9:39 AM, 19th January 2016, About 7 years ago 24
My fundamental question is “what property investment strategy would you recommend for a 55 year old starting out today?” The desired end state is to allow me or both of us to become self-employed in the property business and boost pension income.
My wife and I are amateur landlords – two flats with mortgages being rented out and we’ve just finished a buy – renovate – sell property which is in the process of being sold. We’re now considering whether to take a more positive step into property so I’m looking for some advice on strategy.
The reason I emphasise the age bit is due to limitations on finance which are likely to kick in when I get to retirement age of 65-ish. This will undoubtedly impact my strategic thinking or limit my activity beyond 10 years (unless I have reached a self-sustaining financial state).
My mind is split as to the best way forward both with regards to limited company versus private ownership and buy to let or buy/renovate/sell.
Following the Chancellor’s attacks on landlords I’m presently researching the ltd co v private issue with a local property accountant (but happy for recommendations regarding other specialists whom it might be worth talking to) so the main focus of this thread is to investigate my other dilemma (although I recognise that my second decision may also impact on the former).
I think I ‘get’ the start of the normal BTL strategy (buy cheap, add some value, rent out, remortgage, use additional funds to help purchase of next property, repeat) but I’m not sure I understand the end state. What happens when I hit 65/67 and new mortgages become hard to come by and old ones are being called in by lenders?
Granted, the value of the properties will (hopefully) have risen but then so will the size of the mortgage if I have been sucking value out of them to finance newer properties. Is the expectation that my portfolio will be big enough to sell a few to pay off the many or is there another tactic used by people to continue?
Similarly, income; once all costs are taken out (thank you Property118 landlord calculator – really useful) the true gross profit per month is probably going to be around £200-£300/month per property which suggests a minimum requirement of around 10 properties to provide a decent wage plus some left over to keep a cash reserve. Does that seem a logical conclusion or are there other factors/considerations I need to take into account?
The other strategy I’m considering is the buy/renovate/sell model. For the experiment we’re just finishing we took money out of our offset mortgage overpayments, bought a cheap auction property, renovated it and now look to be in line for a net profit of about £15k on an overall investment of £120k over 8 months (and having gone through the process once we now feel we could repeat the process for less money and shorter timescales, thus potentially increasing profits).
Or do we go the third way and do a bit of both?!
Having spent quite some time looking into this I’m starting to get analysis paralysis so would appreciate any thoughts/comments you might have or words of wisdom from your own experience.
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