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  • Buy-to-Let

    How many investment properties is enough?

    I'm curious as to your vehement response to this question.

    I offer the following as an alternative (area variances acknowledged).

    There is still a shortage of property.

    Rental prices are growing at pace.

    Property prices are increasing.

    Cost of finance is low.

    Savings products offer low interest.

    Diversified Mutual Funds are not 'knocking the lights out'.

    If a property investment, leveraged at 75%LTV, assuming 3%pa capital growth, can offer 20% ROCE, what is the better alternative?



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    New properties being built all the time, look at certain areas where no over supply. Also what is being built is expensive relative to current incomes. Rental prices will drop as rent controls come in. Property prices are increasing- what plant are you on. Financial cost is low but not for long as governments will be forced to move rates up- thats the problem many fail to realize, as currencies come under pressure , inflation will rise ( debt problems - governments unable to repay therefore will inflate , reduces debt in real terms.) With economies collapsing over the next 12/18 months governments will be forced to raid people savings. ( can happen in various ways.remember they have all ready done it £617m from miners last year, and caps on amounts going into pensions so less tax refunds on pension payments.) Diversified funds going short and those long will get hit by stocks etx falling. Being leveraged in this environment is financial suicide, banks and lending institutions will be forced to cut back and increase  margin requirements. ( happening already) And you still want to be long property and increase exposure to the sector.

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    Douglas

    Whilst new properties are being built, not nearly enough are being built, so still a lack of housing, something that will not change anytime soon.

    Expensive homes lead to renting not purchasing?

    IF rent controls come in they MAY impact certain areas, but plenty of areas have rent to earnings ratios way below the threshold limits for imposition of rent controls.

    I assume you mean what planet, I'm based in the Frozen Wastelands of the North, where many have enjoyed 20+% house price growth in the past 3 years.

    Interest rates will increase, but still low relative to average long term rates.

    Boris about to increase threshold for higher rate tax to £80k, already increased to £50k?

    CGT remains at 18%, for now, but not increased.

    A repeal of George Osbourne's legacy would of course be great, but unlikely to happen any time soon.

    I may be looking through rose tinted glasses, but suspect they skew the picture no more than your cynicism does.

    I agree that one can be too leveraged and many people are, thankfully i'm not one of them.

    Regards

    Steve


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    I take Data from Lenders with a big pinch of salt

    they have a vested interest in saying what they say

    I just look at whats been sold what it has achieved and use my own data


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    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.

    Hi Douglas
    Are you looking at this simply from your point of view or possibly a SE point of view.
    If I look at this from my point of view I see these changes as making a dent in profit but not bankrupting me.
    If I take an example of a property o have recently bought for 76k:
    Rent 550 pcm, maintenance & mgt 100pcm, mtg int 160pcm 75% ltv
    Pre s24:
    Profit taxable 290 @40% 116 tax
    Post s24:
    Profit Taxable 450 @40% 180 tax - 20% tax credit so 144 payable
    So 28 pounds pcm worse off

    Yes I could in the future fall into needing to be licenced but no plan yet.
    Agreed fees will increase due to tenant fee reduction but I invest for long term with long term tenants being the target (average tenure in current portfolio 》3yrs)

    So I dont see the current changes as anything other than a challenge to the short term finances, but feel positive still on the long term future if you set up your strategy correctly.

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    Slowly working towards financial freedom


    All that for £43.50 per week. You risk is much greater than you think. No rent or tenant hassle, property prices falling.

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    But at 20 properties its 870 a week, which is a nice income. If you look at your tenants as long term customers who you provide a home too, you rarely get any hassle. I have a property manager as per my costs who deals with any day to day stuff, I rarely get involved unless he feels he has to escalate something. That probably happens less than once per month.
    So I see the rental portfolio as almost 100% passive income. 
    The purchase process however is time consuming ?
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    Slowly working towards financial freedom

    Problem is Steve, equity growth is about to disappear faster than a rat down a hole .

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