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  • Landlords in Distress

    Sell, remortgage or keep?



    To those of you who have kindly given me advice over the last few months after the death of my husband I am eternally grateful.

    A couple of you have looked at my portfolio for me and given me feedback that it’s a healthy one. Whilst I am managing to juggle everything and keep things going, I now feel vulnerable in case anything were to happen to me now as my children will soon have their own careers and probably wouldn’t know what to do with the properties.

    My heart says keep the properties (as they were the result of many years of risk and graft and pride of my husband) but some  of them are being compromised by the new HMO legislation, s24, some complicated planning issues and rising mortgage rates. Some give me a healthy proprofit, some smaller. Some have lots of equity, some ha smaller equity but larger income.

    Although I’ve consulted RITA and John Charcoal, I feel overwhelmed sometimes.

    Therefore my head says I should simplify my life and sell, pay off some debt, treat myself and maybe reinvest. But reinvest in what?

    Another option is to keep the hugest rental earner and pay down the mortgage. What would I gain from this?

    i wish there was a one stop shop to play with tax figure permutations, investment advice, inheritance advice and mortgage advice so they could come up with loads of different scenarios for me to choose from but obviously there isn’t!

    Do any of you have any thoughts on this? Btw I’m not a clueless woman - I’ve been able to keep things going and learn quickly but worry about the complexity if anything happened to me.

    Sorry to bang on but not having anyone to talk to  who is able to understand all the nuances of property, legislation and tax means I’m reliant on PT to get me through.

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    Hi Sharron,

    Have you considered selling your properties into a REIT?

    You could take a mix of equity and shares, or just completely shares.

    The REIT would manage the properties for you, so all your responsibilities would be gone but you would still have a connection with your properties.

    The REIT pays out rental income on a quarterly basis, and your children could inherit the shares rather than the actual properties.

    It might be a good half-way house for you to consider?

    We have a detailed discussion here.

    REITS - Real Estate Investment Trusts

    I have to advise you that this is just giving you the "heads up" of this option, and that you must undertake your own due diligence.

    The other option would be to cherry-pick your best properties, and sell the others, using any equity to pay down the debt on the ones you wish to keep. This would simplify your affairs and improve your tax position.  If you have any spare equity, you could invest in a holiday let that you and your family could use occasionally to enrich your lives.  If you are thinking of retiring to the coast, you could buy a suitable property now, rent it out in the meantime, and then move there full-time when you are ready.

    I am sure others will have some food for thought, but overall, I think you should be looking to simplify your property holdings, as that will clear the decks for you on many levels.

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    If only there was a solution to " wish there was a one stop shop to play with tax figure permutations, investment advice, inheritance advice and mortgage advice so they could come up with loads of different scenarios for me to choose from but obviously there isn’t!" ... but then again we have all heard of the scary stories of those outfits who promise an 'all under one roof' (i.e. jack of all trades) proposition, and that's why you're more likely to succeed with advice from specialists instead.

    The most rational way forward is to have your (what Vanessa calls) Power Team - a 'panel' of specialist Advisers.  As a 'go to' Firm for numerous property investors, we have close links with tax advisers, legal advisers and investment advisers and we all work together as your 'team' for your benefit.

    You have already taken the first step and had a comprehensive discussion with a specialist mortgage broker and we can progress this further to work with your chosen other Advisers (legal, tax etc) too.


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    Hi HD. I’m already in discussion with Jenny at your place for mortgage advice 

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    You sound like a very thoughtful, caring person, but I do wonder if you are worrying too much about things that haven't actually happened.

    Like you, my children are just about grown up now, and I think that's my job almost done. Yes they'll have to face complexities in life, but that's all part of living life to the full. If I pop off suddenly and leave them a muddle of a property business it will be a good learning experience for them.

    Having so many options that you don't know what to do is a very strong and for many people, it would be an exciting position to be in. I'm not a financial advisor and I can't always decide what I want to do either,  but I do like to be in in control, and I do that by putting all my financial options on spreadsheets so I can at least understand the monitary implications of my decisions.

    Of course, not all decisions have to be based on the finances alone. Sometimes it's about what you enjoy and where you see your future going. But understanding the finances is a good way to stay on top of things and see things more clearly.

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    Hi Alison. I understand what you’re saying but I think my teenage girls have had enough to contend with over the recent few years and don’t want to add to their grief and sadness by leaving them a complicated portfolio.

    Yes I maybe over thinking but having lost my husband young and having no other family, I am right to feel worried and vulnerable. Who knows what’s around the corner as we do sadly know.

    Ordinarily I would agree that complexity and challenge is character building and strengthens kids but I think they’ve already had a dose of this prematurely

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    My deepest sympathies to you and your daughters, and I very much hope the next few years will be easier.

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    Dear Sharron,

    I am very sorry to hear about the death of your husband.

    As Vanessa mentioned REITs I thought I would comment and introduce myself. My name is Tom Tennant, I run a company called Somerset Estates REIT Plc. We are a residential property Real Estate Investment Trust (REIT) and are listed on the stock market. Our website (https://somersetestatesreit.co.uk/what-is-a-reit) has a lot of information about what a REIT is, but essentially REITs are specialist property investment companies that do not pay any corporation tax, but must distribute at least 90% of their profits to shareholders. It is a way for investors to invest in property, without the hassle, whilst still receiving the majority of the profits.

    The reason we converted to a REIT is to offer landlords who are struggling with the tax and regulation changes a way of selling their properties whilst still maintaining an income. Rather than buy properties for cash we are buying properties for shares in our company. For example, if your property is worth £200,000 with a £120,000 mortgage, you will receive £80,000 worth of shares. This way landlords still maintain a property income but do not need to worry about the extra taxes and regulation or property management which is becoming more and more of a hassle. You will receive the benefits of property investment, without the hassle. As Vanessa said, you would be able to gift shares to your children so that they can benefit from this as well.

    Our contact details are on our website (https://somersetestatesreit.co.uk/contact-us), if you think this could be of interest please do get in touch and we can have a more detailed chat.

    All the best,

    Tom

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    Somerset Estates REIT PLC

    The Residential Buy to Let REIT

    http://www.somersetestatesreit.co.uk


    Sharron,

    My advice would be to simplify your life, if it provides you with enough income to live in the style to which you are accustom.

    Have you thought of gifting the properties to your children?  Presumably they are young adults (starting on their careers) they will have enough energy to make sure "the business" succeeds and thrives for the following generation.

    If you need the capital from the properties to fund your lifestyle, sell them - possibly to a REIT, as Vanessa suggests.

    What would your late husband have wished for you, to continue the "letting business" with all the work that entails, or taking the money and putting your feet up?

    As far as what to invest the proceeds in, all depends on what yield you would want/need, but speak to a few financial advisors, see what they have to say.  Anything from Cash, Gov't Bonds (i.e. loans to central governments (US, Germany, Canada, UK etc.), corporate bonds (loans to companies) to equities.

    Don't rush into anything before thinking it through fully, as long as the properties are ticking along nicely with too much hassle.

    Remember you could always farm out the management of the properties to an agency, or if there were a PT'er local to you maybe they would be willing to take over the management.

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    Consider doing a Mark Alexander!

    You could move to Portugal where they have a 10year tax benefit regime for foreigners.

    You could sell all your properties and only pay CGT on any CG since 2015.

    Your current portfolio could be much simplified by just selling everything and buying a couple of mortgage free resi properties or more if you can afford it.

    Nothing to stop you having 5 resi properties and taking in lodgers providing you reside for a period in each one.

    I day is sufficent though that might change soon but is only relevant for RARA purposes.

    No S24

    Probably very little income tax

    But I consider doing a M Alexander could be the best way forward.

    He does consultations

    Give him a shout

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    Having read your responses to other posts I would lean to say list the properties in order of those you think you would like to keep to those you think you would like to dispose of, it doesn’t matter if there are some properties that you cannot differentiate between, a general order is more important than being precise.

    Sell those at the bottom of the list and redeem mortgages so that you are debt free, at that stage take a breather and I suspect you will start to see if you want to sell the remaining properties or reduce your portfolio further.

    An alternative is to put them into a REIT and take an income, at least investigate if it would give you sufficient income.

    You are concerned what your children would need to deal with should anything happen to you, you may be able to reduce this concern by writing down guidance for them starting with they should sell to fund property for them to live in and expand other possibilities from there.  If you discussed it with them I suspect their response would be for you to use the funds and equity yourself now rather than be concerned for the future.

    Being debt free can remove a lot of stress and that I think should be an aim if possible.

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