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I'm aged 39 and have £100k equity in our family home and £30k in a buy-to-let.
What would you do in that situation?
We could invest it in our family business. Do banks let you do that? Release equity and invest the cash in our business (buying more stock to sell)
Or can we use it to buy 2 buy-to-let houses with £60k deposit each. In my area a 2-bed terrace is £110,000 so that would be around 50% deposit.
What would you do and why?
Hi Mark,Welcome to the tribe!That's a very difficult question to answer without knowing more about your personal situation, mainly in terms of what you want to achieve by investing and also your financial situation.However, roughly speaking, it is generally recommended that you build a business first and then invest the profits.I would highly recommend that your first action is to sit down with a cuppa and watch our "Financial Fundamentals" series. Map out where YOU are with this, see where the gaps are, and then use that to bring clarity to your direction.Monday - Taking responsibility for your financial future and how to do thatTuesday - Get educated!Wednesday - Create your "income engine" and then turbo charge it!Thursday - Build your "wealth pyramid" to future-proof your wealth.Friday - Protect your assets within a "wealth fortress".Having done that, then speak to a reputable mortgage broker like the team at Property Tribes Financial Services on 01206 654444 to determine how much of your equity you can access, because it won't be the full £130K due to loan to value restrictions. Once you know how much funds you have to play with that will also bring clarity to what can be achieved in reality.Once you have been through the above, then come back here and give a bit more information about what you want to achieve, and the total cash starting point, and then more prescriptive advice can be offered.I hope that helps for starters?
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
Lots of very simple questions there and lots of complicated answers? Oh - If only it was so easy !!
For me to give you answers to your questions It would take about an hour to meet you face to face and get to know your background
BTL is complicated now Taxation has changed
You need to sit down with someone in your area for a long chat
You run a business so your first port of call should be your Accountant or Tax advisor - depending on what they say, I would then move forward
A forum can fill in the answers to issues you have after you have your Tax strategy
But you really need professional advice to start with ....
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.
Welcome to Property Tribes! It sounds like you have 2 very viable options that you could do. Is there one you would want to do more or would suit your current needs? Both are great and would be good for you in the long run. As others have said everyone’s personal circumstances are different so what you do isn’t necessarily what someone else would do.
I hope you are successful in whatever you do next and I’m looking forward to seeing what you decide on.
Transparency notice: OneandOnlyPro is a commercial partner of Property Tribes.
Thanks everyone. Really good replies.
I think the tax situation is enough to put me off jumping into another buy to let.
Pumping as much cash as possible into a profitable business seems like my best bet. Grow the business, invest the nest egg later. But do you know if I can release the equity from my house for the purpose of investing in our business? I'll ask my mortgage provider that one!
at 39 I would look at your pension
Lots of very good Tax allowances
You may like to read a book Called Pension Magic
You can draw pension income at age 55 so its just over 15 years which will pass quick
best of luck
Thanks. Book ordered
Just a little tip when you read it forget the word Pension
Think of it as your own tax free company
Money goes in Tax Free or you claim tax back
It will grow 100% Tax Free no CGT NO INCOME TAX NO CORPORATION TAX
It can be very low fees to run it
If you use it carefully the Funds in your Pension can avoid IHT and you can pass it on to anyone you like just about tax free
The more you learn the more you will see advantages
Pensions are now just part of my wealth building but its all tax free if you extract funds wisely at age 55
and If you ever got into Business problems its ring fenced from all debts
LOads of Ticks
I worked for an American Company the founder of which had a principle of OPM, other peoples money!
For example assuming that the property values are not going to fall to borrow a million at 2% or something and make a return of 7% gives you an income of 50k crudely. To borrow a million you need to gear up your borrowing to cover that finance.
A simple way we have used was to buy a property in poor condition and do it up to a pretty good standard and them sell it into our own Ltd. at a much increased value. A 25% deposit for theB2L mortgage gave us a profit for the next deposit. We had 1% stamp duty followed by 3% into the limited but the profit more ths covered that and multi share owndership spread the CGT. We are fortunate to have some building skills making the doing up pretty cost effecient.
I would say the secret is maximising the return, sounds simple but it is essntial, too many landlords just accept the status quo and miss the chance to enhance income.
The problem with BTL now is fees and costs if your buying with a mortgage via a company
even a modest 3 bed 80k house cost around 5k in fees
I just use 8% yeild now If I make that fig I Buy
If I cant get 8% I know I am paying over the top
Just be very picky what you buy
How do you calculate the 8% return? What is the sum?