Release equity to do another B2L (buy2let) ?

[WhatNext277]

Hi everyone,

Just looking for some opinions and advice.

Me and & DH are both young (as in 40 years away from state retirement). 2 DC. I earn 15k per year (I only work 3 days a week) and DH earns 32k. We get child benefit which is an additional £1,788 per year.

18 months ago we remortgaged and took 30k our home and invested in a buy to let. I see this as something for my future when I retire as I don’t really have a pension. This generates £650 per month - mortgage on it is currently £360 per month with 28 years remaining (I am going to reduce the term when we come to remortgage).

The B2L property is now worth £125k with £84k left on mortgage (so equity of 41k so far).

Our home is worth £247k with £170k left on mortgage (77k worth of equity at this point) with 20 years remaining.

I know I am very lucky to have a combined total of £118k at my age but our remortgage is due April, and I am very tempted to take out another £30k and try do another B2L - again for the future. I don’t plan on selling these properties. I am hoping it’s something my children can inherit and I could use to help me retire.

My question to you - is it worth doing as an investment ? I mentioned this to various people and one said “buy to let market is dead, there are better ways to make money on it as the government are clamping down on this and landlords are looking at exiting this market, not joining it.”. If it’s not worth it, how else can I try make money with minimal risk.

With the changes in mortgage interest being allowable was a deduction many people are avoiding buy to lets unless they can buy outright as they cannot afford the tax due on them

Sell the btl and pay off your mortgage.
Set up a stocks and shares isa or cash ISa

What profit after tax do you receive on the income from your btl? What’s the interest rate on your residential mortgage? How does this compare to what you would save on your residential mortgage if you used the equity in your btl to reduce your residential mortgage?

We have 3 btl properties and are looking to sell one this year. It’s had some good capital gains but it doesn’t generate much more profit than the interest we would save on overpaying our main residence mortgage. For me it isn’t worth the risk, responsibility and hassle anymore and we can put the money to better use.

I think the powers that be are driving private landlords out of the market and I don’t see that trend reversing. But IMO a conservative government poses less risk to private landlords than a labour one would have. So you have some time to decide.

I suppose it would come down to the returns you could generate, and whether there’s a suitable property. Recently there’s been some good little houses near us that have languished at low prices. If you are brave you could do well.

In your situation I think I would wait and see what happens as the new government finds its feet before making a decision.

Do it. Best thing I ever did.

By my mid 30m’s I had / have 8 BTL’s (and now have a portfolio valued at £2m with 2 properties owned outright), they generate a good income for me.

Definitely worth the ‘calculated’ risk. Get a good accountant and join The Landlord’s Association so you keep on top of your legal obligations.

Savings won’t give you anywhere near the level of return you’ll get on property.