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  • Property-a-holics

    Jonathan Clarke - how did you scale up?

    In 6 years you managed to scale up so you could reduce the hours you spent in employment. Was your gearing similar to today? OR do you think that you have to take more risk in the early days?

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    Hi

    I geared at up to the max I could borrow each time .

    So up to 85% LTV mortgages

    My last major buying spree was in 2010

    Since then my gearing is down to around 50% if i include contingency funding saved from cash flow and a few sales. This reduction in LTV is also due to capital growth as opposed to paying down debt . I intend to let inflation and time erode my debt  Looking back i would say i bought aggressively yes which some may see as a risk but i saw it as  i had a good viable business model and i wanted to make hay while the sun shone .

    Today  the risk itself is the same in my view but its the prevailing onerous conditions with regard to tax/ Pra etc  which means if i started again i couldn't grow as rapidly as i did as basically i doubt they would lend me as much in such a short space of time . So for instance i took 4 loans out with TMW in the space of 4 mths in 2010 and was going for a 5th when only then they said Whoa slow down a bit . I doubt i could take out similar loans at that pace today even if i wanted to . So its the lenders which have tightened up on their own risk assessment instead of me .

    I knew i could  make money on every £1 I borrowed so naturally I wanted to borrow as much as I could

    So my model was to make between £1.20 and £1.40 on every £1 I borrowed

    I wanted to get to my goal then stop and let nature do the rest . I achieved  that

    Today you can still do that but it takes maybe twice as long

    If you can make just  £1.10 net on every £1 you borrow that`s still 10% gain so worth it in my view

    Compound interest over time will take it well past that figure as the equity gap in real terms gets bigger 

    As I see it . The risk is more set in the individual,  not so much in the strategy

    Strategy can always be adapted to suit .

    Its the individual that  is sometimes so frozen in their own low risk profile they cant break out.

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    Jonathan Clarke. http://www.buytoletmk.com


    I think this is what's missing from lots of forum posts. We have a bunch of people who have done really well and changed from wealth creation to wealth preservation strategies.

    The strange thing is that they have also forgotten when advising people who are starting out, that the only way to really turbo-charge growth is to take more risk than they are doing today. they are instead advising them to be cautious, have low gearing etc. Clearly this is poor advice and is not what got them to where they are today.

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    This is an interesting topic

    I grew my BTL very slimier to JC 85% LTV was the norm

    The main difference between JC and myself is Capital Growth

    I have learned from this forum the divide between the two is huge

    and I came to this conclusion for what its worth

    If you believe you can get Capital Growth bash on and leverage up as much as you can especially within a company

    If you belive you will see little or no capital growth Buy only on yield and use a Capital and repayment mortgage

    My own calculation are if you take a 25 year mortgage and pay it down on CR your mortgage will be a third lighter in ten years

    If you both use 25% deposit to but the investment you should both do well

    Ie The Southen landlord will have around 50% lending as has happened to JC

    ie the Northern Landlord using capital and Repayment should be around the same level if they have a little bit of capital growth just they have used there higher yields to pay down the debt

    for both today its going to be a slower road  then it was before

    One is a racing bike the other is a mountain bike both have two wheels ect handlebars and brakes

    just used in different environments

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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.


    ``If you believe you will see little or no capital growth Buy only on yield and use a Capital and repayment mortgage``

    Securing a C&R mortgage if you have no CG is not a prerequisite in my view

    The pros and cons of  a C&R v IO mortgage is much more complex than the CG v yield debate

    The reasons for wanting an IO  mortgage  in a no GC area are adequately dealt with in this thread

    https://www.propertytribes.com/interest-...40053.html

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    Jonathan Clarke. http://www.buytoletmk.com


    a landlord without capital growth could set an amount a side every month into a Pension or and ISA

    Im happy to use CR in a company

    Never happy really using it on personal BTL really

    I am happy with the strategy


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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.


    ``a landlord without capital growth could set an amount a side every month into a Pension or and ISA``

    Exactly so an IO gives much  better control .  With C&R you have to relinquish that control

    Its like saying you better look after it as I cannot be trusted with money

    Apart from Pensions and ISA`s you could also   with IO set it  aside to buy another BTL / holiday /new car etc

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    Jonathan Clarke. http://www.buytoletmk.com


    I know looking back ten years if I had gone for CR my lending would have been down by a third in my own name and my S24 tax bill would have been in a better position

    I dont trust govt not to tax investment companies in the future so I am using belt and braces

    Other Landlords have to do whats right for them



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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.


    ``I know looking back ten years if I had gone for CR my lending would have been down by a third``

    It could have with IO as well


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    Jonathan Clarke. http://www.buytoletmk.com

    "...Clearly this is poor advice and is not what got them to where they are today..."

    In my own experience, as a long-standing landlord, things are SO different now compared to what it was like for us back in the 80s, 90s and 00s, to the extent where I seriously doubt if I could ever have even got started if lending restrictions, taxation and lettings regulation were anything like they are today.

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    I agree, in fact the opportunity in BTL today lies in the ability to borrow money at very low interest rates, mortgages for 2% are actually free money. Whoever doesn't take advantage of it loses out. I'm sure that in the future we will talk about this time as the golden era of BTL, we can buy a property for 25% of the price, wow!!!


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