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A Life Changing Decision

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I'm 64 years old and my wife is 61, both in reasonable health, however, we are hoping to retire in 2018.


For the last 30 years, my wife and I have run a Guest House. The building is quite large over four floors including a converted basement area with the land taken away from the gable end creating a large patio area for the basement.


As you can imagine, this is a life changer for us; once we close the doors we stop our income. Scary. That's why I've joined this forum.


The building is worth around £850,000.00 with no mortgage attached.


The location is a south Manchester suburb with very good transport links into the city 5.9 miles away; including a metro stop just a 9-minute walk away (no not 10, 9 ) which take 12 minutes into the city.


We have savings of £150,000, a private pension of £3700 per year with my state pension due in Jan 2018 and my wife’s due in Feb 2022 and a small pension due in 2023 of £4700 per year.


We have two options:


  1. To sell, buying a place for our selves with the proceeds of the sale, say £400.000 and invest the rest hoping for a minimum yearly income of 4% on £400,000. (£1,300.00 per month including fees)
  2. To redevelop the building; creating just 4 luxury apartments (very large, one per floor). With a minimum rental income of £1000 per unit.


The question is what would be the most prudent way of setting up option 2 .


Option 1 Is pretty straightforward, however, we would end up with the main part of our retirement income being susceptible to fund managers decisions and stock market fluctuation (little control).


Option 2 As a couple of potions its self :



  • We move out into my wife’s brother house with them, for a good 6 months or we rent at £700 per month.
  • We use our saving to redevelop hoping £150,000 will be enough, to leave us with no loans or mortgage to repay.
  • Once the work is completed we take on one of the apartments. Reducing our income from £4000pm to £3000pm.


Asset wise we will have the proceeds from the sale of a property to pass on to our sons.




  • We have tree boys all in there 30's. The first two we help to buy their houses. The oldest bought for £62,000 the second bought at £162,000 and the third is having a hard time with the average house around Manchester at £250,000.
  • We could sell one apartment to him for £150,000 through his own mortgage.


After inviting 7 estate agents in round 18 months ago the average sales price of each apartment was £250.000.


  • This will generate another £150,000 in the pot which would secure the development costs and also could be used as a deposit on a house for our selves with repayments met by are overall income.
  • The thought being our youngest son can sell or rent out his apparent to help fund a house for himself.


Asset wise we would have three apartments at a minimum sales price of £750,000 and the equity on the house we would buy.


The  three apartments would act as security on any loan we require for a house.



This is just my thoughts. I would love it if someone told me it's a load of rubbish and came up with a fantastic new way of looking at it.


We rented out a number of properties in the seventy's all to students, so a little experience, but need to get up to speed with todays letting market.


The Planning decision is on the 5th October, in which we envisage no problems.

If we decide against the development the building will be sold with planning permission.


Other factors, My wife is scared stiff.




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Hi toneekc,


Is it right what you say. The existing value of the building is £850,000. Your gross developed value of the 4 flats is £250,000x4=£1,000,000. You have savings of £150,000 which you are using to do the conversion?


If this is the situation I definitely would not do it:-

1. Your profit is £0

2. The estimated value of the flats might be high, in which case you lose money.

3 You have not costed out the project - architects fees alone may be 25k.


Think very carefully. Get advice from specialists - a Chartered general practice surveyor to value the scheme and its various options, a Quantity Surveyor to cost the scheme and an Architect to design it. Speak to them all on an informal basis before you spend a penny!!


It sounds as if you and your wife have worked really hard to achieve a potentially comfortable retirement - you really deserve that.


There are lots of property investment options that you could undertake which are much more secure and give you and your family a better return.


Lots of people on here are very friendly and will offer you great advice.


Good luck to you





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Hi Steve


Thank you so much for your comments, I truly appreciate your feed back.


I'm not to sure if I've explained this well enough.


I'm surprised, in it's shortest terms I see it as investing £150,000 - 200,000 for refurb, to give us a minimum gross rental income

of £3000,00 per month (no loans or mortgages attached).


Also ending up with an asset worth £750,000.


This is after selling one apartment to my son at £150,000, even though it's worth a minimum of £250,000, to help him on to the housing ladder.

So if the worse came to the worse we have £300,000 to throw at the refurb.


I know if I was to invest the £150 -200, 000 else where the return would not be anything like the above.


Are your thoughts still the same?

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Hi toneekc,


Let me start off by apologising to you!! All my working days I spend giving property advice to "hard nosed" investors who examine the figures to the nth degree!! I often come onto the hub after dealing directly with clients and looking at my previous reply I think I was looking at the money aspect of everything and that alone.


Considering life as a whole, family is by far my most important consideration. I have 2 sons, one a professional sportsman who trains abroad a lot of the time and my youngest who is at University. With your scheme as it is, providing a flat for your son in what is likely to be a very nice development it is an excellent idea.


You are right what you say in that investing £150-200k giving you a £36kpa return is terrific. On a 150k refurb that is a 24% simple gross yield. And you are obviously in the fortunate position of not needing to realise your capital asset of 750k to provide an income. You will have your son living in the development to oversee any potential problems and have capital growth if the market improves. 


On the flip side, if you took into account the fact you are tying up your 750k in the process of getting a 36kpa return on your 150k refurb investment, the return you would be getting as a simple gross yield is 4%pa which is still good given their are so many family advantages to your scheme.


My day job is to source deals for investors and look at things for them from the perspective of maximising returns without making frivolous or risky investments. If you were asking me to comment along those lines I would say cash in your property for 850k, add your 150k savings gives you 1m. In whichever way is good for you, give your son the 100k, that leaves you with 900k. Buy a number of BTL properties with a 12%pa simple gross yield ( typical of what I and people like me source). That would give you a rent roll of 900k@12%=108kpa or 9,000pcm.


That is a better financial return, but may not be the best way forward for you and your family.


As I said before, family comes first with me and if it was me, then I may go with your scheme. Putting my investor head on and looking to increase returns, I may not.


Sorry for the long and drawn out answer, hope it helps. Please feel free to message me again if I can help in any way.


Good luck with the project!!!







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