and increasing non-tax efficient.

    Hope that is of some help :)

    haha thanks Shashy - I'll take the condescending tone on the chin since it did come with some useful information.

    I do currently pay the max 5% into my pension via salary sacrifice and my employer matches that. I've never considered AVC's so will definitely weigh up that possibility. I do not have any ISA's so will look to open one of those.

    I luckily am debt free now other than a mortgage. In terms of the emergency fund I have that but not enough yet for 3 months outgoings so will make that my next plan to just put something aside for that.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
    10,000 Posts Fifth Anniversary Name Dropper Photogenic
    haha thanks Shashy - I'll take the condescending tone on the chin since it did come with some useful information.

    I do currently pay the max 5% into my pension via salary sacrifice and my employer matches that. I've never considered AVC's so will definitely weigh up that possibility. I do not have any ISA's so will look to open one of those.

    I luckily am debt free now other than a mortgage. In terms of the emergency fund I have that but not enough yet for 3 months outgoings so will make that my next plan to just put something aside for that.


    When you say "the max 5%" I take it you mean the max you can pay in to get the matching employer %? 10% is most likely well under how much you "should" be putting in, at your age it probably 15% or so is a reasonable minimum. Especially since as a high rate taxpayer you should be focussing on additional contributions. You can get £100 into your pension for just £60 and that tax break is unlikely to continue indefinitely.
  • AnotherJoe wrote: »
    When you say "the max 5%" I take it you mean the max you can pay in to get the matching employer %? 10% is most likely well under how much you "should" be putting in, at your age it probably 15% or so is a reasonable minimum. Especially since as a high rate taxpayer you should be focussing on additional contributions. You can get £100 into your pension for just £60 and that tax break is unlikely to continue indefinitely.

    Yeah so if I pay any extra in my employers contribution would stay at 5%. Ah I see, I'll start pushing more into my pension as AVC since I'd be saving on tax.

    I used to work with an older guy who was mortgage free, he was paying in a ridiculous amount into his pension at the time and I always wondered why?! Not so ridiculous now!!

    Thanks for the advice.
  • capital0ne
    capital0ne Posts: 872 Forumite
    500 Posts Second Anniversary
    . I do not have any ISA's so will look to open one of those.
    ISA's are just a wrapper - it's the contents that matter. As you're a beginner go for something like Vanguard's Lifestrategy fund say the 80% ACC one.

    What does that all mean? Well 80% means 80:20 split between equities and bonds and ACC means accumulation style, in otherwords dividends just roll up into more units in the fund.
    The ISA wrapper means you don't need to declare this on your HMRC SA.

    It's a well known fact that most of the gains on an investment portfolio come from re-investing dividends and not from any increase in the share value.

    BTL - total nightmare and time consuming. Over regulated now, not tax efficient, benefits from gearing I guess, but what about problem tenants. One of those could cost you thousands. What about problems at the property, say the boiler breaks just before Xmas? Costly to fix/replace and tenants will insist you do.

    Good luck
  • eskbanker
    eskbanker Posts: 37,066 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    capital0ne wrote: »
    ACC means accumulation style, in otherwords dividends just roll up into more units in the fund.
    No, dividends increase the value of the units of an acc fund, not the volume of them....
  • capital0ne wrote: »
    ISA's are just a wrapper - it's the contents that matter. As you're a beginner go for something like Vanguard's Lifestrategy fund say the 80% ACC one.

    What does that all mean? Well 80% means 80:20 split between equities and bonds and ACC means accumulation style, in otherwords dividends just roll up into more units in the fund.
    The ISA wrapper means you don't need to declare this on your HMRC SA.

    It's a well known fact that most of the gains on an investment portfolio come from re-investing dividends and not from any increase in the share value.

    BTL - total nightmare and time consuming. Over regulated now, not tax efficient, benefits from gearing I guess, but what about problem tenants. One of those could cost you thousands. What about problems at the property, say the boiler breaks just before Xmas? Costly to fix/replace and tenants will insist you do.

    Good luck

    Thank you! Already looking into the Vanguard's Lifestrategy fund now as all feed back so far is avoiding BTL or atleast pushing that investment idea further down the line.
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