BTL (or shares) cunning plan?
Discussion
I've had an idea... (question at the bottom!)
Background: I work and my wife is full time at home looking after our 2 year old twins. We have saved £67k, mostly from when we both worked. This money is currently in various ISAs and savings accounts, probably not quite keeping up with inflation. Now that we are on my income only save a little most months (which is less than we had hoped) and, if both cars need taxing and the boiler breaks in the same month then we dip into the savings. This is fine currently as we have enough money to live what we feel is a good quality of life. Our current house is worth somewhere between 250 and 300k with 15 years and 112k left oweing. All good.
However, we are on a brilliant rate of base rate +.23. so we are paying .73%. Obvioulsy this won't last for ever. Unless I've had a big pay rise, when the rate goes up we'd planned on paying off a chunk of the mortgage so the monthly payments would be about the same as they are now. We have kept the savings in the mean time on the basis that we are making more in interest than we are spending on the mortgage and we want to keep the rate. I could get a promotion any day but it might never happen. It would be galling to pay off the mortgage, get a pay rise and buy somewhere more expensive and have to pay a higher rate. Obviously this means that we can't move to a more expensive house by adding the £67 to what ever we get for our house becuase we'll need the £67k to pay off when the rate rises.
We'd like to move to a different house in the nest year or two and had agreed to only look at houses that are worth about the same as ours unless I get a promotion in the mean time. But I don't think the £67k is "working" hard, and I would like to have a more expensive house too! And we have all that money that we can't enjoy.
So, how about this?
Buy a studio flat for £60k cash, let it for £350pcm. Put flat in wife's name so reduce tax. Enjoy the extra hundreds a month and use that to pay any extra mortgage if we buy bigger house. This being flexible as we could sell the flat if required. This means we are able to use the savings without reducing them. Too good to be true?
However, it seems that £150 per month (needs to be less than income from flat to allow for rate to go up) doesn't get much extra house.
now confused.
Background: I work and my wife is full time at home looking after our 2 year old twins. We have saved £67k, mostly from when we both worked. This money is currently in various ISAs and savings accounts, probably not quite keeping up with inflation. Now that we are on my income only save a little most months (which is less than we had hoped) and, if both cars need taxing and the boiler breaks in the same month then we dip into the savings. This is fine currently as we have enough money to live what we feel is a good quality of life. Our current house is worth somewhere between 250 and 300k with 15 years and 112k left oweing. All good.
However, we are on a brilliant rate of base rate +.23. so we are paying .73%. Obvioulsy this won't last for ever. Unless I've had a big pay rise, when the rate goes up we'd planned on paying off a chunk of the mortgage so the monthly payments would be about the same as they are now. We have kept the savings in the mean time on the basis that we are making more in interest than we are spending on the mortgage and we want to keep the rate. I could get a promotion any day but it might never happen. It would be galling to pay off the mortgage, get a pay rise and buy somewhere more expensive and have to pay a higher rate. Obviously this means that we can't move to a more expensive house by adding the £67 to what ever we get for our house becuase we'll need the £67k to pay off when the rate rises.
We'd like to move to a different house in the nest year or two and had agreed to only look at houses that are worth about the same as ours unless I get a promotion in the mean time. But I don't think the £67k is "working" hard, and I would like to have a more expensive house too! And we have all that money that we can't enjoy.
So, how about this?
Buy a studio flat for £60k cash, let it for £350pcm. Put flat in wife's name so reduce tax. Enjoy the extra hundreds a month and use that to pay any extra mortgage if we buy bigger house. This being flexible as we could sell the flat if required. This means we are able to use the savings without reducing them. Too good to be true?
However, it seems that £150 per month (needs to be less than income from flat to allow for rate to go up) doesn't get much extra house.
now confused.
In a very similar position, very low mortgage rate, plenty of savings, what to do? We have a little in cash and the rest is boring but high yield shares. Shell, centrica a few others. You could hold them in your wife's name and pay less tax, the rate is also less than income tax. We have never been comfortable with BTL as the rent can easily be absorbed by issues, agents and bad tenets. In addition, house prices can go up and down just like shares in big boring companies. The key thing for us was that there is no solicitor fees and weeks to sell shares as with a house, you can simply cash then in the same day, pay any capital gain, like would if the house had gone up in value and job done, you have the cash ready to buy your dream house when you find it.
Ive just bought my first do up and sell house, cost £80k, spend £25k sell for £135k will make profit but have done deal with a full project manager who sourced the house and oversaw all work I have only paid out money and been to house twice. I have just bought a second house a terrace for £25k that needs ££15k spending to be worth £55k thats for after xmas.
GingerMunky said:
In a very similar position, very low mortgage rate, plenty of savings, what to do? We have a little in cash and the rest is boring but high yield shares. Shell, centrica a few others. You could hold them in your wife's name and pay less tax, the rate is also less than income tax. We have never been comfortable with BTL as the rent can easily be absorbed by issues, agents and bad tenets. In addition, house prices can go up and down just like shares in big boring companies. The key thing for us was that there is no solicitor fees and weeks to sell shares as with a house, you can simply cash then in the same day, pay any capital gain, like would if the house had gone up in value and job done, you have the cash ready to buy your dream house when you find it.
Thanks for replySo big boring companies like Shell, seem to pay 4-6%. So if I put £50k in I would recieve £2000-3000 pa. which is probably about the same as I would end up with on the BTL above (350pcm less costs) and my asset would still be there to sell if required in the future. Also, I can sell a few if required. Is it assumed that share values rise roughly in line with inflation, if you can chose when to sell.
Sounds like a better plan. I don't want to be having to watch the markets though. Would this be a requirement? Or do things balance out if you are planning to hold them for 15 years or more?
Shoestringracer said:
Thanks for reply
So big boring companies like Shell, seem to pay 4-6%. So if I put £50k in I would recieve £2000-3000 pa. which is probably about the same as I would end up with on the BTL above (350pcm less costs) and my asset would still be there to sell if required in the future. Also, I can sell a few if required. Is it assumed that share values rise roughly in line with inflation, if you can chose when to sell.
Sounds like a better plan. I don't want to be having to watch the markets though. Would this be a requirement? Or do things balance out if you are planning to hold them for 15 years or more?
I don't much watch the markets as it means nothing to me, interestingly when I was following comments and charts daily, it didn't seem to mean anything to the 'experts' either. As far as large global companies are concerned they wax and wane with global macro economic and cyclical factors, i.e. they don't move that fast. All advisers suggest shares should be held for the long term as you are planning. The great thing is though, as you have highlighted, is that you could sell 10% of your holding at any time, try doing that with a house. The option to add or remove shares from the holding, such as monthly saving, or selling some to help purchase perhaps a car is one of the key reasons I won't by property.So big boring companies like Shell, seem to pay 4-6%. So if I put £50k in I would recieve £2000-3000 pa. which is probably about the same as I would end up with on the BTL above (350pcm less costs) and my asset would still be there to sell if required in the future. Also, I can sell a few if required. Is it assumed that share values rise roughly in line with inflation, if you can chose when to sell.
Sounds like a better plan. I don't want to be having to watch the markets though. Would this be a requirement? Or do things balance out if you are planning to hold them for 15 years or more?
Try this, it shows what some of the UK's top fund managers are buying. I just look at this, then choose the highest yielding of the biggest most robust companies;
http://www.citywire.co.uk/top-stocks?section=money
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