Selling half of portfolio

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    Selling half of portfolio

    Hi all,

    I got into the market all at once between 2017-2018, paid a fair amount in stamp duty. I got into this as a long investment but looking into all the facts and figures and it just doesn't seem good enough. Stamp duty payments have pretty much cancelled out my appreciation. I get an average of 5.06% yield across the portfolio and looking back due to the speed at which i acquired the properties mistakes were made on my part. Now onto the real question, we seem to be at the high of bubble and im wondering if it might be the best strategy to right my wrongs by selling half of the portfolio. Of course this means i would be missing on the future returns of those properties but gambling on a correction.

    Did anyone do this pre 2007?

    Ps i understand your not financial advisers just looking for views of anyone who has decided that they need to re jig their portfolio and their experiences

    #2
    In my view it would depend on how much you need the income from the current rent you are receiving and how lucky you are feeling re a correction. From what I see people still see bricks as a good investment and when the price dips a bit people race back in for fear of missing out. How many properties do you have?

    Maybe use the good house price to cherry pick one or do that you don't see as good lettable properties or those needing some large capital expenses bills coming soon and remove those. Almost feels like you are in panic mode which is easy to do in these strange times but there must have been good reason for you moving into your position so does that not still stand?

    Who knows where we are in the market, hindsight is a wonderful thing

    All the best

    Comment


      #3
      It seems an odd thing to do unless you really messed up the purchases and haven't ended up with what you planned.
      Property is a long term investment and prices will go through a number of cycles.

      I don't see current property pricing as a bubble - it hasn't collapsed and might when recession hits, but it's not particularly amazing.

      And I've decided not to make any life changing decisions at the moment - lockdown and the plague are affecting my mental health and I don't trust my head.
      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


        #4
        As jpkeates says property is for the long term. I also find much of the costs associated with a new property are in the first year or so and then as time goes on I make more money.

        If you sell now you are in danger of paying all the costs and then not reaping the rewards. Do you often completely change your mind? Make sure your decision is rational or you could end up losing out over and over again.

        Good luck

        Comment


          #5
          Your situation all seems a bit 'marry in haste, repent at leisure' to me. Having said that, 5.06% isn't a bad return on an investment these days. I can't think of many places you'd get that.

          Like other posters have said, a lot of costs (e.g. stamp duty) are up front, and property isn't a short-term, get-rich-quick scheme (well, not any more). What made you decide to do this in the first place ? Do I detect a hint of outside influence ? You might have been better with a buy-renovate-sell model.

          Be careful if all of your properties are similar, and roughly in the same area. If you suddenly panic and try to offload half of them (depending on how many properties you're talking), you could lower their selling prices (by affecting the local supply/demand balance). The same buyers will be viewing some/all of them and they might not achieve offers quite as high as they would by selling one at a time - you'll also pay more CGT (if they're in your own name).

          'Hang in there' would be my advice. You chose to ride this rollercoaster, so ride it out. If you wanted safe and steady, you should have taken a ride on the teacups (with profit bonds).

          You're in this for the long haul, or it could be costly. I'm an ex-Financial Adviser, by the way

          Comment


            #6
            Agree with the others here. Buying and selling takes a lot of time, effort and money. It's not generally something you want to do any more frequently than you have to. Property is a hedge against inflation (although CGT does detract from this benefit since it is not indexed) and there is likely to be appreciation in addition to rental income, so that should be factored in when making comparisons.

            If you really do want to get out, I would advise doing so gradually in order to minimise the downside.
            There is a fine line between irony and stupidity. If I say something absurd please assume that I am being facetious.

            Comment


              #7
              I think you need to discuss your plight with someone with financial experience.You seem to have bought impulsively,and considering selling the same way.Very large sums of money are involved,so even paying someone,sayu £250,could be justified.You may have a good accountant or even an advisor.You would get 1pc on your capital after sales,making 5pc very lucrative.

              Comment


                #8
                Thank you for all of your replies. I am new to the game to tell the truth, looking recently at my figures i can just see where my inexperience has cost me. Ie buying high end 3 beds instead of lower 2-3 beds with better yield. You can see with the properties as i learnt by doing and the back end purchases were much better decisions.

                I just though that perhaps with the current situation there was a chance to not only correct the mistakes but come off better still.
                If anyone has a magic ball handy please let me lend it!

                Comment


                  #9
                  If you are heavily in mortgage debt, then selling half of your portfolio is the correct move. You have to ensure that you can survive if the property valuations drops 20%.

                  In the 2007 banking crash, mortgage lenders which relied on borrowing from the wholesale market, stopped lending to property buyers.

                  This time round in 2020, the BOE is printing money to prop up the economy and mortgage lenders have plenty of cash to lend out. Deposits left in the bank pays a measly 0.1% interest and many cash rich investors are looking for income. So even 5% return from property is good.

                  Comment


                    #10
                    Dont worry if you have slightly overpaid. I predict that with the vast amount of "quantative easing" that there has been (also known as printing money), it is not a case of property prices going up but the value of money going down. This is true for both the UK and USA. So unless you are heavily indebted and short of liquid funds to pay bills for six months ahead hang on to whatever real property you have; unlike shares or other financial assets property always has value. You should have a cushion of liquidity to cover you for tenant default and the unexpected. Sterling may stay weak, it might actually be shrewd to hold some of your cash reserves in Euros. There is a world wide search for yield in a time of negligible interest rates and this is likely to support the value of investment property even if we are in for a rocky time for the next few years; hang on to security. Even a 2 or 3% return, by way of income, which is what you get for prime residential in London after costs of repairs, voids, agents fees insurance etc etc is still a lot better than money in the Bank.

                    Comment


                      #11
                      Concur broadly with the above. Own physical and/or income-generating assets, not cash.

                      I would prioritise ISAs (and probably SIPP) first and foremost, though.
                      There is a fine line between irony and stupidity. If I say something absurd please assume that I am being facetious.

                      Comment


                        #12
                        Money in the bank earns you nothing (or next-to-nothing), but I read a forecaster, only this morning, predicting property values falling 15% in the months following the ending of the current stamp duty holiday. Who knows? I don't have a crystal ball, either, but I am selling my currently vacant property (one of only two). I'm relatively risk-averse, and can't face the cost and stress of a defaulting new tenant with no effective remedy to get redress.

                        The real challenge is to devise a good reinvestment strategy for the capital ...

                        Comment


                          #13
                          Predictions are so often wrong! No-one predicted that this summer would be the boom time it has been for selling, so take I always take predictions with a pinch of salt. Property values are more likely to stagnate than fall by much as only those people who have to sell will do so in a falling market whereas those who have to buy will not have much stock to choose from - that will help keep prices up.

                          I will make 2 predictions of my own:

                          1. In 10 years time property prices will have risen
                          2. People will continue to rent

                          My strategy is to have nicer than average houses in the hope that I get nicer than average tenants and make sure they pass all credit checks comfortably!

                          Comment


                            #14
                            Originally posted by StuartH View Post
                            I'm relatively risk-averse, and can't face the cost and stress of a defaulting new tenant with no effective remedy to get redress.

                            The real challenge is to devise a good reinvestment strategy for the capital ...
                            The very place I am at. Currently starting a top to bottom refurb of trashed empty property Ive just got back and undecided whether to sell, re let or just leave empty on completion.

                            Comment


                              #15
                              As others have said, take a long term view.

                              Power up excel, and for each property you have do some real sums. Best, worst case and most likely case. Really understand the amount of tax you will pay in every scenario.

                              Personally, I'd rather have a £160k 3 bed in L23 with a rent of £720, than 2 x 3 beds in L22 worth £80k each with a rent of £500 each. Less than 1/2 mile as the crow flys - 2 miles by road. Lower yeild, but completely different demographic of renter.

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