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Sorry but I need a tad more advice. PLease don't think this is a humblebrag. I have never had any money to speak of before. I am 60, just retired on a small pension and own two flats outright
2 issues:
1) - some tens of thousands of pension lump sums - needs to be easily accessible and much of it will be spent in bits and pieces over the next few years. Premium bonds? Anything better?
2) - raising money off the two flats to buy a house. One flat is worth £300 000+ , the other £200 000. the smaller one has been rented out for a few years at good money. I want to raise around £200 000. I am thinking buy to let mortgage off the larger flat interest only - the rentals from the two flats would be double the interest cost. Trying to repay another mortgage right now seems daft. I have no one to leave the flats to. any better ways to use the equity to raise this money?
Ta again folks
1) – some tens of thousands of pension lump sums – needs to be easily accessible and much of it will be spent in bits and pieces over the next few years. Premium bonds? Anything better?
All depends on your appetite for risk.
Interest rates are so low you'll be lucky to beat inflation.
You could stick the money in Stocks and Shares ISAs with low cost tracker funds and you'll make money long term. However, always the risk of a short term market correction and you find yourself making a loss for a year or so. So far, the markets have always recovered and gone higher, so just a matter of doing nothing and waiting. However, if you are totally risk averse, then cash ISA and bugger all interest is your best option....
Are you dead set on continuing to be a landlord? If not then why not sell the flats to buy the house?
Your plan of owning two flats and a house means you will be fairly highly leveraged and therefore have more exposure to the property market (may be a good thing if you are sure house prices are going to keep going up).
pretty much dead set on keeping the two flats at least in the medium term - we don't know really how we will get on living outside the city and don't want to burn bridges.
The two flats are mortgage free.
Edit - because of the ridiculous property market it makes sense. The small flat has a rental of £750 a month, the big flat £1000+, interest on a £200 000 loan would seem to be in the area of £700 pcm so we would still have a small income off the flats
I assume CGT an issue on the smaller one - ie you don't want to just sell it?
I'd sell the one you live in to raise the cash for a house - no CGT on that.
If ncessary move into the smaller one whilst it all goes through.
Just read the posts above
I don;t think an ISA / shares thingy would work for us with the lump sums as we will be spending all the cash over the next 5 years.
You're talking good numbers there, but also nothing vastly complex. Go and talk to a good IFA and get some sensible advise.
In terms of zero risk places to put £50k, there really isn't a better option that Premium Bonds unfortunately, even though they've cut chances of winning again recently.
Given the best interest rate you'd get on cash is the wrong side of chuff all (0.4%?), you might as well get the chance of winning a £m on Premium Bonds.
I don;t think an ISA / shares thingy would work for us with the lump sums as we will be spending all the cash over the next 5 years.
yes, timeframe too short.
Why not just sell the £200k flat you rent out? Rent out the larger one for £200 more per month on a 6 month tenancy, giving you the option of moving back if you need to? Stick the surplus rent in medium risk S&S ISA?
I am not going to let the flat out with the prospect of evicting folks - and its a year minimum now in Scotland.
the two flats are also next door to each other. I would rather not sell either at the moment - maybe just being over cautious but I prefer the income to the capital. Property is still going up around here
Do you actually need to *buy* a house? Especially if you're hanging onto the flats as a fallback position for if you hate the house.
I'd imagine if you own £500k of property which you rent out, you could use the rental income to just rent somewhere else and then move around as you desire.
Why not just sell the £200k flat you rent out?
Won't that trigger a capital gains bill....
I was going to suggest renting too - at least short term. That way, you find out whether or not out-of-town living will work for you, which it might not. Far fewer amenities, lack of public transport, likelihood of needing a car (or two).
Still, at least you might manage to find a field nearby for your high horse 🐴 😉
I am not going to let the flat out with the prospect of evicting folks – and its a year minimum now in Scotland.
Six months actually. I know, I gave my tenants notice last month for October 1st.
Do factor in your tax and running costs for rentals these days. It can hurt.
(Landlord selling up here - anyone want a cheap three bed flat in Perthshire?)
You do need to look at Capital Gains here when you do sell - combine price growth with length of ownership could cost a *shed load* of money in a tax bill. Or you can live in the rental flat for 6 months to a year before you sell... 😉
I too would suggest a rental to 'test' out of city living. It will take you past this current frenzy of housebuying that we are seeing. It will also confirm if a smaller town / village would work for you too.
Check the position with stamp duty if you buy a house while still owning a flat; I think you'll pay an extra 4% on top of the normal stamp duty.
3 bedroom flat in Perthshire you say??? Where in 'Perthshire'...unsure why but I'm slightly looking for a place...only slightly looking though but it always helps to see what is available.
Check the position with stamp duty if you buy a house while still owning a flat; I think you’ll pay an extra 4% on top of the normal stamp duty.
LBTT in Scotland, but a second home premium will still apply.
On a £250k purchase the Additional Dwelling Supplement premium is £10k which might sway the decision to rent first to try it out.
Holding on to both flats is sensible. The rent will easily cover the loan and they are a handy fall back pot if things change. You've been a landlord long enough to know how it all works so no extra risk there. The money will keep coming in and you have the option for travel and still having an income.
As for the cash, it is a bit short term for S&S but if (big 'if') the markets carry on like the have for a few years then you'll be quids in. You can still take money out as and when you need. I'd be tempted to put half in knowing it'll be there for at least 2 1/2 years and should do well enough over that time. You might find at that stage you don't need to take it out as the other rental income is enough.
House renting if you are testing the water sounds sensible but if you are mortgaging you could look at the sums for an offset mortgage & stick the extra cash in there?
You don't have kids so I'd assume you are going to sell the flats at some point. When would that be if not when you retire?
No suitable rentals available for us - precisely 3 places with gardens for rent within 50 miles of here all of which are not suitable
Molgrips - the aim was to sell up in perhaps five years or more? Its a very fluid situation I am in right now so its a bit about hedging my bets
A good point above about owning multiple houses and increased land and buildings tax.
@DickBarton - Crieff Road, Aberfeldy, almost on cross roads. £130k. 😉
on CGT - we have a couple of different possible ways round that - sell one, live in the other for 6 months then sell or one flat is solely in my name - the other in Mrs TJs
I feel you pain and can resolve this issue.
I have no one to leave the flats to.
You can leave them to me.
Problem soved.
No need to thank me .... but since I am due to inherit a couple of flats can you make sure the tenants are nice please.
£1/2 million in assets, plus pensions on top, and you want to “get around” paying CGT? With all the needy people in the world, that doesn’t seem very ethical to me....
TJ Considering your views on the self employed engaging in supposedly dodgy tax arrangements I find your comments on circumnavigating cgt pretty shitty
Good point well presented. consider me told!
Always looks different when you are the one paying tax doesn't it?
We haven't actually done it!
the two flats - one is in my name and the other in Mrs TJs. we haven't even really looked at this at all.
Do I get any credit for not getting married 40 years ago and paying MORE tax as a result?
The cgt “live in it for six months” and sell it without CGT thing doesn’t work.
You’ll get time apportionment for the time it was principal primary residence but that’s it.
HMRC will have data from land registry and also tax returns from the rental income (assuming declared!)
Assuming it’s the same in Scotland there’s also a tax return to complete when you sell a second home which needs to be completed within 30 days (separate from your normal SATR)
HMRC will have data from land registry and also tax returns from the rental income (assuming declared!)
You don't specify the rental address in the tax return, so they have no record of where you actually lived and which house you rented.
Do I get any credit for not getting married 40 years ago and paying MORE tax as a result?
Pretty sure married tax allowance is next to worthless if you both work.
With all the needy people in the world, that doesn’t seem very ethical to me….
Pot and kettle did spring to mind! Always a completely different scenario when its someone else trying to minimise their tax......
You don’t specify the rental address in the tax return, so they have no record of where you actually lived and which house you rented.
Scotland has Landlord Registration which is run by Registers of Scotland (Land Registry in Scotland) so in theory they could work it out if they wanted to join up with HMRC.
The logistics of it actually happening are beyond the capability of development teams in both organisations IME though.
Pretty sure married tax allowance is next to worthless if you both work.
years ago it was worth more and could have saved us over £1000 a year
Ok folks - I take my beating!
I have no idea how CGT works at all
CGT Calculator Here
https://www.gov.uk/tax-sell-property/work-out-your-gain
Ta
years ago it was worth more and could have saved us over £1000 a year
The Married Couples Allowance was worth £344 a year for basic rate taxpayers in 1994. It was abolished in 2000. Perhaps you are confusing the fact that it operated by adding over £1000 to your tax code.
maybe - I thought it worked out more than that back in the 80s. we could have married in 1980!
Just worked out cgt payable from that calculator - its peanuts. Not worth worrying about
My only comment is that you need to think about when you want money and what for. You have about 15 years before you slow down. With no need to leave a legacy other than for a surviving partner the drivers are different to someone who has kids.
I second the comment about seeing a good IFA, people with property as their "pension" are more common these days so they should have a good idea of the best strategies.
No suitable rentals available for us – precisely 3 places with gardens for rent within 50 miles of here all of which are not suitable
Are you looking in the right place? There's properties round here with gardens which fairly regularly get let / re-let without estate agent boards / adverts ever appearing. I assume the local agents have a healthy list of people. Would guess that Dalgety Bay, Dunblane, Bridge of Allan, Linlithgow, North Berwick, Lenzie, etc will all be similar so must be more than 3 properties with gardens in 50 mi of Edinburgh. And that's just picking the "highly desirable" areas (as you've no children to send to school you may not want to pay catchment areas premium).
Where would be the right place to look? Having lived in the same property for 30 years i am somewhat out of touch
Sell up, buy a small Croft up Northwest with a little shack tucked away that I can rent off you, hth!