Starting a fresh

[waughl]

Hi,

I have experience with renting out a couple of properties over the last seven years, had good tenants and looked after them well. I did a spreadsheet recently and was shocked to see that the gross yield was 3.8 and 4.2 ( this is after the service charge which I think should be part of the equation)

Sadly I will be inheriting from my father £225k later next year and I would like to take this opportunity to expand the portfolio and be much more professional.

I have seen the programs on TV ( homes under the hammer ) and looked at the auctions on line and the properties hammer price. Looking at these avenues of information it seems to me that gross yields can vary between 6-20 %!! Is this a fair representation of what LLs should be looking for?

Can I ask what I can do in the mean time to help prepare for this influx of monies.. books to read, auctions visited, programs, etc..

Also I would like to do this in the most tax efficient way ,... (please forget that I have two at the moment as one is going to be sold soon to buy a home to live in (( We rent currently)) the other will be sold also to increase the pot. ) with this in mind I'm I best to set up a company? My wife is in the 40% tax bracket and I currently have no income at all... ( I have savings , and I don't claim anything from the government )

My plan is to buy in auction and then re-mortgage 60% of the value , looking at buying properties that may have a tenant i them.. looking at flipping one property a year, and build up a portfolio of about five or six as I think anymore and it will become a full time job! and hoping to achieve a yeild across the board of about 8%..

I would also like to give my mother a income from the business ( at the moment she has a 13k pa. pension income) would like to know how best to give her payments.. ie special dividends or employ her as a director?

I appreciate all advice and thank you for reading to this point.

[Richlist]

I think you need to be cautious with yields......they mean different things to different people. Often, no matter how the calculation is done, there are shortcomings in the results.

In my experience and its not always the case, when you have a high yield it is often linked to a property at the bottom end of the market, in a rundown area, with little opportunity for capital appreciation and often in an area of falling values. Match this to problem tenants and you have a recipe for disaster.

You can still pick up property at bargain prices but be mindfull of ALL the other factors that will affect profitability, the level risk and your time & effort in running that business.

[Mortitia]

In your post Needshelp you mention service charges.

Try to buy freehold properties - then you won't be bothered with any of that. Or if you are in an area like London where property is expensive try and buy a leasehold with a share of the freehold - that will give you more control over those charges.

HUTH always gives a rosy picture of yields but these are often on properties that were a wreck, sold for little money and done up by builders - so no or little labour to pay out for.

Mortitia

[Geezah]

Hi,

I have experience with renting out a couple of properties over the last seven years, had good tenants and looked after them well. I did a spreadsheet recently and was shocked to see that the gross yield was 3.8 and 4.2 ( this is after the service charge which I think should be part of the equation)

Sadly I will be inheriting from my father £225k later next year and I would like to take this opportunity to expand the portfolio and be much more professional.

I have seen the programs on TV ( homes under the hammer ) and looked at the auctions on line and the properties hammer price. Looking at these avenues of information it seems to me that gross yields can vary between 6-20 %!! Is this a fair representation of what LLs should be looking for?

Can I ask what I can do in the mean time to help prepare for this influx of monies.. books to read, auctions visited, programs, etc..

Also I would like to do this in the most tax efficient way ,... (please forget that I have two at the moment as one is going to be sold soon to buy a home to live in (( We rent currently)) the other will be sold also to increase the pot. ) with this in mind I'm I best to set up a company? My wife is in the 40% tax bracket and I currently have no income at all... ( I have savings , and I don't claim anything from the government )

My plan is to buy in auction and then re-mortgage 60% of the value , looking at buying properties that may have a tenant i them.. looking at flipping one property a year, and build up a portfolio of about five or six as I think anymore and it will become a full time job! and hoping to achieve a yeild across the board of about 8%..

I would also like to give my mother a income from the business ( at the moment she has a 13k pa. pension income) would like to know how best to give her payments.. ie special dividends or employ her as a director?

I appreciate all advice and thank you for reading to this point.

Hi needshelp (Mark?)

As a Mortgage adviser and Landlord, I would say that purely from a financial point of view, setting up a company may be the best way to go, but you really need professional advice from a tax planner or an accountant who is also a qualified tax planner. Bear in mind that if you wish to use borrowing to increase your property portfolio, you will find that BTL lenders do NOT like to lend to limited companies. Therefore you will be restricted to just buying using cash or using commercial loans which only offer limited interest only options (advisable especially for properties you want to flip) and must be paid by retirement age 65.

If you have no income, then it may be advisable to put the properties in your name only to use up your tax allowance, again, appropiate professional advice is needed.

You will find it difficult to remortgage a BTL property unless you have owned it for 6 months, so you may want to buy with a mortgage or wait.

Lenders criteria is a continually moveable feast and if you require accurate info on BTL mortgages etc, personal message me, I'm sure you dont want to reveal your full personal financial life in an open forum.

Get professional advice ref making payments to your mother, it may be best to employ her. My student daughter is my Administration manager.

Alan