Owner > buy to let - er?

Registered with Property118.com
Tuesday 10th September 2013


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Total Number of Property118 Comments: 5

Owner > buy to let - er?

11:25 AM, 7th August 2014
About 7 years ago

First big investment decision - low risk or higher risk?

Thanks very much indeed for these thoughts. To answer queries - the flat is mine, the salary is my husbands'. A mortgage/btl/homeowners' loan would be based on the property and the salary.

My strong inclination to keep the flat, thereby taking the risker option comes from 1) my strong sense that its value (rental and capital) will hold or increase, irrespective of wider UK trends
..& 2) because i would like to use it to generate income, and release capital, allowing me to pursue my studies further.
....& 3) because in the future I would like to have access to it again for my own use.

To reduce the risk of being exposed to unaffordable interest rates I could A) buy the second property at much less than £850k, ie basically out of London (I have found one at £350k), and so be much less leveraged and B) make sure I get a decent salary.

So my latest plan is to do the above: rent the flat, borrow against it and buy out of London.

I appreciate the thoughts on cgt - Mark, you say things have changed, but your article you quote is very encouraging on the cgt front - is that position no longer the case?

On the CGT exposure, my current estimate is that if I sold in 5 years, I would have rented the flat for 65% of the time I had owned it, and would be liable for CGT of (say) 25% on 65% of any capital gain. If it had gone up by £100k, I would need to pay about £15k to HMRC, without counting any exemptions. If I then took it back as my primary residence,that would potentially reduce this liability further...?

thanks... Read More

Owner > buy to let - er?

13:05 PM, 31st July 2014
About 7 years ago

First big investment decision - low risk or higher risk?

Many thanks John and Mike, too. Excellent advice, we will model the various risk scenarios as suggested and weigh it up. If it is any use to others, we can share our decision here later.... Read More

Owner > buy to let - er?

12:57 PM, 31st July 2014
About 7 years ago

First big investment decision - low risk or higher risk?

Reply to the comment left by "Mark Alexander" at "31/07/2014 - 11:16":

Many thanks Mark. 80% leverage is a worst case scenario, rounding up, since there are so many different mortgage options and variables to consider.... Read More

Owner > buy to let - er?

15:12 PM, 10th September 2013
About 8 years ago

Is 100% buy to let leverage a good idea or not?

Reply to the comment left by "Neil Patterson" at "10/09/2013 - 14:36":

Thanks Neil,

I would have a small buffer of cash in the form of savings, and I would be releasing enough equity to cover the refurb on the second flat and provide a comfort level on the repayments. I would ensure that repayments on the BTL were well under the rent level as far as possible. And the cash released on my new primary residence would be only 30-40%.

Does this change your advice at all?

Many thanks... Read More

Owner > buy to let - er?

14:26 PM, 10th September 2013
About 8 years ago

Is 100% buy to let leverage a good idea or not?

Hi Mark, I have a similar question - would your answer be the same?

I own a 3 bed flat in central london with no mortgage or other loans, now worth 550,000. In 10 years' time or therabouts, I would like to be able to buy a family house in central London, of the size & location which is now priced at about 1,500,000.

I am thinking about taking out a buy-to-let mortgage on my flat at about 60% ltv, and an additional mortgage on a new flat, to buy a second property which is worth 575,000 and has great potential to add value via refurbishment. The second mortgage would be at 40% ltv. This would mean we would be fairly highly leveraged and exposed to quite a bit of interest rate risk, which we are nervous about.

I would let the first flat to cover all mortgage expenses on the buy-to let (I think interest only - do you agree?). I would pay back the other mortgage with capital repayments, so that I can recover the full amount, plus the investment I put into it to refurb and add value. My plan would then be to sell both flats to invest in a family house in 10 years time. As per your advice, I would also consider interest-only on this property.

This is my first time considering property investments of this sort, but I would consider continuing to invest in buy-to let if it works well.

I'd appreciate your thoughts and those of others on the forum.

Many thanks... Read More