UK Landlord Forum / Life

I have read and taken seriously the stern words about one post wonders and shall endeavor not to become one...like on all the other forums I've joined.

I was recently diagnosed with cancer that was operable and am in the process of making a claim on a critical cover policy that we only had for three years. I am in the in the very fortunate position of potentially receiving a 150,000 payout  in my late thirties. Whilst it would be nice to live mortgage free, I would also relish the opportunity if possible to to make this money work for us.

The money is two separate policies one for our family home for 85 000 and the rest on my wife's previous house that we currently rent out. The last couple of years have led me to believe that we could easily manage the property better than the current letting agent. My wife is extremely practical, and I bring good people skills and a finely crafted cuppa!

It would be amazing if we could arrange our lives so that I could either work part-time and manage the properties, or I could manage the properties full time. I currently earn 20,000 a year. And whilst a little more would help, we could sustain ourselves on that plus the money that my wife makes from her business if there was potential for us to work our way towards more long term. Is 150000 enough to achieve this?

We live in the North, and our current property has not yet made enough money for us to be taxed on.

Would love to hear your thoughts.

When you say not enough money to be taxed on the income from the property should be added to your income and then tax payable on that amount.  Are you saying your rental property has not even given you £1 in profit?

I don't know how much houses are around you but if you're going to go into it in a big way you need to see how many 25% deposits your £150,000 would allow.  The more houses the better, rather  than just buying 1 or 2 outright and tying your capital up.

The North, you say?

£150,000 is likely enough to purchase 2 small properties outright. I'm thinking 2 x 2 bed terraced houses in steady order. Depends on what part of the North, obviously. In Sheffield I'd really be looking at around £90,000 to £100,000 per property (of the type I described). However, I'd also be looking at £500 to £550 rental income per calendar month.

Would you want to use the £150,000 to buy properties outright? Or would you prefer to have properties on mortgages - even interest only mortgages - where you are really banking on the capital appreciation over time and will 'get out' when it feels right, but with a nice profit and probably some rental income in the meantime to tide you over?

I have a target of being mortgage free on a modest number of properties I let out. Then I think I can really sit back and not be beholden to banks and rental income as much as a person who has to have that rent coming in to pay the mortgage, otherwise they're stuffed. I am, personally, not a subscriber to "the more properties the better" approach. I'm not saying there is right and there is wrong.

Your £150,000 treat as a deposit.

You can then on  a 60:40 split get a mortgage of £225,000, so total £375,000.

Say that buys you 5 or 6 units ( mid terrace 2 - 3 bed for £65 - £70k?) at £400 to £450 a month would gross you approx £30k a year, with interest of £10k you could end up with your £20k income.

Once it's up and running you should then be relatively work free, max 1 day a fortnight I would say would be as much as you need to do.

Plus the money is safe and hopefully will increase over time.

Personally in your position I would be on it like a car bonnet, but that has to be your choice.

Oh, on another note, please get well soon!

Thanks for the prompt replies

When I say we haven't made enough to pay tax, I mean we're yet to make a profit. Mortgage payments, work on the house, and letting fees mean we are yet to make any money, though the work has added value.

I think we'd be happy to have mortgages, my only concern would be over extending ourselves. We're based in Bradford, and thirty minutes drive would have me considering properties from Leeds to Huddersfield, and Batley to Keighley. Any profits on top of living I would be hopefully paying into the equity of the properties. Interest Only mortgages.

So you're both saying opposite approaches, both intriguing lots of properties on mortgages with lower profits, of fewer properties without mortgages but higher yields?

Would the 150000 be enough of a start?

Thanks for a the well wishes Boboff. Is there any reason wgy you'd be so prompt? A little afraid of overstretching ourselves.

Quote from: Sungover on July 10, 2014, 02:01:50 PM
work on the house,

I think you need to read up on tax regarding rental properties.  Depending on what 'work' was done to the house this may not be tax deductible but would be deductible for CGT instead.

Well you see my attitude is work is for suckers, and your quality of life is much better without a job!

But it is a personal choice.

YOLO inspired, me at the minute, but then I might get a parking ticket and that will cause a bout of depression meaning I wish I had never seen a tenant!

You have choices

Quote from: Sungover on July 10, 2014, 02:01:50 PMSo you're both saying opposite approaches, both intriguing lots of properties on mortgages with lower profits, of fewer properties without mortgages but higher yields?

My approach is not about the higher yields... it's [supposed to be] about stability, self-determination and quality of life. If I have unencumbered properties I'm letting out then I'm not worried about voids as much... sure, I have to pay some bills and Council Tax and I'm not getting income in, but I'm also not paying a mortgage out. I'm feeling better about things like repairs as well... as I can go to town more when I have any voids, rather than struggling while Tenants are in place. Also, I'd be getting good income from them, but I wouldn't want 20 properties to look after myself... I want something more like 5.

Maybe it's all a pipe-dream... I have 1 unencumbered let property right now and 1 let with a CTL mortgage (obviously repayment). I'm looking for my next - a proper BTL (but repayment again) - but am taking my time and ensuring I do it right... if interest rates rise and mortgage deals start getting worse, I'll not worry too much. I need to consider a BTL mortgage with a 20 year term anyway, as I'm nearly 40, and I'd prefer to not make things difficult with 25 year terms and all those added questions about retirement.

£150,000 is enough to make good inroads into whatever route you decide to go down, for sure, and you seem to have a bit of experience already. You have a good set of towns / cities in your range... just for completeness, I might be tempted to look up the LHA rates for each of those Councils... there might be better pickings if, for example, you ended up letting to people in receipt of LHA. They might all be roughly the same, but there might be anomalies to benefit you too.

£150,000 can probably buy 10 properties in certain parts of Bradford (I went to University there).