How would you invest £195k

premiumz

Hi,

I would like to know what would you do if you were in our position.
We want to grow a property portfolio but are at the beginning stages.
My wife and I are in our early 30s and have 2 kids.

We own a house valued at £400k with a mortgage of £280k.
We also have cash savings of around £75k.

We need to move and size up to a new property. Probably costing around £550k but I feel putting all of our money into one house at this stage would be a daft move and we could essentially spread the money out across multiple properties.

Basically, we're not sure the best way to go about it with the funds available to us above.

What's the best strategy on maximizing the available money?

What would you do?

Many thanks

ACG

Have you looked at being a landlord and what that entails? It is a business and you are not protected by consumer rights. Tenants on the other hand are. You have legal responsibilities and there are also tax implications (higher rate stamp duty, income tax, corporation tax if you do it through a limited company, capital gains tax etc).

Having been a landlord in the past, all I will say is there is a lot to be said for an easy life. I would never do it again (and I was a landlord before the recent tax changes came in).

littleredhen

Unless savings interest rates are above mortgage rates you aren't saving money, you'll be paying more in interest

SonOf

We want to grow a property portfolio but are at the beginning stages.

With that new taxation, that generally means it is likely to be best within a limited company. That is the way multi-owner landlords are going.

We need to move and size up to a new property. Probably costing around £550k but I feel putting all of our money into one house at this stage would be a daft move and we could essentially spread the money out across multiple properties.

I am a little confused by this. Generally speaking, you will always need a house to live in. So, most landlords do not consider their own residence to be in their property portfolio.

If you have a need to move up in size, then buying multiple properties is not going to achieve that objective.

Pre-credit crunch, anyone could be a landlord and make a success of it. Since then you have had increased legislation, increased taxation and a Government that is looking to reverse the trend that has seen homeowners decline and tenants rise. The Government have a plan to increase tenant rights (scrapping Section 21 for example). You have also seen lending tighten up. And rental yields in the general market at not what they used to be. Nowadays you have to put in more research. And ideally, be good at DIY or have a very low-cost source of professionals.

You dont have much in savings either. Yes, 75k isnt bad but for someone with aspirations of being a multi-property landlord and looking to move up on their own house, it is not much.

premiumz

ACG wrote: »

Have you looked at being a landlord and what that entails? It is a business and you are not protected by consumer rights. Tenants on the other hand are. You have legal responsibilities and there are also tax implications (higher rate stamp duty, income tax, corporation tax if you do it through a limited company, capital gains tax etc).

Having been a landlord in the past, all I will say is there is a lot to be said for an easy life. I would never do it again (and I was a landlord before the recent tax changes came in).

Hi,

Thanks for the reply.

As we run our own company, I am familiar with paying our own tax on income and handling accounts, so that wouldn't be an issue.
Also, I'm aware that stamp duty rises to 8% from 5% if it's for a second property. So I have that in mind.

So based on your previous experience, your advice would be to not invest in property?

Many thanks

premiumz

SonOf wrote: »

With that new taxation, that generally means it is likely to be best within a limited company. That is the way multi-owner landlords are going.


I am a little confused by this. Generally speaking, you will always need a house to live in. So, most landlords do not consider their own residence to be in their property portfolio.

If you have a need to move up in size, then buying multiple properties is not going to achieve that objective.

Pre-credit crunch, anyone could be a landlord and make a success of it. Since then you have had increased legislation, increased taxation and a Government that is looking to reverse the trend that has seen homeowners decline and tenants rise. The Government have a plan to increase tenant rights (scrapping Section 21 for example). You have also seen lending tighten up. And rental yields in the general market at not what they used to be. Nowadays you have to put in more research. And ideally, be good at DIY or have a very low-cost source of professionals.

You dont have much in savings either. Yes, 75k isnt bad but for someone with aspirations of being a multi-property landlord and looking to move up on their own house, it is not much.

Hi,

Thanks for the response.

I was hoping to try to get a mortgage on our second home with the cash we have saved. Then maybe remortgage some money out of the first house to help put money down on a third house?

But by the sounds of it, that might be a bit of a dream?

Do you think it would be possible to buy a new property and hold on to our current property or are we going to have to put everything into our next house?

Appreciate the responses. Just wanting to get an idea.

Many thanks

ACG

Personally I wouldnt.

If I was doing it again I would probably look at commercial property rather than residential but that is me speaking personally rather than a mortgage broker.

ec9wrr

I wouldn’t. I’d be investing in a stocks and shares isa. Maxing my pension contributions. Only then would I consider further property.

dimbo61

So you have debts of £280,000 plus another £150,000 if you but your bigger family home and £75,000 in savings.
So £350,000 mortgage and No savings !
I would concentrate on paying down the mortgage/ building up savings
If you have the cash to buy the little btl property CASH then you can start the property empire.
Consider an offset mortgage if you have a good savings pot

[Deleted User]

premiumz wrote: »

Hi,

Thanks for the response.

I was hoping to try to get a mortgage on our second home with the cash we have saved. Then maybe remortgage some money out of the first house to help put money down on a third house?

But by the sounds of it, that might be a bit of a dream?

Do you think it would be possible to buy a new property and hold on to our current property or are we going to have to put everything into our next house?

Appreciate the responses. Just wanting to get an idea.

Many thanks

Is there much rental demand for the kind of property you currently live in? What rental yield do you expect to make from it and how long will it take to break even after paying an extra £16.5k to purchase your next home?

getmore4less

We own a house valued at £400k with a mortgage of £280k.
We also have cash savings of around £75k.

We need to move and size up to a new property. Probably costing around £550k

IF you look at that in Isolation.

LTV 70% net £205k debt LTV 51.25%

if you let to buy max 75% LTV you free up £20k

keep old buy new place SDLT £17,500 + £16,500 = £34k deposit(less other costs) £61k

LTV 89%

sell old buy(net £120k) new SDLT £17,500 deposit(less costs) £57,500+£120k

LTV 68%

A 70% LTV mortgage rate will be a lot better than 90% if you can find enough cash to cover the other costs, otherwise you might be at 95% on the new place if you keep the old one.

You would want your letting business earning enough to cover this extra cost

If you went to 80% on the new property selling the old one you could probably have around £65k spare after costs that is probably enough to get a £200k(ish) place to let SDLT £7,500.

Crunch some numbers on the letting side for your current home against property selected as a good rental.

Then if you want to build a portfolio will you be generating enough free cash flow from the rental business and your own earning to get the deposit for the next rental on a reasonable time scale.