Save up for deposit or release equity?

Hi Jonathan,

First of all there is no guarantee that you could release equity, as many lenders are not doing further advances.

However, there is an innovative new product just released that provides a 2nd charge equity release:

http://www.propertytribes.com/2nd-charge-btl-mortgage-available-via-ptm-t-8631.html

Your original post is really asking:

"To gear or not to gear?"

It's a great question to ask as many people who were highly geared have gone pop, while others have achieved significant wealth.

So there must be some devil in the detail of how to apply gearing and leverage that sorts success from failure.

We have two fantastic discussions on this topic on Property Tribes that I regard as essential reading:

http://www.propertytribes.com/get-gearing-get-rich-c-jonathan-clarke-t-6955.html

http://www.propertytribes.com/leverage-leverage-leverage-really-a-good-thing-t-8544.html

I would read through those and then sit back and consider your options ... and speak to a mortgage broker too!

Reply to the comment left by "Jonathan Lewis" at "07/08/2013 - 09:44":

**EDITED BY MODERATOR - contact details removed - please see my previous response**.

AM usually best to call. I’m sorry, I didn’t realise you couldn't see my property sourcing website details from my post.
To answer what you’ve put Mark I did update my profile when I answered the post and realised my profile is incomplete, to state or confirm that as a landlord member, I am an accredited landlord in Wales, and have been since the scheme began. I have managed my own modest portfolio of lettings in South Wales for a decade under the aegis Vegan Investments and I also help other landlords to buy investment property with my business South Wales **EDITED BY MODERATOR - website details removed** which was advertised on the Property 118 directory at its inception in 2011. I don’t take money upfront from sourcing clients although I am beginning to systematise the business better as time goes by as you have with Property 118, Mark, which is a great site!

Reply to the comment left by "Mike Sosner" at "07/08/2013 - 12:14":

Thanks for the explanation Mike and sorry to have to keep moderating you. Please re-read my post above as this explains why. You should also have received an email explaining the "netiquette" expected from Property118 members when you first commented.
.

Hi Jonathan

Nice to see a fellow South Walian!

I'm looking at purchasing a my first Buy To Let in South Wales, currently looking at the Cilfynydd/Pontypridd area as it's where I live, but was wondering if you could offer any specific advice based on your experience.

Where do you have your properties, any areas you see as doing particularly well and do you self manage or use a local agent.

Thanks in advance!

Robert

Reply to the comment left by "Mark Alexander" at "06/08/2013 - 16:23":

You also need to consider the effect of re-mortgaging your property on future CGT especially if you don't plan to sell soon. CGT is based on the price sold minus the price bought regardless of the mortgage amount. I recently sold a 90K flat for 240K (after 20 years). The CGT is based on 150K gain (less allowances). Because of re-mortgaging, the net cash from the sale (100k) is significantly impacted by the CGT due. I will gain from the profit I make from selling the flat the re-mortgage allowed me to buy but it does need careful planning to maximise gain and reduce CGT.

Hi Jonathan,

Hello from another fellow South Wales investor/landlord! There is little I can add to what others have already said in respect of what the impact would be on your own personal circumstances, consulting a financial adviser or broker and so on.

All that I would add is to say if you do go ahead and buy a third, make sure that there is plenty of cash flow to deal with problems and emergencies. The more properties you have, the more issues crop up. We don't have a particularly large portfolio, but one bad winter with boiler and roof problems across a few properties can have a big impact.

An off the wall comment maybe, but going for a third property, it might be worth considering an area where there is a chance of some capital gain over the next couple of years as well as cash flow, to balance releasing the funds from the first. As you know, some districts will have a better chance of gain than others.

You don't mention which part of South Wales you are looking at. Some LAs (not all) operate the 2+2 LHA, where 2 LHA tenants over 35 have access to the 1-bed flat rate when they have 2 rooms for exclusive use in a single house, but can share a kitchen and bathroom. It increases the cash flow on a suitable property that meets the criteria, but the tenant profile can be riskier for the landlord. We have dipped our toe in the water on this and let out the first through an agent who specialises in this. I would strongly advise a landlord going down this route to make sure first that they are fully prepared to be in this market, and already have some experience as a landlord.