Investing in BTL property to eventually gift dc

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We have approx £400k cash to invest, (£100k inheritance from my parents & £300k from dh’s parents).

We are mid 40s have 2 dc & I would ideally like to buy 2 properties that we can let for the next 10 years then potentially gift to dc. I feel more comfortable with the bulk of the money on bricks & mortar. Dh is in agreement to purchase one property to let & see how that goes. Prices here have gone up approx 10-15% in the last year & competition is stiff & properties are going consistently above asking price, a decent semi about £170k atm letting for approx £850-£950pcm

We have no mortgage but poor pensions - dh earns about £35k & I’m not currently working but looking for something, preferably part time & wouldn’t be much over minimum wage. We don’t have an extravagant lifestyle or many unnecessary outgoings apart from my gym membership.

I’m unsure if buying properties outright is the wisest move or if there is any benefit to having a mortgage on the BTLs or starting a small property company as an umbrella.

Any words of advice on this as an outline plan or if a one off sessions with a financial adviser would be helpful? If so, would a standard IFA have sufficient knowledge of the most efficient way to establish this?

Many thanks for any views!

I would whack a big chunk into your pensions tbh. I think it's silly to give dc a property outright when you could be living in poverty as a pensioner.

I'm not sure BTL is the way to go, you can open s&s isas for the dc & yourself.

I agree with the PP. It's one thing to leave them whatever you can when you die, but why would you give them a house each when your husband isn't on a high income and you're not earning and your pensions aren't good? That doesn't make sense at all.

I suppose you could rent them out and throw that money into pensions, but some money needs to go into them pretty quickly.

Would one house be more profitable regarding rent (and repairs etc) than two in your area?

Yep, just don't. Sort your pensions out, leave them the pension. Sort their pensions out or ISAS, all sorts you can do that's just plain less of a ballache.

Costs to buy, all the maintenance and upkeep, fees, new legislation...

If you buy in their names, any houses they wish to buy for themselves will attract the higher rate of land tax (stamp duty).

If you really must, consult a properly qualified financial planner to discuss all the aspects, who may suggest more passive ways to invest that will work better.

Consider capital gains tax at a later date

Thanks both, appreciated. I guess I’m keen to have something concrete that can provide a small income now if needed & depending how things go is there if needed for dc or for us to downsize to. One dc is very academic & high achieving & the other is less interested in school, although bright but has a chronic illness which is currently well managed but could impact future prospects.

Also, (although I know we shouldn’t bank on it), dh is very likely to inherit more, probably approx £1m down the line & before we reach retirement age which would help with pensions.

One property would certainly be better for now to see how things go. Perhaps it’s not the best return overall but I will admit there is a heart pull for me for my parents money to go into a property, especially as property is historically a consistently performing asset over time & Im fairly risk averse

Hi, we have two rental properties (mortgaged) that we plan to leave to DC. This is on top of us heavily investing in pensions etc too: by the time we retire, we plan to use these to retire early and then to top up state and private pensions. Then leave DC one each plus our reaidential property. Had one rental for 15 years and very few issues arisen in that time. I have a friend who is a financial advisor and his advice was to invest in BTL but both were purchased before the recent stamp duty hike for second homes.

Thanks for the replies. We’ll do what we can to mitigate CGT & whatever other tax liabilities come up in future. Pensions no longer exempt from IHT but we will address those as best we can & get a consultation booked with an adviser soon.

Don’t do it. The new tax laws are extortionate. First you pay 25% stamp duty on any property that isn’t your home and when you sell up, capital gains can be from 18% to 24%.

You also have tenants to manage, they can be a nightmare.