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Interested in opinion's on the best way forward for me and my wife. There are two aims of wanting to build more cash flow for future and also purchasing a house for ourselves. I realise these conflict slightly but trying to work out the best solution.
Currently we have a residential mortgage of £1350 a month on a two bed flat in SW London that we live in that has 300k left on it. We also have a buy to let interest only mortgage on another two bed flat in the same area that's £950 a month also with 320k on it. The one we live in would be valued around the 440k mark and the one we rent around 400k.
We are wanting a bigger place in the next two years with family in mind and unfortunately constant noise from the flat above has hastened our decision that we want to move sooner rather than later.
We would also like to keep the two flats if possible as we've not had either more than four years and won't make any profit on them. However the yield on our current one if we were to rent it out would be very low.
Do people think doing this and relying on capital gain over the next 15 - 20 years is acceptable or are there any other alternatives I've missed that would fit our situation?
I would say you need two things
a good mortgage broker
and a tax advisor
you have said nothing about your level of salary or your tax rate
BTL is no longer simple due to S24
as for capital growth I don’t even think about it now if it happens it happens
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
Between us we earn about 95k a year so bordering on the higher bracket at the moment.
Speakig to a mortgage broker and accountant in the coming week.
Well you need good advice with a taxation’s accountant who understands BTL first
if your borrowing are high S24 will tax your plans badly
If I were you, I would sell both and start again. The honest truth is both property have very low yield.
If you kept them and want to build on your portfolio, you will not be able to after your 3rd purchase as once you have release equity and buy more BTL, it is likely to fail PRA stress test. You would have the same problem if you release equity to buy your own place.
No plans to release equity to buy house in future, we would save up for deposit/stamp duty.
However understand about struggling to release equity again in future.
Assume you would lose almost half the gross joint 95k income when starting a family - unless spouse can work remotely - and that would impact any residential mortgage you may need.
From a lifestyle/family perspective most in your position move out to Home Counties when wanting a family - more bang for buck.
BTL has had a good run for 20 odd yrs - but is now a cash cow for Chancellor in many cases.
Plus the total yield on BTL in London/SE has relied very heavily on cap growth - that being challenging to predict in short let alone medium term.
These type of questions are always difficult to answer fully because you never know the persons full position. By what you say I would sell you main flat and up grade for the future. Keeping the two flats and buying another all depends upon your financial position. In keeping the flats and buying another could put you under financial stress ie need rents to cover mortgage payments- why bother. Also remember starting a family incurs many more costs than you think ( many can vouch for that ) and also the call upon your time. Having a property to live in that meets your needs and with another rental might be the easy option pp in the current economic climate.Property usually goes up over time but short term ie next 2yrs or so don't expect it. Keep it simple, don't over extend yourselves , you can always buy further property in the future. One other point if you want to move due to the noise just think what hassle tenants would give you over the noise. Good luck and hope all goes well for future.