Pick apart my strategy!

zagfles

Thrugelmir said:

zagfles said:

thegentleway said:

I got into "property investing" 7 years ago with no idea how to renovate a property whilst having a full time job. I bought a shell at auction and renovated it to a HMO for student let. I knew it was a big project but I massively underestimated how much work/time it would take. Original plan was to release equity and do loads more. That soon changed after the first one: it was great learning experience but wouldn't do it again that's for sure! It can be done but it's a full time job and you've already got one of those!

Remember that Property Ladder programme with Sarah Beeney about 15 years ago, following amateur property renovators? They usually screwed up big style, but were rescued by the high house price inflation we had in the decade before the financial crisis.

Funnily enough the series stopped at about the same time as house prices stopped rising...

To make money all somebody need to do was buy a property and hold it. No need to renovate and flip. 

Between 1997 and 2007, yes definitely. As on Property Ladder, they often screwed up the renovation and still made money! But since then, in a falling (real terms) market, they'd be losing big time!

TheAble

I wouldn't be borrowing against my main residence to invest - way too much risk, especially if you have family who depend on you. If you're already well-off with a good job and salary etc why take the risk to make a few extra points of return? I'm a little surprised your lender agreed to this remortgage tbh. Did you tell the truth about what you wanted to do with it..? 

thegentleway

Newlyboughthouse said:

thegentleway said:

I got into "property investing" 7 years ago with no idea how to renovate a property whilst having a full time job. I bought a shell at auction and renovated it to a HMO for student let. I knew it was a big project but I massively underestimated how much work/time it would take. Original plan was to release equity and do loads more. That soon changed after the first one: it was great learning experience but wouldn't do it again that's for sure! It can be done but it's a full time job and you've already got one of those!

There are a hell of a lot of variables at play here. You bought a shell - the ones I’m looking at are habitable but need cosmetic work. The sold prices on the same street are 3-4x as much. You also took on a HMO project - of course that’s a hell of a lot of work. BTL wouldn’t be nearly as much.

May I ask what became of the HMO?

Yeah of course! I've still got it, it's a gold mine the plan was always to keep it for rental income. I look after it myself which isn't too difficult but again more work than most people expect. I was there a couple of days ago checking an alleged damp problem, which is just a tenant drying their clothes in their room and not opening their window. Week before that it was a shower valve that needed servicing. Now I have the knowledge to renovate a house all the way from groundworks to furnishings, I could easily do more and even take on smaller projects but in my opinion for the amount of time you have to put in, it's not worth it. Just finding tradespeople is a major headache. I live next to a University where rental demand and BTL demand is very strong so I know lots of people locally who have tried their hand at property and all of them have pulled out. I much prefer to invest my money on the stock market.
Anyway I really can't see how you are going to triple or quadruple value with a lick of paint... Sounds way too good to be true.

Alexland

OP - how would you feel about this idea if we see interest rates rise back to their historic average causing your mortgage payments to substantially increase after the fixed rate expires and assets such as the S&S or investment properties to decrease in value to make their yield attractive again?

steampowered

You are proposing to start a lettings business. As with any business, it's fine to do that, as long as you understand the risks involved, do not over-leverage yourself with debt and are prepared to put the work in. 

Personally, I would not start with buying at auction. There is often a problem with auction properties - hence why they are going to auction rather than being sold normally. 

If you intend to buy at auction, be careful of so called "modern auctions" which sting the buyer for massive fees. Read everything in the auction pack with a fine tooth comb. There are lots of threads about this in the House Buying, Renting & Selling forum. 

Also, don't let the tax tail wag the investment dog. You talk about minimising your CGT tax bill - but you'll still be paying income tax on anything you take out of the company through dividends, and you'll be paying higher rate stamp duty on the property purchase price, and even if entrepreneur's relief still exists in a few years time (unlikely frankly - that relief is expected to be abolished) you'll still be paying CGT. The best way of minimising tax is of course to invest through a S&S ISA where there is no tax at all.