Loan to increase BTL portfolio
Discussion
Hi guys,
I currently own a BTL property and on the search for my second one next month.
I have been wanting to build a portfolio for a while whilst I am young and just purchased my first one which went well and gives me approx £220 per month in 'profit'. It was a cheap ex-council house (40k) so minimal deposit plus I avoided the additional stamp duty.
Anyway I was thinking this evening on ways to free up some money and increase the number of properties next year. The below is my plan, just wanted to run it by you for some additional advice/tips.
I currently have a 2014 Audi RS4, the car was purchased with a partial loan (not a car loan) which is £450 per month. I was thinking of selling the car next spring/summer to free up the money, the car plus some savings will leave me with at least £30k in the bank. This would be enough to buy three properties in the area, after fees etc it should leave me comfortably with £600 per month in profit whilst also having three new properties getting repaid. There would be approx 2 and a half years left on the loan so after that I would be £450 a month better off. After my car has gone I would probably go down the PCP route, a specialist near me often gets good deals on X5's and similar where I can put a 2-3k down and pay around £350-400 per month for the time being and then re-assess after that.
Just looking for some feedback, should I take a punt or would I possibly struggle to get a BTL mortgage if the deposits are funded from a loan?
Thanks
I currently own a BTL property and on the search for my second one next month.
I have been wanting to build a portfolio for a while whilst I am young and just purchased my first one which went well and gives me approx £220 per month in 'profit'. It was a cheap ex-council house (40k) so minimal deposit plus I avoided the additional stamp duty.
Anyway I was thinking this evening on ways to free up some money and increase the number of properties next year. The below is my plan, just wanted to run it by you for some additional advice/tips.
I currently have a 2014 Audi RS4, the car was purchased with a partial loan (not a car loan) which is £450 per month. I was thinking of selling the car next spring/summer to free up the money, the car plus some savings will leave me with at least £30k in the bank. This would be enough to buy three properties in the area, after fees etc it should leave me comfortably with £600 per month in profit whilst also having three new properties getting repaid. There would be approx 2 and a half years left on the loan so after that I would be £450 a month better off. After my car has gone I would probably go down the PCP route, a specialist near me often gets good deals on X5's and similar where I can put a 2-3k down and pay around £350-400 per month for the time being and then re-assess after that.
Just looking for some feedback, should I take a punt or would I possibly struggle to get a BTL mortgage if the deposits are funded from a loan?
Thanks
No. I have my own home which I purchased 2 years ago.
There was approx 50k equity in the property so I have just remortgaged and took £8000 in equity out to go towards my next BTL.
The properties I would purchase at around the 40k mark I would make sure fall just below to avoid the additional stamp duty, the last one I purchased was approx £39,900 from memory so I just avoided it.
However I wouldn't limit my self to just this price, if a good purchase came up for more money then I would go for that and just pay the additional stamp duty.
By freeing up the money I would hope to purchase three properties within 6 months or less. Hopefully taking me to five BTL properties by the end of 2019.
There was approx 50k equity in the property so I have just remortgaged and took £8000 in equity out to go towards my next BTL.
The properties I would purchase at around the 40k mark I would make sure fall just below to avoid the additional stamp duty, the last one I purchased was approx £39,900 from memory so I just avoided it.
However I wouldn't limit my self to just this price, if a good purchase came up for more money then I would go for that and just pay the additional stamp duty.
By freeing up the money I would hope to purchase three properties within 6 months or less. Hopefully taking me to five BTL properties by the end of 2019.
Sounds stonkingly good. There are houses within an 30 mins from me that can still be purchased for 40k. But the economy is poor, risky tenants, zero capital gains and seemingly little hope of improvement. But I'm sure it can be done elsewhere.
Sounds like a good plan, especially if you are under 35.
Sounds like a good plan, especially if you are under 35.
Thanks.
The houses near to me are not the best in all honesty but you can still pick up a reasonable tenant and make the place nice for them.
I am/will be quite picky so I can hopefully prevent as many problems as possible, once the numbers increase I will probably get them managed by a local agent.
I have been thinking about it the last couple of days and think its a 'risk' I will take.
Going down the PCP route on a normal car is not something I would normally do but it gives me the option to do the above and then re-asses in a few years, perhaps the new shape RS4 will have came down to a reasonable figure by then
Age wise I am 25. Hoping to get a few houses under my belt by the time I am 35.
The houses near to me are not the best in all honesty but you can still pick up a reasonable tenant and make the place nice for them.
I am/will be quite picky so I can hopefully prevent as many problems as possible, once the numbers increase I will probably get them managed by a local agent.
I have been thinking about it the last couple of days and think its a 'risk' I will take.
Going down the PCP route on a normal car is not something I would normally do but it gives me the option to do the above and then re-asses in a few years, perhaps the new shape RS4 will have came down to a reasonable figure by then
Age wise I am 25. Hoping to get a few houses under my belt by the time I am 35.
Edited by JCKST1 on Sunday 11th November 21:29
I worked with a chap who had around 10 properties of similar value, 40k each.
It was a full time job for his wife managing the tenants. Everytime i spoke to him regarding them, it felt like they were a chain around his neck.
All on interest free mortgages, never knowing if the bank was going to pull the rug from under you.
It was a full time job for his wife managing the tenants. Everytime i spoke to him regarding them, it felt like they were a chain around his neck.
All on interest free mortgages, never knowing if the bank was going to pull the rug from under you.
The one I have just taken out (and all future ones will be) repayment. The current one is a 20/21 year mortgage term from memory.
My plan is to keep the property 2-4 years until there is enough equity in it to 'upgrade'. I will then sell the property, cash out and use the money to buy a slightly more expensive house in a better area. Something around the 60-70k mark. It will probably give me a similar yield but its a higher value asset when paid off in 20 years or so.
At the price I am buying the properties for there would unlikely be any major increase in price, I will do basic work to them and leave a tenant in if needed so its ready for an investor but I would expect to sell for 43-45k in a few years.
As the number of properties continues to grow I will look at getting them managed.
When buying I try to make sure all major jobs are taken care of. So if the property needs a new kitchen, doors etc I will do that first in the hope to prevent any future problems rather than letting something come to the end of its life and have to replace with a tenant in place etc.
The property I just purchased has had a new kitchen, bathroom, boiler and UPVC doors in the last 5 years.
I got the property at a good price in this case as the vendor needed to sell. There shouldn't be any major expenses unless items are damaged.
My plan is to keep the property 2-4 years until there is enough equity in it to 'upgrade'. I will then sell the property, cash out and use the money to buy a slightly more expensive house in a better area. Something around the 60-70k mark. It will probably give me a similar yield but its a higher value asset when paid off in 20 years or so.
At the price I am buying the properties for there would unlikely be any major increase in price, I will do basic work to them and leave a tenant in if needed so its ready for an investor but I would expect to sell for 43-45k in a few years.
As the number of properties continues to grow I will look at getting them managed.
When buying I try to make sure all major jobs are taken care of. So if the property needs a new kitchen, doors etc I will do that first in the hope to prevent any future problems rather than letting something come to the end of its life and have to replace with a tenant in place etc.
The property I just purchased has had a new kitchen, bathroom, boiler and UPVC doors in the last 5 years.
I got the property at a good price in this case as the vendor needed to sell. There shouldn't be any major expenses unless items are damaged.
Don't forget that (and I assume you are a higher rate tax payer), you will no longer be able to deduct the interest aspect of the mortgage from your tax return, you will be subject to CGT on any profit when you sell the house(s) (above the 11k appx limit).
Are you still making £200 "profit" after paying tax at 40%? I have just sold my two BTL's as I would effectively be paying per month for them after taking my PAYE wage into account.
Are you still making £200 "profit" after paying tax at 40%? I have just sold my two BTL's as I would effectively be paying per month for them after taking my PAYE wage into account.
I am the director of a LTD co so take approx just 11-12k per annum in PAYE, the rest is through Divi's. Tax will be 20%?
I will look in to other options later down the line in regards to creating a ltd co and perhaps using that to 'manage' them?
CGT should be OK, as mentioned there would only be a few thousands profit on each property anyway and they would be getting sold off at various points over the next few years.
Another option is purchasing commercial property, I understand you can still claim the interest back on them?
There is a small high street unit near me come for sale via the owner who wants to partially retire and free up some funds, I am going to view it this month. It looks like a good return at approx 45k purchase price and he agreed to rent it back at 5k per annum (I could get slightly higher but happy with that and can keep him in). He has been in the same shop since 1978 and doesn't want to completely pack up and sell the business but by selling the freehold it gives him some equity release.
I will look in to other options later down the line in regards to creating a ltd co and perhaps using that to 'manage' them?
CGT should be OK, as mentioned there would only be a few thousands profit on each property anyway and they would be getting sold off at various points over the next few years.
Another option is purchasing commercial property, I understand you can still claim the interest back on them?
There is a small high street unit near me come for sale via the owner who wants to partially retire and free up some funds, I am going to view it this month. It looks like a good return at approx 45k purchase price and he agreed to rent it back at 5k per annum (I could get slightly higher but happy with that and can keep him in). He has been in the same shop since 1978 and doesn't want to completely pack up and sell the business but by selling the freehold it gives him some equity release.
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