Help me with my BTL strategy!

[connorm]

Hi All, 

I'm seeking some feedback from the veterans of the property game (and experienced newbies!), on my strategy. 

My goal is for me OR my partner to semi retire in 10 years with 3-5 BTL properties netting circa £2,500 a month. (give or take with those figures). 

I've just completed a renovation on my own residential house and lucked out with the housing market. (property purchased for £230k, now worth ~£380k with market and reno uplift). My partner has also just purchased a BTL flat in her own name, netting her circa £500 per month profit. 

My rough strategy in getting there consists of;

• remortgaging my own home in 6 months time and taking out £100k 
• Set up a LTD co
• Loaning the LTD co the 100k 
• Buy a tired BTL, freshen up / renovate
• Remortgage OR pay the loan back slowly 
• Build cash in LTD co 
• Remortgage my current home (again) across to a BTL (yes, I know there's duties owed etc). 
• In time, with market growth / crash, buy another BTL 

I think thats quite a generic strategy, my main questions come around execution. 

Taking 100k out significantly increases my mortgage repayment. With increase in rates, and adding a 100k ontop, it's almost doubling the repayment. Is this a daft and expensive way of releasing the capital? 

If I intend on moving out in a few years (from my residential) should I just wait to realise the gains then? I could hypothetically flip the house to a BTL mortgage AND have enough to invest again?

 

My final execution question which is complicated is around holding co's. I run a small successful engineering company which has investable profit. Should I be using a holding company to redistribute the gains into the LTD co as a more cash effective method of buying property?

Thanks for taking the time to read this.

I appreciate it, as well as your thoughts. 

Cheers

Connor

[Stuart Phillips]

18 hours ago, connorm said:

My final execution question which is complicated is around holding co's. I run a small successful engineering company which has investable profit. Should I be using a holding company to redistribute the gains into the LTD co as a more cash effective method of buying property?

The number of lenders available to you when you have another company as shareholder drops dramatically. Its feasable, but more expensive. It also generally only works when the directors of the holding company mirror that of the property company. IE if you want you and your wife to be directors of the SPV, but you are sole director, or director with another 3rd party on the engineering company, you will find that very difficult to finance.

[EvolutionBlogger]

On 8/4/2022 at 4:13 PM, connorm said:

 

My goal is for me OR my partner to semi retire in 10 years with 3-5 BTL properties netting circa £2,500 a month. (give or take with those figures). 

The challenge you have is to get £2,500 pcm in profit from BTL. BTL yields aren't very high, so you need to invest a lot of money to get that sort of income. I have a couple of suggestions that could help you to achieve your goal:
 

• Have you considered commercial property? Yields of 10%+ are common place
• Do you have a pension? If you convert it to a SSAS, pension, then you can use pension funds to invest in property

I've written articles about these strategies (and others) on my website

 

[george-choy]

Hi Connor

Why wait 10 years? Aim for 2 years or less instead?

Regarding changing your home to a BTL: When you have an expensive property like yours at £380k, you will find you get better yields by selling it and buying multiple BTLs, or buying a Commercial property instead. Consider renting a home for yourself until you are financially free (and perhaps even after that). I lived in a rental and had a multi-million property empire at the same time. I've only recently bought my home again.

If you are a higher rate tax payer then buying multiple BTLs in a Ltd company can make sense. Speak to your Accountant.