What would you do? Brilliant property strategy and planning (I hope…)

by Readers Question

10:02 AM, 12th November 2014
About 4 years ago

What would you do? Brilliant property strategy and planning (I hope…)

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What would you do? Brilliant property strategy and planning (I hope…)

Hi All

I’m a landlord because I doubt that a pension alone will feed me in my dotage… What would you do

Anyhow…I generally know what I want to do and how, but the next decisions I make could be critical and I feel that some wiser heads than mine could be very useful. I may need to review my strategy! Here’s my portfolio as it stands:

1) worth £365k, mortgage 22k
2) worth £160k, mortgage 76k
3) worth £255k, mortgage 56k
4) worth £190k, mortgage 127k
5)absolute turkey – negative equity 🙁

Apart from #5, the others all look hopeful; rising prices, in demand areas, regeneration, improved transport links and lots of goodies coming soon.

So good news is equity galore.

Being an earnest type I want to pay all these off as soon as possible so I can retire and live off the proceeds.

Before I do that I was thinking of borrowing back the £25k deposit I put into #2 to pay off property #1 completely, or to invest in equities or to save towards a bigger residential property.

The new EU laws coming about affordability tests make me wary about going on an equity spree in case I can’t remortgage in future if the powers that be decide I’ve bitten off more than I can chew or they regulate BTLs and we all have to get repayment mortgages etc etc so I’ve been focussing on the overpayment/repayment plan instead.

I’m not much of a risk taker, but something makes me think I might also be missing a trick. I could buy a ton more properties with my equity or use the money to invest in stocks or something else, but I had more properties and got rid of them as they were stressing me out and I realised I don’t want to own 100 properties after all. More hassle than it’s worth sometimes… I want a simple life, but to also live well. If I make some savvy choices now I feel I could be laughing…

Am I being an idiot?

Shall I play it safe and repay and leave it there?

Have I overlooked some brilliant options completely?

Thanks very much in advance.



Comments

Mark Alexander

10:11 AM, 12th November 2014
About 4 years ago

I need to begin by asking you some questions; what is your first name and how old are you please?

Next question: based on your strategy, why haven't you sold enough of your properties to repay all of your mortgages?

I can only assume that deep down you have realised that in certain circumstances mortgages can be as much an asset as a liability in that a strategy using mortgages can increased your income and returns on capital invested.

We are all different of course, hence there is no perfect strategy. I'm 46 years old and my strategy is very different now to when I became a landlord 25 years ago. For all I know you could be 90 years old.

For what it's worth, I've documented my strategies and learning experiences over the last 25 years in a series of short articles - see >>> http://www.property118.com/how-to-become-a-respected-profitable-landlord/60765/

The ideal strategy for you may be very different to mine. Please take a look at the following link to see how I may be able to help you further >>> http://www.property118.com/consultancy-mark-alexander/61522/
.

Adrian Jones

11:57 AM, 12th November 2014
About 4 years ago

How much do you need a year to live your lifestyle?

Mark Alexander

12:03 PM, 12th November 2014
About 4 years ago

.......... and what are the rents on these properties?
.

John Constant

12:04 PM, 12th November 2014
About 4 years ago

Wouldn't want to say too much about knowing a lot more about you, but one point is that with a value of £160,000, the best BTL rates are going to be at the 60%LTV mark. This would mean a remortgage of £96,000, which in turn means that you could pay back £20k, leaving just £2,000 to worry about.

If you would like to discuss your options further (including your absolute Turkey No 5) HD Consultants have a business link with Property 118. Just click on my member profile link and you will find a contact form which can be used to get in touch with me.

Carol Thomas

14:16 PM, 12th November 2014
About 4 years ago

Just a couple of thoughts:
1. Why would you want to tie up your cash by paying off BTL mortgages?
2. Don't get stressed with managing properties. I was and rather than get rid of what was to be my pension, I contacted LettingSupermarked, as recommended by property118, and they do it all for me at a very reasonable cost (which can be offset against your tax bill).
3. You appear to have an awful lot of cash in your properties that is doing nothing. Release it and buy more!
Best wishes, Carol

Bricks n Mortar

14:44 PM, 12th November 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "12/11/2014 - 10:11":

Hi Mark / All,
Thanks for your replies. I am 37. I sill want to hold on to the properties at this age - it's still too early to sell them. I was going to overpay them without selling any properties to repay the mortgages as I think there is far more growth left in them.

I also would probably keep a few properties on very low mortgages so that I can use this to gear up and get cheap finance if I ever needed it, assuming the LTV on them by that stage will be very, very low.

I want to be able to retire within the next 3-5 years.

I reckon I need £1500 pcm or 18k per year to live on.

Monthly rents are
1.£1300
2. £720
3. £1000 (but I live in this one)
4. £1200
5. Turkey brings up the rear at £385
Total £3605

Recardo Knights

15:17 PM, 12th November 2014
About 4 years ago

I agree with caZ, if cash is king why would you want to pay off your mortgages in full. With them you are known and should have a good credit rating, and with plenty of equity it would be easy to get further borrowing if needed.

With no mortgage all rental income is taxable, so reduce your tax by paying a small mortgage.

I have 5 mortgages on BTL, I also have cash in the bank. If I used my cash to reduce a loan, what happens if I then need some cash and find it hard to borrow. If I spend my cash now and come across hard times, higher interest rates, non payment of rent or wrecked properties, where do I borrow money at a cheap rate.

LVW4

15:41 PM, 12th November 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "12/11/2014 - 10:11":

As I am in a similar situation, I've decided to seek the advice of your financial advisor panel, and shelled out the £200. So, I look forward to hearing from you, creating a new plan to optimise my available funds and properties to set me up into retirement, and sharing my positive experiences here in due course.

Mark Alexander

15:43 PM, 12th November 2014
About 4 years ago

Reply to the comment left by "Trying Hard" at "12/11/2014 - 14:44":

Thanks for replying, more questions ......

1) When do you want to retire?
2) If you think properties will increase in value why don't you buy more and sell them when you decide to retire in order to pay off all mortgages and increase your income and cash reserves?
3) Have you read my strategy?
4) Have you looked Equity Finance? - if not see >>> http://www.property118.com/equity-finance-for-buy-to-let-landlords/44713/
.

LVW4

15:53 PM, 12th November 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "12/11/2014 - 15:43":

Hi Mark,

Some would argue I've already retired compared to what I was doing before and what my friends and colleagues continue to do. I have a small company selling software for companies not based in the UK, which offers me a more balanced lifestyle.

My 'work' motivates me, so I intend to continue for as long as possible, while building up my BTL assets

I'm hoping your advice panel representative will help me exploit all the options to get me 2.

You've set them up, so let's see them deliver.

1 2

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