Best time to release equity during a boom?

[chris_heirani_gmail_com]

Hi everyone, I’ve recently finished my second BTL and have around 60K equity in the property which I’d like to release to start on the third BTL in 12-24 months time. My question is do I release it now and just sit on it until I’m ready to go? Wait 12 months? 24months? If A crash happens which if we follow the 18 year property cycle then it’s on its way, the equity will disappear I assume as the house won’t be worth as much as it is now. 
I’d love to know all your thoughts 💭 

cheers

Chris

[Lilla D]

Hi Chris,

We would all love to have a crystal ball sometimes  

From a mortgage point of view, all I can say is that

- some lenders would want to see where the money goes (i.e. details of the 3rd BTL property or even a mortgage offer for it), while other lenders are not too bothered;

- some lenders require that you own the property for minimum 6-12 months prior to remortgaging it, so if you do the remortgage now, your lender options will be limited;

- some lenders prefer to see a certain length of landlord experience (e.g. 6-12 months and have a tax return showing profit from it), so dependent on when you bought the first BTL property, your lender options could be impacted.

All in all, as a broker, I'd say you'd normally be in a better position, if you waited, but as a person without a crystal ball, all I can say that it's your call whether you press ahead now or wait - it's a risk either way.

[chris_heirani_gmail_com]

9 hours ago, lilla d said:

Hi Chris,

We would all love to have a crystal ball sometimes  

From a mortgage point of view, all I can say is that

- some lenders would want to see where the money goes (i.e. details of the 3rd BTL property or even a mortgage offer for it), while other lenders are not too bothered;

- some lenders require that you own the property for minimum 6-12 months prior to remortgaging it, so if you do the remortgage now, your lender options will be limited;

- some lenders prefer to see a certain length of landlord experience (e.g. if it was also bought during the last 6-12 months and you don't have a tax return showing profit from it), so dependent on when you bought the first BTL property, your lender options could be impacted.

All in all, as a broker, I'd say you'd normally be in a better position, if you waited, but as a person without a crystal ball, all I can say that it's your call whether you press ahead now or wait - it's a risk either way.

Thanks for the detailed reply Lilla, really appreciated. I believe the the mortgage works will give me a further advance if needed but like you said it’s just getting hold of that crystal ball. I may look for a potential property first and then go from there rather than having the money in the account and nothing to do with it. Thank you again. 

[EvolutionBlogger]

On 12/31/2021 at 11:30 PM, chrish88 said:

Hi everyone, I’ve recently finished my second BTL and have around 60K equity in the property which I’d like to release to start on the third BTL in 12-24 months time. My question is do I release it now and just sit on it until I’m ready to go? Wait 12 months? 24months? If A crash happens which if we follow the 18 year property cycle then it’s on its way, the equity will disappear I assume as the house won’t be worth as much as it is now. 

Let me get this right. You plan to borrow £60,000 for 2 years and do nothing with it? During that 2 years you will pay out money every month for interest payments, while earning nothing from it.

If you borrow at 3% for two years, you will have paid £3,600 in mortgage interest payments and got nothing back.

You'd be better off by setting money on fire..

[chris_heirani_gmail_com]

2 hours ago, EvolutionBlogger said:

Let me get this right. You plan to borrow £60,000 for 2 years and do nothing with it? During that 2 years you will pay out money every month for interest payments, while earning nothing from it.

If you borrow at 3% for two yours, you will have paid £3,600 in mortgage interest payments and got nothing back.

You's be better off by setting money on fire..

I guess what I’m asking is when is the best time to borrow the money before the crash comes and wipes all the equity from the house and be a struggle to get an advance then. 

[ayns]

Naturally the best time to re-finance is at the top of the market and the best time to buy is at the bottom of the market. 18 year property cycle predicts 2026 will be a bust so work by that if you like but this is Crystal ball territory at the moment.

Your more likely to regret not buying than making a move on something sooner rather than later. I’ve bought 2 this year, 5 year fixed at great rates and have good long term tenants in both. If there’s a crash in 4 years time that wipes out the 4 years of growth, I’ve still gained just under £40k in rent over that time.

the best time to buy / re- finance was yesterday, next best time is today  

[chris_heirani_gmail_com]

7 minutes ago, ayns said:

Naturally the best time to re-finance is at the top of the market and the best time to buy is at the bottom of the market. 18 year property cycle predicts 2026 will be a bust so work by that if you like but this is Crystal ball territory at the moment.

Your more likely to regret not buying than making a move on something sooner rather than later. I’ve bought 2 this year, 5 year fixed at great rates and have good long term tenants in both. If there’s a crash in 4 years time that wipes out the 4 years of growth, I’ve still gained just under £40k in rent over that time.

the best time to buy / re- finance was yesterday, next best time is today  

That’s very helpful and informative, thank you. 

[Sam_F3]

4 hours ago, ayns said:

Naturally the best time to re-finance is at the top of the market and the best time to buy is at the bottom of the market. 18 year property cycle predicts 2026 will be a bust so work by that if you like but this is Crystal ball territory at the moment.

Your more likely to regret not buying than making a move on something sooner rather than later. I’ve bought 2 this year, 5 year fixed at great rates and have good long term tenants in both. If there’s a crash in 4 years time that wipes out the 4 years of growth, I’ve still gained just under £40k in rent over that time.

the best time to buy / re- finance was yesterday, next best time is today  

Good comment, but you had me at the good "long term" tenants who have only been there a few months lol let's hope they are there long term as you expect! 

[EvolutionBlogger]

17 hours ago, chrish88 said:

I guess what I’m asking is when is the best time to borrow the money before the crash comes and wipes all the equity from the house and be a struggle to get an advance then. 

In my opinion, you'd be better off setting money on fire

Nobody on this forum knows the future and when a crash will come. If they did, they would be trading stocks and earning millions

FYI: I have worked in Investment Banking for 15 years

[chris_heirani_gmail_com]

11 minutes ago, EvolutionBlogger said:

In my opinion, you'd be better off setting money on fire

Nobody on this forum knows the future and when a crash will come. If they did, they would be trading stocks and earning millions

FYI: I have worked in Investment Banking for 15 years

Thank you for your input. What would you suggest instead? Release the money now and move plans forward? Release the equity when ready and hope there is still enough there to get another btl if a crash does happen? Or any other thoughts would be greatly appreciated. 

[ayns]

19 hours ago, Sam_F3 said:

Good comment, but you had me at the good "long term" tenants who have only been there a few months lol let's hope they are there long term as you expect! 

ha well as long term as they may / may not / could be :0). 

Tenants who have a long term track record of renting locally (next door!), kids in the local school , jobs locally etc. Your right, actually how long they will be there..who knows