A risk too far?

[Amarillo]

That sounds like a good plan. Debt free retirement cannot be underestimated.

I’m coming to the conclusion that you are right.

It has been an incredibly useful thread, and my understanding of our options and risks has grown immensely.

I have learnt about the dual mortgage package of let-to-buy. I have also learnt that if buying a second home for main residence you need to pay a 3% stamp duty surcharge, and that can be refunded if the previous main home is sold within three years.

 

[Amarillo]

There’s no risk involved if you have that much equity as the gains don’t count until you cash in.
So even if the market drops you will never be in negative equity, and wouldn’t of lost money as you never had that amount.
It’s only the costs of original investment that count until you cash in.

Sounds like you will have to act quick if one ever comes up, so I would say let to buy or home to get it then review your options once in.

I think that you are wrong about the risk. However likely or unlikely there would be a risk of a catastrophic financial calamity if I took on that much debt at that stage of life. There is also the chance of significant financial gain.

I think I can do without that risk.

On your second point, I agree completely. We need to get ourselves into a position where we can move quickly, possibly without selling our current home until after purchase.

 

[Amarillo]

Be good to go now. If your heart’s set on one of five, maybe bigger risk is they don’t come up, or do, but you miss out. If one does becomes available, you may have to pounce. Near us, good ones are currently selling within days of coming on market.

I’m expecting the housing market to be very different this time next year.

I have just looked at one of our rental properties on Zoopla. The estimated value has hardly shifted in five years. That suggests stagnation rather than a bubble in this part of London.

 

[The Merle]

I think that you are wrong about the risk. However likely or unlikely there would be a risk of a catastrophic financial calamity if I took on that much debt at that stage of life. There is also the chance of significant financial gain.

I think I can do without that risk.

On your second point, I agree completely. We need to get ourselves into a position where we can move quickly, possibly without selling our current home until after purchase.

Great thread Tom, I have enjoyed reading.

No mortgage or debt is the best way to be in my option, a lot less sleepless nights and way more freedom.

 

[Lightning]

Remember to factor in the £6 to £16k cost of each heat pump to replace all the boilers. I hope there are subsidies for all this.

Climate change: Ban all gas boilers from 2025 to reach net-zero https://www.bbc.co.uk/news/science-environment-57149059

 

[WelshGas]

Remember to factor in the £6 to £16k cost of each heat pump to replace all the boilers. I hope there are subsidies for all this.

Climate change: Ban all gas boilers from 2025 to reach net-zero https://www.bbc.co.uk/news/science-environment-57149059

Why?

 

[Lightning]

Why?

Why not? Are you 12?

 

[Ch1pbutty]

Remember to factor in the £6 to £16k cost of each heat pump to replace all the boilers. I hope there are subsidies for all this.

Climate change: Ban all gas boilers from 2025 to reach net-zero https://www.bbc.co.uk/news/science-environment-57149059

If introduced, it would only apply to new installs from 2025

 

[Lightning]

Only applies to new installs from 2025

If he keeps the properties the boilers may eventually need replacing. The EPC minimum legal level to let for landlords is currently E, likely raising to C supposedly by 2025, after that who knows.

 

[Lightning]

If he keeps the properties the boilers may eventually need replacing. The EPC minimum legal level to let for landlords is currently E, likely raising to C supposedly by 2025, after that who knows.

By the way the proposed cap on out of pocket expenses to landlords to meet or try to meet the EPC of C is provisionally proposed to be £10k per property.

 

[jimmywease]

CGT is often a lot lower than people expect - see my calculations above:
1.4% of a £385,000 property for a lower rate taxpayer; 3.9% for a higher rate taxpayer.

I think as many people underestimate CGT as overestimate. There’s a kind of tipping-point with PRR. Run the forecast, reducing the personal allowance to zero and increasing the rates to match income tax.

As you can see, I don’t think the Treasury has finished with BTL but you might be more optimistic!

This isn’t really an issue for your circumstances, but I would shy away from dismissing CGT as having limited impact. People with heavily remortgaged BTL portfolios do get caught out.

 

[Amarillo]

By the way the proposed cap on out of pocket expenses to landlords to meet or try to meet the EPC of C is provisionally proposed to be £10k per property.

We are used to occasional one off bills for joint maintenance, new roofs, replacing asbestos guttering, tree felling, etc. Fortunately four of our flats are leasehold with a share of freehold, so costs are properly managed. The fifth is leasehold, but with a covenant stating that the leaseholders are responsible for arranging building maintenance.

Incidentally, the houses which we have our eye on are leasehold with a share of freehold. It gives us some handy shared facilities such as a large dinghy park, but has restrictions such as no caravans or boats to be stored on the driveway or front garden.

 

[Lightning]

We are used to occasional one off bills for joint maintenance, new roofs, replacing asbestos guttering, tree felling, etc. Fortunately four of our flats are leasehold with a share of freehold, so costs are properly managed. The fifth is leasehold, but with a covenant stating that the leaseholders are responsible for arranging building maintenance.

Incidentally, the houses which we have our eye on are leasehold with a share of freehold. It gives us some handy shared facilities such as a large dinghy park, but has restrictions such as no caravans or boats to be stored on the driveway or front garden.

I’m not sure if the other leaseholders would be so keen on contributing to improving your flats so that your business meets the minimum requirements for letting? The minimum EPC requirements don’t apply to private residences yet.

 

[WelshGas]

Why not? Are you 12?

If the plan is adopted then they wish to stop production. There is no plan to force people to change. They will change when their gas boiler can no longer be repaired to an available alternative.
This is one the prices we will have to pay to combat climate change, or find an alternative, such as substituting a Hydrogen gas mix for pure Natural gas.

So why subsidise. We’re all in it together, unless you consider your case special?

As far as your comment. No I’m a little older. But then you do like to be rude when you don’t understand.
Have a nice day.

 

[Perfectos]

Tom,

personally, having some experience of your situation and hindsight.

I would position myself financially to be able to act quickly if one of the five homes comes on the market. (When ever that may be)

be ready to act, dispose of the minimum amount of assets to achieve a small fixed rate / period mortgage for the new home, that can easily be paid down (at future fire sale prices: Bank Valuations, not market valuations) with the remaining assets, minimising risk of future unknowns.

As your aware, disposal of assets takes time and can be fraught with headaches due to the U.K. conveyance process.

Pay the Tax required to achieve your goal, hard as it may seem.

I did exactly what WG sister did, letter through the door.
I took about 14 months for the occupiers to come to the conclusion to sell.
we were on holiday, the kids were three and one year old, when my wife received the a call out of the blue Telling us they were ready to sell, did we want it and most importantly how quickly could we move !
Our move relied on us selling our existing home and re mortgage.
We kept our BTL rental property, but opted to fix the BTL mortgage for a period of time so to create surety should interest rates change.
The proceeds selling our current home introduced factors outside our control & a high level of stress.
We arranged the necessary financing with no issues at all, we marketed our home immediately.

long story short, despite accepting an offer, the sale took 6 months, despite us having funds in place, the purchase of the new home relied on the sale of our old home.
The owners of our prospective home grew increasingly impatient during the process, they appointed an estate agent after three months of accepting our offer (their asking price) needles to say, we nearly lost the house due to factors outside our control (others in our chain) and the need for the owners of our prospective to commit to their purchase / upper chain or lose their retirement home!

To top it all off the buyer of our home, dropped a short on our toes on exchange day, leaving a not inconsiderable short fall in our funds (On exchange day ! )
Needless to say we overcame all the issues and have long since forgotten the stress.

my advice :
Put a note through all the five doors, hope that someone wants to sell, be ready to act when the time comes.

when the time does come, do it in a way to minimise your stress and long term risk, without risking the loss of what you have built over over many many years of hard graft.
Plan for potential future grief when the inevitable future obstacles come into view. (they will when you least expect or need another problem).

increasing age means a tapered reduction in your future possibilities / time, to enable you to rebuild your assets / equity if things should go wrong.
your “future” risk assessment should take account of unforeseen events, and mitigate those risks where possible, including changes in financial circumstance, I’ll health, disability, loss of income, one in a life time events & most importantly what would happen if death of one or both of you or your wife.
define your acceptable risk vs goal / benefits (whether tangible or not). plan to achieve an acceptable balance of your future risk, (only you can decide what is an acceptable risk vs retention of existing assets)

good luck I don’t envy the process you’ll be going through.

 

[VWCoastbusters]

I'm not an expert in any of the btl, cgt etc issues. But I would say if your heart is set on one of four properties, that's your main issue. You have to be ready to buy if one is available or, more likely, approach the owners for a potential sale. To me, that's the biggest conundrum you have. So I'd prioritize investigating the potential with the four owners - are they thinking of selling? Retiring and downsizing? Whike no guarantees, you might find one is planning on relocating in 5 years, for example, giving you an option to make a plan. Then work from there.

 

[Ch1pbutty]

By the way the proposed cap on out of pocket expenses to landlords to meet or try to meet the EPC of C is provisionally proposed to be £10k per property.

EPC is not just the boiler, it covers all aspects of the property (wall & floor insulation, lightbulbs, thermostatic radiator valves,). Our rental is rated D, but would be a B, had the expert EPC surveyor not missed the huge solar panels on the bungalow roof! (The comment in his report even recommends having panels installed). We didn’t ask for a new report as had a lot going on at the time. It’s rented to a friend, rent is at set rate whether we are A,B, C,D…etc so just needed the report to tick a box and keep the ‘expert’ surveyor employed.

Our family have owned the rentalproperty since it was built so no mortgage. I would never buy- to-let as it seems like a hassle getting rid of someone who stops paying their rent as I would probably end up getting arrested! Would rather put money into the property that we live in then you have more control and still get more back than cost. Ie - extension, garden annex, loft conversion… but to do that you need to find somewhere that has the space that allows you to do so which is becoming very difficult now.

 

[Lightning]

EPC is not just the boiler, it covers all aspects of the property (wall & floor insulation, lightbulbs, thermostatic radiator valves,). Our rental is rated D, but would be a B, had the expert EPC surveyor not missed the huge solar panels on the bungalow roof! (The comment in his report even recommends having panels installed). We didn’t ask for a new report as had a lot going on at the time. It’s rented to a friend, rent is at set rate whether we are A,B, C,D…etc so just needed the report to tick a box and keep the ‘expert’ surveyor employed.

Our family have owned the rentalproperty since it was built so no mortgage. I would never buy- to-let as it seems like a hassle getting rid of someone who stops paying their rent as I would probably end up getting arrested! Would rather put money into the property that we live in then you have more control and still get more back than cost. Ie - extension, garden annex, loft conversion… but to do that you need to find somewhere that has the space that allows you to do so which is becoming very difficult now.

I realise that. For some properties reaching a C from E is very expensive. I know I own one that I let out. It has solid stone walls and a modern oil fired boiler. I would need to spend a fortune to get to a C rating, internal wall and floor insulation, a change in heating technology etc.
Interestingly, if a tenant to refuses to give permission to allow the work, it gives a 5 year reprieve, or until the tent at changes.

 

[davidgmo]

Hello Tom

I am a Chartered Accountant but yet would strongly advise that you consult an IFA which my wife and I have done on our pension, re-mortgaging plans and property. Best of all if you can is to find a qualified ie Chartered IFA as most are not.

In general terms my IFA advises for continuing with a mortgage, especially fixed deals, as you can - if well managed - earn much more in a balanced market portfolio than it will cost you with a great mortgage deal. Fixed interest-only of course ensures no rate rise exposure and along with that, I used an associate of my IFA who is a qualified mortgage broker - they are worth their weight in gold.

Happy to refer you if you want a quote or a chat....

For us to go mortage free at a time of such very low rates is not wise and savings efficient, but I know it is what most people strive for - for me it is heart rather than head thinking

Whatever you do, strongly recommend you get good independent savings/mortage advice

David

 

[davidgmo]

Thank you for reminding me. CGT is something I am aware of, but often neglect to include with my calculations.

From memory, this is how it is calculated for a part main property and part rental property, using my first flat as an example.

May 1990 £57,000
May 2021 £385,000 (zoopla estimate)
Capital gain £328,000
Owned for 372 months
Main residence May 1990 to August 2011: 255 months
Add grace period of 6 months: 261 months
Taxable capital gain (372-261)/372 X £328,000 = £97,871
Lower rate 18% CGT = £17,616
Higher rate 28% CGT = £27,404
Less CGT allowance of £12,300
As a lower rate taxpayer I would pay £5,316
As a higher rate taxpayer I would pay £15,104

Hi Tom

Re CGT, one thing to remember if and when you sell a house and make a taxable capital gain, that you need to self assess and report the CGT due to HMRC and pay this within 30 days of the sale date. Many do not realise that and think they can wait until the final Self-Assessment deadline - not so.

David

 

[Amarillo]

P.s Are you likely to get the mortages you require at 62 years old?

Yes, I think so. The main criteria for a buy-to-let mortgage is that estimated rental income covers 125% / 145% of mortgage interest for basic rate / higher rate taxpayers, and a minimum 25% deposit. There might be an age cut off, but if there is I’m confident that we will be well under it.

I’ve looked closely at both Leeds and Nationwide RIO products. Nationwide say they’ll lend to people aged 55 to 94 if they already hold a Nationwide residential mortgage, otherwise 55 to 84.

 

[The Merle]

Yes, I think so. The main criteria for a buy-to-let mortgage is that estimated rental income covers 125% / 145% of mortgage interest for basic rate / higher rate taxpayers, and a minimum 25% deposit. There might be an age cut off, but if there is I’m confident that we will be well under it.

I’ve looked closely at both Leeds and Nationwide RIO products. Nationwide say they’ll lend to people aged 55 to 94 if they already hold a Nationwide residential mortgage, otherwise 55 to 84.

Hi Tom you need to look at let to buy mortgages they maybe a little different than a buy to let.

 

[Amarillo]

Hi Tom you need to look at let to buy mortgages they maybe a little different than a buy to let.

Let to buy is a relatively new product, and almost perfectly fits with what we were considering.

If we need to move quickly on our purchase and buy without selling it is likely to be the right product for us.

We essentially did a let-to-buy back in 2011- and that was five years before any let-to-buy products had been launched.

Which have a very good page on let-to-buy.

Let-to-buy explained - Which?

Discover how to let your property out if you want to buy a new house without selling your current home, including the criteria for let-to-buy mortgages.

www.which.co.uk

Where our circumstances may differ is that we hope to be mortgage free on our current home relatively soon, so this would remove a layer of complexity.

 

[willwander]

Trend or short term reopening spike?

UK inflation rate more than doubles in April

Inflation in the UK rose by 1.5% in the year to April, compared with 0.7% in March.

www.bbc.co.uk

 

[CALI FATE]

I feel your pain Tom - if i understand the matter correctly - you want to leverage in additional funding to buy your dream home, continue to build your property investment portfolio, capitalise on the strong rental market, squeeze as much value / profit as you can out of your investments - while ensuring you pay the least amount of tax you can get away with. - i think its a good plan, but i can also see how being a property investor and speculator does not fit well with your social conscience - people who buy more homes than they need drive up house prices, trap potential home owners in the rented sector and deprive people of their only 'dream' home. Reading between the lines you seem to be an upstanding chap with fine socialist principals - yet here you are exploiting the housing sector like a true capitalist

This forum is about campervan ownership - if you want to to want to flaunt your good fortune - i suspect there are other more specific websites where you can be as smug as you want

You usually hit the hijack button when you think someone is criticising you and get the admin to 'cancel' them - i suspect you will do the same with this post.

Lets keep things about VW California vans