400k cash to invest but how?

Hi Thaddeus,

1 and 2 are all perfectly well used strategies so it does depend on how much time and effort you can put into the project.

As you have found out financing the purchase of an auction property is more difficult as you need to have the finance in place before you know you have a successful bid. But as you are a cash buyer the auction route is that much easier and puts you ahead of the game compared to non cash buyers.

Please also consider purchasing in the name of a Limited company so you are not caught out by Section 24 mortgage interest relief restrictions.

As ever it depends what your goals are, your appetite for risk and how much you need cashflow.

If you want to make as much money as quickly as possible, then flipping is the best route.

If you want lower risk then btl is the way to go.

If you need cashflow, then you may want to look at an alternative approach - you need to be more creative to make an operating profit and good ROI these days.

Buy well.
The ideal investment period is to perpetuity.
Every time you sell a property you expose yourself to tax which reduces your equity. Do a spreadsheet
Things will not always go to plan.
You need to consider which is a bigger drain Capital Gains Tax or section 24 finance act 2015.
There are fewer complications generally with houses than flats.
Remember KISS
Keep It Simple,
Buy well,
Do a spreadsheet.
When you make an offer for a property expect it to be turned down. Make ten offers a year and you may buy one, or perhaps two. Make offers to buy with cash and remortgage your exixting portfolio at your leisure.

My suggestion would be to read Robert Kiyosaki's book , Rich dad Poor dad, as a starting point before making any investments. Invest in your financial education first.

Buy a property suitable for a holiday let. Only 10% capital gains tax. All start up expenses tax deductible. I would suggest Windsor - you could get a good 2 bed property for around £400K and with a holiday let you can reserve weeks for yourself if you want to. Good tourist hot spot - besides Windsor Castle you have Eton just over the river. Legoland is quite close. The royals quite like Windsor too and its not too far from London. Something different to other posters which might appeal to you.

Blow it all on booze and strippers. Oh sorry, wrong forum! There are so many options but I guess it boils down to how much work you want to do. Flipping has the possibility of generation more profit but is more risk and potentially more work. Whereas BTL are pretty safe and profit is limited to the rent received (assuming you don't sell and realise capital growth). Reading RDPD as mentioned above is a must for anyone looking to invest in property.

S24 probably means that 4 properties is not viable. 3 would more likely be the max.
But as you have a lot of initiative, your idea of refurbishing properties sounds more productive. After all, it is somewhere you can actually add value rather than passively waiting for the market to increase the value and you don't strike me as a passive kind of guy.

Consider purchasing in a company. As you’ve lent £400k to the company that is money you can take out again over time tax free. The corporation tax rate is decreasing to 17% by 2020, so you’ll pay less tax on profits. Also there is no CGT on selling company assets so if you do sell you will pay the corporation tax rate rather than the much higher CGT rate, and all the interest on your loans will be tax deductible.

You mention that you have a good income currently so you don’t need the income from your properties to live off, but any purchase in your own name will be taxed as your personal income. A company however is a separate legal entity from yourself and even if you are the sole director it’s income wil not be added to yours other than what you pay yourself as an employee of the company or any dividends you take, bearing in mind that you will have a float of £400K you can take tax free before this becomes an issue for you!

Not sure how much you know about the new tax regimen for individual landlords Thaddeus, (apologies if you already know all this), but if you purchase income producing property in your own name (as opposed to a company name), all property income will be added to your other income in its gross form to determine your tax band. If you are not currently in the higher tax bracket this could have the effect of putting you into it meaning all your net non-property related income will be taxed at 40%. The govt will then “very generously” allow you to claim back a 20% tax allowance on your property loan interest, which obviously still leaves you potentially 20% worse off overall if you’ve been bumped into the 40% bracket. This punishing new taxation has seen many professional landlords seeking to incorporate, which is an expensive route, but those starting out in property can do so fairly cheaply.

If I were you, stay away from Lettings and become a short term provider of bridging Finance.

There are professionals out there offering a minimum return of 8%, Ｅｑｕｉｔｙ or a combination of both.

Why you would want to deal with tenants, navigate the preposterous legislation and take rent dodgers to Court after the Crap most of us have to go through is beyond my comprehension.

Open up a dog kennel and earn the respect of the public you deserve.