Time to get out?


Readers Question - Published on 13/04/2017
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I’ve been an avid reader of Property 118 for a few years now and I’m frequently amazed at the wealth of information freely shared by its contributors. Long may it continue.

One question which surfaces from time to time asks “when do you start to enjoy what you’ve built up?” 

This usually refers to landlords who have spent years creating something which they hope will fund their chosen lifestyle and allow them to enjoy a comfortable retirement.

Well, after 22 years as a landlord, approaching my 63rd birthday, I find its now my turn to ask that question.

The raft of Central and Local Government initiatives over the past two years designed to discourage the Private Rental Sector has finally taken its toll. I thought the introduction of Section 24 was a step too far but the possibility of being asked to pay the missing duty on my tenants illicit tobacco sales just blew me away.

I’ve spent considerable time pondering the implications of selling up and I’ve asked myself numerous questions such as:

  • Would I miss the regular income?
  • Would I kick myself if property prices greatly increased after I sold up?
  • How much Capital Gains Tax would I be liable for?
  • Do I really want to give away 000’s of £’s to a Government who are doing their best to make my life so difficult?
  • Where would I invest the net proceeds of the sale?

I could probably fill a page with questions I have considered over the past 18 months, but I never seem to arrive at a definitive conclusion. There are always pluses and minuses for whatever decision I arrive at.

My current thinking is to reduce my portfolio to a level where the income derived keeps me in the 20% tax bracket. I think I could just about stomach that. But how do I go about this?

I read, so often, of these illusive Southern based investors who are keen to put their funds to work in the profitable North. I’m based just North of Manchester so how do I find them?

Where is the best place to advertise my properties?

Can I trust them?

Would they look after my tenants the way I do?

How do I ensure I won’t fall victim to some scam merchant?

If anyone can provide some insightful information, you would, as they say “make an old man very happy”.

Thanks

Tom

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Comments

  • That’s what’s happening to me now Jonathan, I’m ending up as mediator between tenant & Letting Agent ’cause Letting Agent can’t get the balance right.


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  • Reply to the comment left by “Jonathan Clarke” at “15/04/2017 – 14:19“:

    Your exit plan is not to exit? Interesting view Jonathan but it is not for me.

    When I first started out I remember writing in a Filofax the returns over 10, 20, 30 + years. Getting more and more excited by the multi millions I would make.

    Then I drew a line under it and wrote ‘How much is enough?’

    I then worked out my exit plan from that, to enjoy enough wealth whilst still relatively young.
    (Which incidentally all went slightly pear shaped with the scrapping of CGT taper relief!)

    So in answer to Tom’s question;

    “When do you start to enjoy what you’ve built up?” 

    About 10 years ago is my view.


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  • Reply to the comment left by “Mick Roberts” at “16/04/2017 – 07:02“:

    That’s what I’ve found too Mick.

    The estate agent chains doing lettings as a side line are totally useless.

    The high street one man bands, if they are any good, become a victim of their own success.

    For a competent landlord they are more trouble than they are worth, which as Jonathan highlights is a very high price- 10% commission and 10% incompetency fee.


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  • Member of The Landlords Union - Click Here for Details

    Reply to the comment left by “Monty Bodkin” at “16/04/2017 – 09:43“:

    Too true Monty, I stopped investing and started living in 2009.

    I built the portfolio gradually and will unwind it the same way.

    No need to sell the lot in one go, hedge bets!
    .


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  • This thread is a fascinating read – I love Jonathan Clarke’s posts.

    I have been mulling over selling a large portfolio en-masse.

    But then I read reports from the CEBR predicting 25% house price growth in the next 5 years – https://www.cebr.com/reports/house-prices-in-2017-will-continue-to-rise-despite-brexit-negotiations/

    Saville’s published their rent report predicting 15-20% rent increases over a similar period.

    I’m highly leveraged – about 90% LTV on my mortgaged properties. But these are low rate mortgages – 1.75% above base. And I have cash and debt free properties to enable me to pay down to circa 30% LTV should I needed too.

    If I was to sell now on my highly leveraged portfolio, after CGT, fees, lost rent during sale etc etc,I’d come away with nothing on circa 100 properties.

    Whereas, after 5 years, my 90% LTV now becomes 65% as a result of 25% capital growth. I’d go from getting nothing to several million over equity upon sale after fees.

    Fortunately, all my properties are managed by the UK’s Best Letting Agent 🙂 and I spend less than 1 hour per week managing over a hundred houses.

    So, I’ll be drip feed selling and having a ‘wait and see’ approach.

    What is interesting is that the Council of Mortgage Lenders and our own experience (managing nearly 50,000 houses), show that new BTL purchases are down around 50% year on year since the second home stamp duty levy was introduced. More landlords are selling than buying, reducing the net private rental supply for the first time in decades. This will accelerate as Section 24 takes hold over the next 5 years.

    This will significantly push up rents IMO.

    As for Section 24 – Capital Growth and rent increases more than covers the cost for me and I am fortunate enough to be able to pay down mortgage debt substantially should I need too.

    For me, this turbulence means it’s less attractive for new entrants which means I should be thankful for the mountain climbed (J Clarke’s analogy) and I’ll going to enjoy the view and count my blessings that I was fortunate enough to be around during a time of relaxed lending to get where I am.


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  • Member of The Landlords Union - Click Here for Details

    I have incorporated using Mark Smith (Cotswold Barristers) and can’t speak highly enough of the help he’s been. It is a pain and time consuming and quite stressful but I am so happy I did it now and can now move forward with expanding which hit the buffers when s24 was announced. In my humble opinion this is what the government want companies not individuals running the PRS.

    I will still be selling some properties that have larger mortgages when they come empty though to release equity and hedge bets as nobody knows what’s coming next with this horrendous landlord bashing government.

    If it wasn’t for being a member of Property118 me and my partners and friends would have been sleep walking into this tax nightmare

    Thanks 118


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  • Hi Anne, very interested to know who this sterling agent in St. Albans might be please?

    Thanks
    John


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  • I say it again Jonathan, u think same as me.
    Yes I’ve started to think that the last two years or so after I sold 4 about 3 years ago.
    Why should I ruddy sell after working so hard in early years to get them.

    Let’s let inflation reward us now over the next 10 20 year or so.


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  • Member of The Landlords Union - Click Here for Details

    Reply to the comment left by “ ” at “18/04/2017 – 18:18“:

    HI, it is Richard Cleall of Martin and Co. St Albans Tel 01727 898 236. Deals with all my lets, including Multi-occupancy, which many agents a few years ago would not deal with. (long story, could tell you more).

    Regards

    Anne


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  • Member of The Landlords Union - Click Here for Details

    Just received an email about new regulation coming in:
    ==quote==
    As you may know the new Minimum Energy Efficient Standards (MEES) come into effect in April 2018 and will affect you if you are a buy to let landlord (resident landlords remain unaffected).

    The 2015 Energy Efficiency Regulations set out minimum energy efficiency standards for properties in England and Wales. These regulations make it unlawful for landlords to lease or grant a new lease for properties that have an energy performance certificate (EPC) rating below E, from 1 April 2018, unless the property is registered as an exemption. After 1 April 2023, landlords must register an exemption for any building with an EPC rating of less than E if they wish to let the building.

    Key dates

    April 2018 – by this date it will be unlawful to let out a property with an F or G Energy Performance Certificate rating, as a new let.

    There will be a few limited exemptions April 2020 – by this date the requirement for a minimum E rating will apply, not just to new lets but also to existing tenancies

    2025 – the target is for a minimum D rating

    2030 – the minimum target will be a C rating
    ==unquote==


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