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(*Moderator note: JC = PT member Jonathan Clarke*).Today JC has made me think twice about my future direction.I made a decision to sell a property to decrease my debt position. Hence listing in the marketplace.Today Im second guessing myself and need to get some perspective and opinions.
I feel like i should continue swimming ( see reply much further down)I like JC comments and his optimism and unwavering passion to overcome hurdles.
When I read the ' Fight fire with Fire ' response to S24 I was intially flabbergasted.
See DL post - 3 long years.
How can you compound the problems?, and was this an example of Regency bias in property investing.
But then I realised JC is simply doing more of what he already does and loves.
I have included an interview done be Vanessa with Jonathan Clarke (JC) for PT in 2013 as a reminder.
Be greedy when others a fearfull approach?
All my eggs are in one basket and no significant pension. ( 2k invested 15 years ago and due to self employed status only got about 5 qualifying years)
And whilst I don't share the Passion JC does , im starting to understand the logic behind it.
Why reinvent yourself or diversify away from a money making machine.?
Taking calculated risks is something we all do.
Should I consolidate or continue to try build wealth and freedom, with the only thing I might be good at.??
They say patience is a virtue , but sometimes I'm lacking in it.Help appreciated.
My property journey and background context below.
Coming soon Investorsk8.com
Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs.
Why do you need to sell?
Averting selling off a property when I don't need to.
I have a property that has positive cashflow
Option 1- selling property and using additional cash funds 55k to pay down 2 others , so I'm not encumbered on 2
Consildating debt - was the prudent approach yesterday. TODAY I'm not so sure.
option 2-keep everything, usings 55k to buy first property in SPV. Create even more cashflow.
If money does not flow or move and becomes stagnant it will never create freedom you want.
Compounding with leverage is reason why property returns are sought after.
You control a larger asset with a smaller sum of money.
keep the faith and stick to the road less travelled
despite the headwinds and government meddling to come.?
After JC insights and DSS thread even considering LHA tenants again!! ( Bad experience 6 years ago).
I think it is a good idea to have a conticontingency cash and not to stretch yourself too much
I do not know your financial situation and if you have job to support yourself or not ...but I would not sell if you can rent
Buying another one...Iam waiting
However if you have access to some BMV properties than buying is not a bad idea
I keep a sinking fund of about 10k and have 4 BTL and lodger income.
Will be back later this evening
I need some air and time to think. Taking my kids to park.
Think about it.
Would you invest in the stock market to pay S24 taxes so as to maintain your current rental income from leveraged property in your own name.
Investing in income producing assets that is effectively guaranteed is already well known to you in the form of property.
So if you are able to invest in more property which after all taxes could generate enough cash flow to cover all your other S24 taxes it makes sense to buy more.
The hard thing to accept is that the income from those properties is not for you.
It is to pay your S24 taxes so that you maintain your current net rental income.
Your possible 2 new properties are there solely to pay your S24 taxes.
Effectively they are just tax generators for the Govt.
But having say 2 properties working solely for the Govt means they leave the rest of your income alone.
Of course if you are prepared to accept a reduction in income then you can assign some of your existing properties to paying S24 taxes.
Somehow S24 taxes need to be paid.
Property income can do this as well as anything.
Obviously the easiest way to afford S24 is to reduce them by reducing debt.
But that invariably means less income.
After all S24 is just reducing your net income.
Personally I am selling and I accept I will suffer a reduction in income.
But I will replace that net income with one lodger.
Yes I miss out on future CG but I have no choice as I am not able to obtain a mortgage.
I will actually be making more income out of a lodger than one of my existing properties.
Unfortunately I cannot take on any more lodgers due to the size of the property.
But if I had a 3 bed property I could sell 2 rental properties and make more tax free income as I would EVADE tax on any lodger income I received.
Even with the one lodger rent that I will hopefully soon charge will be more than the RAR allowance
There is no chance that HMRC will know anything about that.
Lodger rent will always be in cash.
I have only just advertised the room and already have enquiries.
But my strategy is not open to most LL who have what could be considered as normal domestic circumstances.
I am not in that position so have more freedom to EVADE tax on lodger income.
Income is what I am after.
If S24 causes me to sell up then lodger income can replace tenant income.
My other strategy I am seriously considering is to have two lodgers and then I will buy a narrow boat and become a constant cruser but as far as anyone would be concerned I would still be living at my PPR.
As a constant cruiser you are off the map.
Very easy to go the property once per month to see how the lodgers are getting on.
But for investing in more property to pay S24 taxes makes sense unless you are prepared to accept a reduction in income or maintain it by deleveraging.
You can't really spend equity.
But investing into two income generating properties can be the way for your S24 bill to be met leaving your current net income still fully available to you.
I have always said BTL is a super investment or should I say Was A Super Investment
The reason for my view on this is the way Taxation and Regulation has gone ??
The principles of buying BMV property and renting is as strong today as it was
And the Investor needs to weigh up is the effort and risk worth the net return especially if the Investor is a higher rate tax payer
My major issue with BTL is ?Its now taxed at a higher rate than other investments
I was a wage slave in a 40hr week I would still go into BTL if I wanted finical independence and out of the rat race
We should all be looking over our shoulder's Now
I still don't have confidence as a professional investor that this Govt or the next one is finished with us yet
I do have the opportunity to Build to Rent now and this has to be my own way forward without the need to borrow and this will be my own expansion in the coming years
The days of LTV 75% mortgages are over for me
The less you borrow in this game the better in my opinion and the safer you will be ??
Learn Change and Adapt ?????
Sorry if I have caused confusion.
My position - wife with rental income close to being HRT
I am not currently HRT because I decided to stop working 18 months ago.
(Childcare and call it a career break/ change in direction. I really thought I would escalate my property portfolio.)
Over the last 18 months I felt like I'm drowning. ( Perhaps an early mid life crisis)
Life is not a movie scene, but the scene below sums up my current thinking.
In Gattaca, Vincent and his brother Anton play a game of chicken, which Anton always wins. Vincent finally beats his brother in chicken and has to save his brother from drowning.
Later in the movie.
- I feel it would be better to swim to the other side ( continue on present trajectory )
I never saved anything for the swim back financially.( No pension ) and only property assets.
( Some business failures)
Why not buy a holiday let.You will get full relief on your interest costs and you can further reduce taxable profit by paying into a pension
I know virtually nothing about pensions but it looks like you can contribute up to 40k per year and get full relief at the higher rate.
This means the tax man will get nothing!
Hey thanks for reply Bill.
I have a general distrust for pensions. Perhaps a control issue and pensions raids by government. I have 2k in a Prudential one from by brief job. Been self employed last 13 years. I was meant to be buying one property per year. So should have 13 by now.
I'm considering holiday let's potentially in Wales - 1 1/2 hours drive away.
I consider my area to be landlocked and in my mind
Nobody wants a holiday around here.
Does ANY property close to an airport constitute a holiday let?
Or mobile park home in residential areas?
You can only invest the £40k pa into a pension from earned income..if your only income is from investments the maximum is £3600 pa.