Use cash to buy house out right or multiple BTL mortgages?

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    Use cash to buy house out right or multiple BTL mortgages?

    Hello I am after some advice.

    I currently have a mortgage on my family home and also a BTL mortgage on a rental property.

    Theres around £78,000 left to pay on my rental property , I’ve worked out I can save approx £2000 a month, so I could pay this off in just over 3 years.

    My question is do I pay this mortgage off and use the rental profit of around £350pcm to put towards another property, save up for another 4/5 years and buy another property outright and do the same every 4/5 years

    or should I buy a house every 1/2 years with a BTL mortgages.

    Will waiting 4/5 years to save up for each house cost me in the long run due to house price increases?

    My current thinking is if I set up a LTD company for tax purposes it will be much simpler if I buy the houses outright rather than getting a BTL mortgage through a LTD company.

    #2
    Personally I would focus on paying off my Residential mortgage before making subsequent acquisitions to the rental portfolio, currently you enjoy various tax benefits on the BtL but none on your main residence so for the present it might be considered prudent to use such surplus monies to make further monthly savings on the cost of your home and increase your potential disposable income.

    Buying additional property via an SPV makes, based on current tax legislation, economic sense, pricing on LtD Co BtL’s are very competitive when compared to similar loans to individuals; I am not a Tax Advisor and therefore would encourage you to consult a qualified accountant and NOT someone whose title indicates “ Bookkeeper & Accountants”

    The decision on which option to take is dependent on your long term investment planning with an eye to retirement and whether you are deeming it more prudent to have a number of properties generating income without being saddled with mortgages or taking advantage of prevailing tax benefits but acceptingthat nothing can be guaranteed.

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      #3
      is there any equity in your current BTL that you can release to use as a deposit for another BTL? that way you may be able accumulate properties every couple of years, it has its risks of course (property price drops) but if you are sensible about your investments and improve the properties you buy rather than just relying on rising markets to create the equity, then building a portfolio might be achievable.

      construct a business plan with properly planned outcome AND an exit strategy - tax on BTL etc is going to change, so you need to have a long term plan and take professional advice, my comments are based on my personal experience and are not professional advice

      Comment


        #4
        Loanarranger's advice is sound.

        It's hard to beat paying down the mortgage on your home as an investment in the long (medium) term.
        It can be beaten - if you are the only income and you only part own the property, so take some advice.

        The essential consideration isn't tax or what's efficient - it's where are you now in life and what would you like to achieve over what timeframe?

        When you talk to financial planners they will take an objective view of a financial plan. You should think what you want out of life.
        Having an extra holiday next year or a nicer car might have a greater value than a pension in 30 years time.
        Or planning for your own (or children's) future might make that seem like a daft notion and you'd feel happier knowing your future is more secure.

        Life has a habit of changing unexpectedly, and I'd suggest a long term "life plan" with a 5 year actual "plan" - on the basis that a lot can happen in 5 years.
        In 2013, we were "happily" in the EU, we had a coalition government and a sane US president.
        By 2023, who knows?
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          while I agree with the advice given re paying off your mortgage - you really do need to consider long term planning. yes, paying off your mortgage reduces your payments, but by the time you have, property prices might have increased to a point where you find yourself priced out of the BTL market. But by then there might be a sounder investment strategy and BTL might be 'old hat'.

          you need to decide what you want long term, what risks you are prepared to take and in what way.

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