8:30 AM, 24th December 2021, About A year ago
I suspect the reasons you first got into property investment were the same reasons as mine. One of the first property goals I set for myself back in 1989 was to borrow £1,000,000 to buy rental properties. When I achieved that I went on to repeat the process over and over and over.
There were quite a few reasons for my initial £1,000,000 mortgage debt goal:-
I knew I would have to put down deposits so that encouraged me to save, at least to begin with.
I believed rents would increase broadly in line with inflation, so my rental profits would grow exponentially, thus increasing the returns on the savings I’d invested into property.
I believed property values would increase over the long term, so again the return on my initial deposits as a percentage would grow exponentially.
I was right on all counts.
Now there comes a point for us all when we start to think about when it’s time to cash in. Maybe you start feeling it’s not worth it anymore or you’re just tired and feeling trapped? I know I did!
I got to that stage in 2009, stopped buying and started selling a few properties every year. At one point (in the Summer of 2015) I was going to sell the whole lot in one go, but finally decided against that when I realised the amount of work that goes into it. On top of that, what would I do with the money?
For over a decade my decision to sell a few properties every year seemed to make sense, but recently I’ve changed my mind about that. I had decided to hedge my bets back in 2015/16, but with the benefit of hindsight, I think I made a few mistakes. My strategy to stop investment and start living was partially flawed. Yes, I’ve had a great life roaming the globe as a perpetual traveller and living the high life, but the mistake I made was to stop investing.
I now have a new strategy.
There are definitely a few deals that I’ve done since 1989 that are no longer giving me as good a return as I might get elsewhere, so I’m still selling those properties. However, I’m not spending all the money.
I had an epiphany earlier this year when I remembered why I got into property in the first place. I then realised that if I go back to my first strategy I would soon have even more money to pay other people to do the tasks I don’t like doing. Not only that, I can still sell properties that are a drain on my time and invest some of the sale proceeds into other properties that require very little time and produce far higher profit levels. So that’s what I have done.
This year I have acquired land and agreed to build a supermarket and a fast food building, both pre-let to very well known businesses. It’s a completely different scale to the first 3 bed bungalow and 1 bed flat deals I did at the start of my property investment journey, however, the basic principles are the same.
32 years after having completed my first property investment deal I would like to think I’m much wiser too. I certainly know a lot more about tax than I did back in 1989!
I have optimised my tax position so that I don’t get clobbered for CGT when I sell the properties I no longer wish to keep. I also have a SmartCo structure in place to minimize my exposure to income tax and in the longer term inheritance tax when the grim reaper finally pays me a visit.
Having been in property investment for 32 years (and hoping for at least the same again) I have experienced the benefit of owning a geared property investment business. Also, I hope to be around for at least another 32 years and now have plans to grow my business as opposed to reducing it. By doing that I will employ people and help to grow the economy at the same time.
Some may say that my plans (especially my tax planning) are selfish and that I shouldn’t be playing the system to my advantage. Well, I’m sorry but I love my family far more than anybody else and the last thing I want to leave them is a legacy of tax problems, especially inheritance tax. I want us to enjoy the rest of our lives together and for them to celebrate my life when I’m gone, not having to clean up a huge inheritance tax mess when I finally depart this amazing World! Thankfully, I know for sure that all my plans are spot on and in the spirit of the tax legislation as well as being covered by £10,000,000 of insurance.
If you feel the same way and would like to discuss tax planning strategies, please complete the form below.
Wishing you every success.
Mark Alexander – founder of Property118
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