Property Investment Strategy and Advice Required

by Readers Question

12:56 PM, 13th October 2014
About 4 years ago

Property Investment Strategy and Advice Required

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Property Investment Strategy and Advice Required

I wondered if you could give me your thoughts on my situation although I have only 2 properties! Property Investment Advice Required

BTL was bought 1987 for £82k now worth £450k it was my principal private residence (PPR)until 2000. £90K mortgage due to be repaid in full 2025 – variable rate 2% currently producing £16,200 PA rent

My PPR now was bought in 2000 worth £680k.

I would like to avoid selling my PPR if possible but would like to realise largest lump sum possible with least CGT or alternatively use some of lump sum to buy smaller freehold property provide monthly income. The current mortgage on my PPR is 2% variable £90K paid off in 2020

I am 53 and wife is 55

Just a bit confused by all the options!!!

Thanks

Kieron



Comments

Mark Alexander

13:05 PM, 13th October 2014
About 4 years ago

Hi Kieron

Some questions for you first please.

You say "The current mortgage on my PPR is 2% variable £90K paid off in 2020" - I am not clear whether you mean you have to repay ££90k in 2020 or whether you have a repayment mortgage which has £90k outstanding now but will be paid off in 2020. Please confirm.

Why do you mention selling your home?

You mention that you are looking to buy another property to produce monthly income. If you intend to borrow all of the funds to buy that property, in the short to medium term the cost of borrowing and running that property is likely to exceed the income it is likely to produce.

I feel I am missing something here, can you be more specific on what it is that you are attempting to achieve please?

I suspect I will have more questions when I get your response but I do intend to provide some answers too.

If you would prefer to employ me on a private Consultancy basis, as opposed to discussing your personal finances in public, please see >>> http://www.property118.com/consultancy-mark-alexander/61522/
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Kieron Brophy

17:02 PM, 13th October 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "13/10/2014 - 13:05":

Mark hi,
thanks for opening a new thread.

in reply :-

I was thinking about an exit strategy to free up cash

I have a repayment mortgage which has £90k outstanding now but will be paid off in 2020.

I am concerned about the amount of CGT to pay if I sell the BTL. Thats why I was thinking of selling my PPR

I was thinking about selling the BTL for £450k payoff the loan and CGT and then use say 80K deposit to buy a 2 bed flat for about 230k producing approx 15K PA rent

What do you think?

any information is much appreciated
thanks
Kieron

Alan Capper

18:28 PM, 13th October 2014
About 4 years ago

Reply to the comment left by "Kieron Brophy" at "13/10/2014 - 17:02":

Hi Kieron,

Why not remortgage the BTL on a 75% mortgage for 25 years, releasing £337,500?

You are currently getting £1350 pm and the BTL mortgage would be about £1K pm. Then you could buy 3 props at £80K each producing £45K pa with just under £100K as back up.

£350 pm (left over from original BTL remortgaged) = £5K (almost) pa + £45K pa comes to a nice £50K pa cash flow + 5 properties you own (including PPR)

Why would you want to sell the GOOSE that keeps laying the Golden Eggs?

Just a thought,
Alan

Kieron Brophy

18:51 PM, 13th October 2014
About 4 years ago

Reply to the comment left by "Alan Capper" at "13/10/2014 - 18:28":

Hi Alan,
Thank you for that.A very interesting idea!

A couple of queries aged 53 and 55 would we get a 25 year loan? As a remortgage there is no CGT to pay. I like this

The remortgage of £337500 does not mention the current BTL mortgage is that paid off out of the £337K? it currently costs £635 pm on a repayment basis.

I take it this is all predicated on an interest only loan - which I have no problem with

Cheers
Kieron

r01

20:32 PM, 13th October 2014
About 4 years ago

Keiron,

You did a great thing living in your first home before renting it out and if you sell the first property it may well attract little or no CGT at all as you lived in it for so long.

What you do depends on your motivation and what you want to achieve.

Accountants will charge you for the info but you can find the capital gains formula on the Inland Revenue website and if you don't understand it just ring them and ask for a tax inspector to discuss CGT, as the call centre people won't know enough. I did this and the inspector even went through all the figures and computations with me - wow. I presented the figures exactly as agreed and was CGT free even without my personal allowance.

Like you, I had lived in the property for around 50% of the time I owned it. You are entitled to relief for the number of months you lived in the property, plus letting relief, plus all purchase and sale costs (legals, agency fees etc), plus any capital expenditure you made up to the date you let it and of course, your mortgage has to come out of the profit too. You and your wife also both have your own annual capital gains allowances to offset against any CGT due, assuming the property is jointly owned.

There is an election next year and all the signs are that whichever party gets in will have to raise further funds - guess where that will be from? Yes, taxes on people like us. Capital gains will almost certainly increase to satisfy the "poor" (them) and to penalise the rich (us).

Of course we must all make our own decisions but I hope that is food for thought and urge you to investigate all options. Incidentally, I am currently looking at the figures on a second property, but I am a few years older than you and your good lady. World cruise, here I come.....

R

Alan Capper

22:22 PM, 13th October 2014
About 4 years ago

Reply to the comment left by "Kieron Brophy" at "13/10/2014 - 18:51":

Hi Kieron,

Unless the law (rules) have changed, a BTL mortgage (remortgage) is based on the property NOT the owner - who still has to prove that they can repay the mortgage. This, of course, you can do through the rent which you have previously stated.

As far as the current outstanding BTL mortgage is concerned, I presume that is £90K due by 2025? If so, then only buy two other properties instead of three. Sorry, I left that out of the calculations - missed the fact that £90K owed on your BTL and PPR as well.

Still, you get to receive £35K pa in Rent with about £90K in cash and no CGT. Not a bad retirement plan

Alan

Mark Alexander

9:45 AM, 14th October 2014
About 4 years ago

Hi Keiron

The comments posted by other members, in my absence, match what I would have suggested 🙂
.

Mike McDonagh

10:14 AM, 14th October 2014
About 4 years ago

Hi Kieron,
Not sure if I can mention individual lenders but TMW have just granted us a 35 year interest only BTL mortgage and we are 62 and 68.
Cheers Mike

Mark Alexander

10:29 AM, 14th October 2014
About 4 years ago

Reply to the comment left by "Mike McDonagh" at "14/10/2014 - 10:14":

Nice one Mike! 😀 😀 😀
.

Howard Reuben CeMap CeRER

10:54 AM, 14th October 2014
About 4 years ago

TMW are one of a handful of lenders who have NO upper age limit, so this is no surprise for Brokers like me.

As long as you are 70 or under on application, you can have a mortgage way past 'normal' mortgage end termination dates.

To see what 'no max age' lenders a borrower is eligible for, send your details via the enquiry form here > http://www.property118.com/member/?id=314

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