Investment strategy for a 55 year old?

Hi Paul,

A difficult one as the only constant in the current climate seems to be change.

At the moment obtaining BTL finance beyond age 65 is not a huge issue as many lenders criteria goes to age 75 some 80 and some have no max. However this could equally be reviewed by the FCA and PRA in the future.

From speaking to investors the purchase refurb and sell model has been increasing in popularity certainly for the last 3-4 years.

As our esteemed chancellor, Alice, spends a little bit more time ATM reading the dribble in the guardian and the likes of housepricecrash.co.uk etc, than here, he seems to think the rental market is oversupplied, (sic) and the renovating model for the feckless may be more sustainable, at least for now.

If £120k provides a net return of 4% year in year out, but a renovate can provide £5k or £15k return, but completed within a 3month cycle, this could give a £20 - £60k pa return on that same £120k. Depends on how much needs doing and if you do to it yourself or with a trusted builder. This is something many renters could do for themselves with a little initiative.

I am a qualified ex builder, with an in depth knowledge of multiple trades. At the age of 61 and with decades of experience employing a whole range of tradesmen, I have no method of finding a trusted builder or one who remains so over time.
I use the obvious web routes to minimise risk. I have found recommendations to be a liability on multiple levels.
Just providing a quote or turning up for work seems to be almost impossible to achieve.
I recently approached 27 bathroom fitters on Checkatrade. Six responded. Four turned up to assess the simple work. Two provided quotes. One took over a month to say that he was too busy. The one that I hired will take three weeks to fit a bathroom.

I don’t mean to be a damp squib on someone who sees property as a way forward (as I did) but given you’re now 55 and taking into account that the government has BTL in the cross hairs; Alice Tax, SDLT, CGT etc, why would you want to do something as risky with your capital as property development or even consider the much lower net returns and much higher tax burdens in business such as private rental?
Agreed, in the past a frequent re-mortgage and high leverage strategy made this an interesting cash positive business but now I feel landlords should be paying down their mortgage debt and not increasing it.
Unless you are into the South where the property CAGRs are 10%+ I feel you’ll really only make decent money through property on capital appreciation but then you’ll need to work hard on a tax efficient exit strategy.
Given the pension freedoms for the over 55’s, the fact that you get tax back on your contributions and with a typical 4% growth on a managed fund over the long term and that you can draw down at any time why bet your ranch?
By all means keep and manage the three BTLs you’ve already got but personally I have decided not to increase my property investments further and considered diversifying away from BTL and into more passive tax efficient investments.
The cynic in me thinks this was the secondary intention of the Government’s strategy to penalise the PRS all along, possibly following pressure from the institutional investors (and possibly Tory party donors!). Good luck...

Paul...two property type specific points ..unless you are going for multiple occupancy....... rental returns are very low generally and on any gearing higher than say 50/50 fin. v cash...... can end up close to zero...Secondly generally avoid apartments /flats ( note the generally !!! ) due to the cost of building management fees..and the capital growth can seize up if big numbers are built locally and its much more likely more flats developments will occur.. in a city at least.. than big new house numbers. Many thousands of flats have sprung up in cities over the last 15 years and still do. In a smaller town two or three large apartment developments can seriously affect cap/growth in adjacent districts......
.Some general points..........................
Also be very wary of old properties..a new roof..or new boiler will shift your 200 gross per month (on that property) for the whole year.!!!
FINALLY TAX >>MAKE DAMN SURE YOU UNDERSTAND CLAUSE 24. Many existing landlords ive spoken to clearly do not. Even some accountants dont !! Partly due to the way its been reported upon. As a newby you might be better in small commercial property or some other alternative especially if you are using over say 50% finance. Best of luck.

I suggest that you read up on Multiple Streams of Property Income via Progressive Property - we are just about to book for our 1st training event, having read Property Beginners' Secrets.

All,

Thanks for your comments – some interesting things to think through.

Neil – I thought there must be something in place for the more ‘mature’ market (me, not the property!); my research hasn’t got to that stage yet but nice to know that something does exist (at least at the moment…);

Chris – your example sums up why I persuaded my wife that we try the buy/renovate/sell. However, I think you might be a little over-optimistic in your time cycle. It took us a long time to find the right property, then wait for the auction (note to self – put a bid in before the auction, nothing to lose), then wait for the completion after the auction, then wait for the builder to be available (can totally relate to Paul’s comment about finding tradesmen even though we did a lot ourselves) and finally to sit on tenterhooks while solicitors do all their bits. Granted we weren’t in a rush but I would be surprised if anyone could realistically do the whole process in less than 6 months so, unless you have the finance and manpower, doing more than two per year would be a struggle.

Paul – one builder I approached in April said he could do the job but the earliest he could do it was December! As he was a personal recommend I don’t think he was just putting me off, just really busy because he was good. I’m sure some mathematician out there can work out a formula that shows the sweet spot between builders being available tomorrow because they’re crap and those not available for 10 months because they’re so good! Also, although the main builder we used for some structural work produced a good end product it was a painful journey getting there so I’m not sure I would use him again. But then better the Devil you know, perhaps?

Claudio – you make some very sensible and logical points but there’s something in me that makes me want to take active ownership of my future while, at the same time, moving away from a job that isn’t giving me a great deal of satisfaction or flexibility at the moment.

Michael – my leaning towards buy/renovate/sell and things like Clause 24 are pushing me towards moving my plan forward as a limited company although I’m by no means certain yet. While Alice/George can change the goalposts on a whim for landlords/developers working under personal tax rules I don’t believe he has the same degree of flexibility when it comes to limited companies so the playing field should be a little more level.

Clair – thanks for the tip – will start tonight!

A long-winded answer but thank you all for participating in the discussion so far; will be interesting to see what other comments come in. I’d be particularly interested to hear thoughts from those who are operating as a limited company and how they see the future panning out.

The obvious web routes find the people who are working at self promotion. They may or may not be reliable and good value but if recommended are likely to be relatively expensive and in high demand.
Reliable and reasonably priced trades can make or break a project. Ideally get a tradesman recommended by another landlord, not VAT registered, not advertising and not instantly available.
Deal fairly with them and pay bills quickly to keep them on baord.

Is stamp duty an allowable expense against cgt when flipping property on buy sell and refurb model?

Well, if you ask me, the most critical part of preparing for retirement is just having a plan. Whether you use a spreadsheet or a tool like OnTrajectory or some other website -- you have to get everything out in front of you so you can make smarter decisions. Once you do that, then implementing your disciplined retirement strategy becomes critical.