BLT v Bigger Home v Pension

Dave_MacDonald

We have just sold an inherited property and after all taxes, we should be left with approximately £540,000. We sold it because it was not in an area we wanted to live.



Out of these 3 options which is the best for an investment.


Option 1
To let out the house we are currently living in and buy a new house in the region of £600,000 - £650,000. Our house we currently live in is worth £340,000 (£105,000 mortgage left).


Option 2
To sell our current house (£230,000 left after solicitors & estate agents) and add this to £540,000 and buy a house around £700,000 and be mortgage free.


Option 3
Same as above, but to buy a new house worth £800,000 with a new mortgage deal approx £100,000.


Option 4
Sell current property and buy a house about £600,000-£650,000 and invest any left into a pension

[Deleted User]

Do you actually want to be a landlord, with all of the extra legalities that requires?

Do you need/want an £800,000 house in the area you wish to live? Would you be just as happy with a cheaper one?

OldMusicGuy

Pension investments are low hassle plus you get tax advantages. You will need these for when you are older. Being a landlord will be a potential hassle and the tax regime is increasingly negative.

First thing to do IMO is consider the pension. If you don't have enough then this should be a priority. Then decide what you want to do for the future - do you really want a bigger house now or would a BTL be a better way of achieving your future goals.

AdrianC

Dave_MacDonald wrote: »

Out of these 3 options which is the best for an investment.

Option 1
To let out the house we are currently living in and buy a new house in the region of £600,000 - £650,000. Our house we currently live in is worth £340,000 (£105,000 mortgage left).

Option 2
To sell our current house (£230,000 left after solicitors & estate agents) and add this to £540,000 and buy a house around £700,000 and be mortgage free.

Option 3
Same as above, but to buy a new house worth £800,000 with a new mortgage deal approx £100,000.

Option 4
Sell current property and buy a house about £600,000-£650,000 and invest any left into a pension

Let's break those down, shall we?

You have £540k cash available. You owe £105k mortgage, and have £230k equity in it.

1. Do you actually want to live in a different/bigger house or in a different area?
2. Do you actually want to set up a business in the residential letting industry?

If you don't particularly feel the need for 1, then... don't.
If you don't particularly feel the need for 2, then... don't.

OK, so let's say that you really can't think of a better investment than property, and you really do want to move...
Is your current property ideal for a residential let? If you were going out to buy a property to let, would THAT be it? What yield is it going to give, once you've spent whatever it needs to be lettable?

If t'were me, I'd be starting by paying off the current mortgage, and then looking across all investments to properly diversify that £435k remaining cash. Not just BtL or pensions...
Start here: https://forums.moneysavingexpert.com/forumdisplay.php?f=17

Think about your aims and goals, and what stage in your life you and your family are at.

lisyloo

I’m not sure you should invest in bacon, lettuce and tomato sandwiches ��

If it were me I would not invest in BTL either.
It involves work and risk and in general the return is not brilliant at today’s prices (there are exceptions).

I would personally spread it between

The home you want and can continue to afford in the future (don’t know your ages and future pension provision)
Top up pensions where tax relief is available (this will be limited especially if you already contribute)
Max out ISAs (equity)
Keep some in cash
Spend some (holiday, car)

hazyjo

How old are you?


I'd go Option 2.


Wouldn't bother with 1. Far too much hassle. Others will disagree, but it's def not for me. Not sure I'd bother with 3 either unless £100k is going to make a massive difference to what you can buy. 4 - depends on age and what current pension plans you have.

Dave_MacDonald

Deleted_User wrote: »

Do you actually want to be a landlord, with all of the extra legalities that requires?

Do you need/want an £800,000 house in the area you wish to live? Would you be just as happy with a cheaper one?

I haven't got any other form of pension or savings other than my business which I hope to sell when the time comes.

Of course it would be more of a dream home to have a £800,000 house, but I would be fine living in something cheaper. The question comes down to which is the best for a long term investment.

AdrianC

Dave_MacDonald wrote: »

The question comes down to which is the best for a long term investment.

Dave_MacDonald

hazyjo wrote: »

How old are you?

I'm 47.

lisyloo

Dave_MacDonald wrote: »

I haven't got any other form of pension or savings other than my business which I hope to sell when the time comes.

Of course it would be more of a dream home to have a £800,000 house, but I would be fine living in something cheaper. The question comes down to which is the best for a long term investment.

How old are you?
I presume we is you and your spouse? Do you have or might you have children in future?
How much do you anticipate the business being worth?

No pension isn’t good but how bad it is depends on how old you are.

lisyloo

At 47 I’d say no pension is pretty bad.
Yes you have the business but there’s a risk it might not be worth as much as you think and might not be enough for two pensions.
On the pensions board we discuss pension pots in the range of £400k (frugal) - £1 million (luxury) for retirement.

I think you need to concentrate on your retirement provision (a pension is one vehicle but there are limits on how much it makes sense to put in as you’ll pay tax on the income in retirement).