Tag Archives: equity release

Barry’s story – it could have been you! Financial Advice, Landlord News, Latest Articles, Property News

Barry’s story was written by the Mark Alexander back in December 2010. It has since been updated and re-published several times. The dates, times and people are fictional but the story is based on real life events.

It’s a modern update of the classic “A Widow’s story”, this time written as a cautionary tale for landlords and their families.

Barry is 53 years old and married to Sharon. They have three teenage children; twin girls aged 15 and a 13 year old son. Barry worked as a self employed salesman in the plant hire business. Sharon had a part time secretarial job in a local school.

Barry and Sharon purchased their first investment property in 1996.

As property values have risen they have continuously remortgaged and used a proportion of the equity released as deposits to purchase additional rental properties. They also saved a proportion of the equity released for a rainy day. To accelerate the growth of their portfolio Barry and Sharon raised extra cash for deposits by remortgaging their home. The profits from Barry’s plant hire business covered the family’s commitments comfortably.

They had accumulated a portfolio of 23 properties with a combined valuation of £1,650,000, against which they had mortgages of £1,400,000.  The portfolio produces rental income of £87,000 per annum. Their rainy day fund amounted to just over £64,000. By having all of the above in place you might be forgiven for thinking that they had set themselves up with a very safe future.

On Sunday 21st December Barry had a bad day. He was on the way home that evening having just been out to fix a tenants leaking shower tray when the traffic on the M6 came to a grinding halt. Barry managed to stop his car, avoiding the lorry in front of him, but the car behind him ploughed into the back of him, wedging his car under the back of the lorry.

The emergency services managed to free Barry from the wreck and his only damage was shock, whiplash and major bruising to his legs. However, two days later Barry collapsed whilst out shopping for last minute Christmas presents. He was rushed to hospital where it was discovered that a blood clot in Barry’s leg had passed to his brain. Barry had suffered a major stroke.

He lost his speech and most of the use of one side of his body. The family were in tatters. Sharon had to give up work to care for him.

Up until having a stroke Barry had managed the property portfolio and taken care of most of the maintenance himself. Could Sharon care for her husband, her family and the management and maintenance of the property portfolio too?

They considered putting the properties on the market but soon realised that after deducting selling costs and CGT there wouldn’t be much money left over. They would also lose their income and they would be leaving their tenants in a difficult predicament too. Sharon has had to employ a lettings agent to manage the portfolio. Since then it has cost the family an average circa £3,000 a month to pay for ongoing maintenance and management.

Fortunately there has been some good news, at least financially. First, low interest rates have meant that Barry and Sharon’s mortgages have got much cheaper than when they started their property rental business. Many of their mortgages have reverted to tracker products due to their fixed rates coming to an end. They are focussing on Barry’s recovery. What will happen when interest rates go back up again though? How will the restrictions on finance cost relief for individual landlords affect them?

The real saviour for the family has been insurance. Fortunately, Barry and Sharon were astute enough to insure against these eventualities. They took out life assurance policies that pay out a regular monthly income right up to Barry’s 65th birthday. These policies were written on the basis that they also pay out in the event of a critical illness. The family are therefore confident that these provisions will see them through these troubled times and out the other side. They will then revert to plan A, which was to live off surplus rental income over and above the mortgage payments on their portfolio or to sell the properties and live off their gains.

What insurance provisions have you made for your family?

How are you investing the windfall of increased cashflow that record low interest rates have produced for your family?

Have you made similar provisions to Barry and Sharon?  If you haven’t it may not be too late, we want to help.  If you have already taken advice and put insurances into place we would like to introduce you to one of our recommended advisers to review your policies and ensure they are competitive. Most important of all, to ensure that the right person gets the right money at the right time.

You may have more funding choices than you think! Advice, Financial Advice, Guest Articles, Guest Columns, Latest Articles

Banks aren’t always the friendliest of places when it comes to borrowing money. All the “hoops” they expect you jump through, and even then you’ll be told what you can or cannot use the cash for! So it’s good know that you may have more options than you think. Let’s give you a working example: Simone Gilks

John, age 63, has his main residence with an outstanding interest only mortgage of £40,000 which is due for repayment later this year. He has a holiday home (mortgage free) in Cumbria that is used exclusively by him and his family, and he also has four “buy-to-let” properties (mortgage free) dotted throughout the town, and all producing good rents.

John wants to raise cash for various purposes including clearing his mortgage , plus money to help buy another new buy-to-let property, as well as paying for the world cruise he promised his wife 10 years ago! His bank is not being very helpful, so he has an interesting chat with one of our equity release experts.

It transpires that John could in fact use equity release to get cash from his main property and/or his holiday home, and/or his buy-to-lets, or any combination of the three. The cash released can be used for whatever purpose he likes, although the existing mortgage would have to be cleared, but that was part of his plans anyway.

Knowing his debt will increase was at first a concern, but John sees this as a reasonable compromise because equity release means no monthly repayments and so no impact on his income situation. In fact his disposable income will increase as his existing mortgage will be gone.

John is pleased to learn that the interest rate on the equity release loans would be fixed and guaranteed for life. He is told that these type of loans are also portable. This gives him the possibility to be able to move a loan to another property should he need to sell at any time without having to pay off the mortgage if he chooses not to.

Another benefit is the possibility of setting the interest against rental payments for tax purposes, although he knows this will depend on how the cash is used. So tax relief on the cruise is out of the question! Or is it? See this page about Landlord Tax.

John is now arranging a sit-down meeting at home with one of our fully qualified Beauwater financial advisers. John will be presented with written facts, figures and all the pros as well as the cons. John thinks: “That’s something else I never got from the bank … a home visit!”

Initial consultations are free so please feel free to get in touch and I will happily refer you to the most appropriate member of our team. We operate Nationally.

Contact Simone

Mortgages and Life Insurance

Property plays a vital role for funding pensions Buy to Let News, Financial Advice, Latest Articles, Property Investment Strategies

Property investors with buy to let rentals and holiday homes expect to supplement their pensions with cash from renting or selling, according to a new survey.

Around 73% of over 55s expect to raise extra income or cash in their retirement from property, says the Equity Release Council, the trade body for equity release lenders. Continue reading Property plays a vital role for funding pensions

Get into High Gear with Gearing Guest Columns, Property Investment Strategies

Using Finance to Increase your Returns

After recently attending local property networking events it still amazes me that investors think it’s a good idea to buy properties for cash. Firstly, the financial returns are less when a property is purchased for cash. Secondly, it means a large amount of cash is tied up for six months as no remortgaging can take place until a period of six months has elapsed. This means if a bargain property opportunity comes along within that six month period you will miss out, unless you have more cash to hand. So start as you mean to go on i.e. gear the property on purchase with a mortgage, ideally 75% to 80% loan to value mortgage. Continue reading Get into High Gear with Gearing

Build a balanced property portfolio with no risk’ -The ‘What’, the ‘Why’ Guest Columns

Previously I’ve discussed the different types of investment techniques, but all that information is barely worth a plate of beans unless you put it into action. Armchair investing can work, but virtual investing will not.

One of the most common mistakes investors make is to only buy when everyone else is buying and selling only when everyone else is selling. Effectively, it’s buying at the near top of the property market and selling at the near bottom of the property market and makes for a perfect recipe for investment loss. Continue reading Build a balanced property portfolio with no risk’ -The ‘What’, the ‘Why’

Property Analysis – Part 2 – How it can save you thousands! Guest Columns, Property Investment News, Property Investment Strategies

Missed Part One? Click to read Property Analysis – Part 1

Mortgage Cap Rate (Interest Only) = Net Annual Rental Income + Annual Mortgage Cost / Current Mortgage Outstanding

Expressed as a percentage this indicator will tell you the maximum interest rate you can sustain and still break even. Obviously the higher the number the greater the safety net you have against rate rises. Any property with a figure around 5% or less needs looking at to see where either cost can be cut or the rent increased. Continue reading Property Analysis – Part 2 – How it can save you thousands!

Property Prices are Still Falling…Except in London House Prices, Latest Articles

Red arrow going downwards

"House prices are dropping, except in London"

The latest home price survey reveals a no-holds-barred analysis of the property market.

Prices in England and Wales fell for the fourth month running in July – by 0.1% on prices in June, according to the Acadametrics house price index.

The average home value is now £217,300 and in the 12 months to July, prices dropped by 2.6%. Continue reading Property Prices are Still Falling…Except in London

Could this be the ultimate buy to let investment property exit strategy? Estate Planning, Financial Advice, Latest Articles, Tax & Accountancy

About a year ago Mark Alexander predicted that Equity Release mortgage providers would enter the buy to let lending business.  With most traditional lenders insisting that buy to let mortgages are repaid at age 75, it looked as though the only real choice for borrowers with an interest only mortgage was going to be to sell their properties when they reached a certain age. This could well trigger unwanted capital gains tax.  However, this is no longer the case as Equity Release now provides an alternative exit opportunity. Continue reading Could this be the ultimate buy to let investment property exit strategy?

The History of Buy to Let Sale and Rent Back Favourite Articles, Latest Articles, Property Investment Strategies, UK Property Forum for Buy to Let Landlords

Mark AlexanderBy Mark Alexander.

I closed my first Sale and Rent Back, “SARB”, deal in 1990. It wasn’t for me personally though and it wasn’t a property deal either. I had just set up a commercial finance brokerage. At that time we worked from my dining room. One of my first clients was a Norfolk based hire company.

Continue reading The History of Buy to Let Sale and Rent Back

Bank mortgage lending hits five-month low. Full report from the British Bankers Association and statistics also downloadable Latest Articles

The banks continue to put a brave face on restricted lending by claiming mortgage approvals are up year-on-year – but any property investor or buyer trying to raise a loan to buy a home will probably tell a different story.

Lending figures issued by the banks, building societies and other financial sector groups are now in a cycle of the organisation putting a spin on short-term upward blips when long-term trends tell a different story. Continue reading Bank mortgage lending hits five-month low. Full report from the British Bankers Association and statistics also downloadable

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