having one or two properties?

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    having one or two properties?

    quite a basic question, but if I have 110k and my property is worth 220k I have 50% equity.
    If I remortgage for 165k and use the 55k as a 25% deposit on a buy to let, what are the pros and cons of doing so?

    #2
    If you listen to the gurus of the so called Property educators , equity such as you have on your one Property is regarded as “Dead Money” and indeed they could be considered correct if it is your intention to grow your portfolio; however before you leap into remortgaging the Property to release equity consider that property is cyclical and with the imminent increases in interest rates that in itself could have an adverse effect on capital values and whilst one sincerely hopes that this would not manifest itself in a significant correction in present values, a 75% loan could readily become 80% or worse and which could make subsequent funding options that more difficult. Having a sound buffer in place might suggest that you keep such gearing to a maximum of 70%.

    On the positive side by buying a second Property has the effect of slightly diluting your risk on income should you experience a void for possibly longer than the average of 2 monthson one of the units Such borrowings at 70% might also offer a lower rate of interest which could help in improving the yields.

    Go for it if you believe the economics work for you but do exercise caution in the level of borrowings you undertake.

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      #3
      I'd suggest the biggest con is that you would have no diversity in your investments. Everything would be in residential property. No shares. No bonds. No commodities. No commercial property. No overseas. No cash....

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        #4
        Originally posted by leaseholder64 View Post
        I'd suggest the biggest con is that you would have no diversity in your investments. Everything would be in residential property. No shares. No bonds. No commodities. No commercial property. No overseas. No cash....
        Exactly. And it is all effectively in one currency.

        You will have more leverage (75% of the asset not owned) in one asset.
        Let's suppose Corbyn gets in, interest rates and your mortgage rates rise to 10%, the property market and economy tank, the pound falls by 25% against a basket of currencies, and landlords are threatened by a rise of a new type of Assured tenacy that allows no eviction and no rent rises for decades -- how will your investment look?

        If all will be sweet smelling roses -- then go for it.

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          #5
          thanks for the replies, would your views change if the said property with 50% equity is my only property and residence? or does it make no difference?

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            #6
            It all depends what other investments you have got. Corbyn is obviously a real risk to anyone investing in anything at the moment. I would normally advocate borrowing more and buying more but if this is a large part of your entire net worth I would borrow some more but diversify it. If you have say 50-100k in other assets then I would perhaps be thinking about expanding with property and taking on a little risk - again though this depends on your age, how much risk you want, security you need and a few other personal factors.

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              #7
              how much rent will you generate from your £220k purchase and how much will you current mortgage go up by when you remortgage, also are you a 40% tax payer ?

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                #8
                Originally posted by leaseholder64 View Post
                I'd suggest the biggest con is that you would have no diversity in your investments. Everything would be in residential property. No shares. No bonds. No commodities. No commercial property. No overseas. No cash....
                so if we can currently tolerate some risk, where would the best place be to place £100K cash right now as an alternative to our five properties?

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                  #9
                  I think you would generally be advised to split it into multiple investments, with most of those being funds rather than, say, individual shares.

                  Incidentally, being a landlord is more of a business than a simple investment.

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                    #10
                    Originally posted by leaseholder64 View Post
                    I think you would generally be advised to split it into multiple investments, with most of those being funds rather than, say, individual shares.

                    Incidentally, being a landlord is more of a business than a simple investment.
                    I agree shares. However can I put a different spin on what shares.

                    Property investors need to be mindful of the big picture. That big picture includes far more than short-term rental yields -- it includes long term asset value, and also long term high-value expenditure (replace the roof, need to take legal action against a freeholder, tenant from hell). Capital gains is a big one.

                    There is a big advantage in investing in individual shares as opposed to unit trusts for a property investor. A basket of 10 or 20 individual mainstream shares probably reflects the market overall pretty well, but has much less costs attached. But more to the point, some might do very well and some might do very badly. You can time sales so as to maximise the offsetting of share capital losses against property capital gains (or in the future if may be visa versa). Much harder to do that with Unit Trusts where you cannot split up the diversity as convenient.

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                      #11
                      Originally posted by BROOSE View Post
                      how much rent will you generate from your £220k purchase and how much will you current mortgage go up by when you remortgage, also are you a 40% tax payer ?
                      And how many years of net rental income after your mortgage will it take just to break even on your 3% additional stamp duty.

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                        #12
                        You should consider another option. Sell up. Cash in. Enjoy your money and re-invest it elsewhere. We are at peak house prices, lets say Brexit does n't go well and prices fall back to 2008 levels. Will you regret not cashing in?. I tried to sell my rental in 2008, but there were no buyers. Even though the price was insanely low. The property did n't even sell at auction! (we were forced to put a very low reserve). Not a sigle person came to the auction viewings. We re-let it but it took a while to find a tenant. Now things are different.

                        You can't trust any Government which introduces tax changes such as Clause 24.

                        Many councils are introducing Licensing schemes.

                        They are campaigning to get rid of S21, which means if you need to get vacant for re-sale you won't be able to. If you have a problem tenant, it could be like a bad marriage, except you can't get out of it.

                        They already have introduced increasae stamp duty.

                        If prices crash in 2019, can you afford to wait until say 2029 for house prices to pick up again?

                        We had a a crash in 1987, but it was only until around 2000 (13 years later) for prices to pick up again.








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                          #13
                          all good thoughts... thanks for sharing...

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                            #14
                            We are not at peak house prices in my opinion, we are heading in to the second part of the cycle and price rises should be significant. Wages will grow and inflation will take hold - I see one the largest economic booms in history about to happen over the next several years. Think about it - Ai, robotics, genetic engineering, space travel, renewable energy, driverless cars, Fintech, peer to peer, crypto currencies. Look back through any major market which accelerates and you will see when things start going up people think it is a new high and time to sell but quite often the graph then goes massively on. What is more likely than house prices falling is wages rising.

                            Investment wise if you had 100k I would say take some foreign funds, some smaller cap funds, some peer to peer sites across different spectrums and a tiny amount of crypto currencies. Funds and shares are also expensive and anything you are buying abroad you have a low pound to consider whereby if the pound rises you will be losing out on the exchange rate.

                            If it was my money I would stick with the property but I am very risk heavy. I would not advise other people to plough everything in to property though. You should definitely try and do some of this through your ISA allowance

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                              #15
                              Looking at the Nationwide house price index. North (where I am based). In 1998 second quarter. House prices reached an all new time record of 49,336. 10 years prior they were 29,247. I actually know people who sold out at this point, some of them for a number of properties. By 2005 average price was 122,827. If you consider there is an 18 year cycle, then we could be at a point where selling up looks like it makes total sense as it did in 1998. I am currently seeing a number of landlords selling up at exactly this point, some will be down to changing legislation/others see it as the peak of the market. What I would say is when a market reaches a new high this is often the time you actually want to be piling in to it. Fortune favours the brave

                              https://www.nationwide.co.uk/about/h...m-1973-onwards

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