Am I too old to increase my wealth?

Am I too old to increase my wealth?

9:20 AM, 20th March 2023, About 2 years ago 67

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Hello, Any suggestions/advice would be much appreciated. I have a property portfolio with low loan to value ( 20% ) and I am in my 70s and bored!!!

I don’t want to sell up and pay CGT, then IHT. I think I really would like to increase my wealth.

Am I too old to increase my portfolio? Labour may be voted in and may impose a rent cap or they may not.

I could just do nothing but that’s not very interesting.

I’m in a position to substantially increase my portfolio but don’t know what to do and can’t decide.

Any suggestions?

Thank you,

John


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Fred Lawless

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8:42 AM, 21st March 2023, About 2 years ago

Interesting to see how people's viewpoints on retiring differ on here. In less than 3 weeks the Government will declare that I'm officially old and will send me a little money each week to help me deal with this devastating news! I've therefore decided to retire and sell most of my portfolio and unlike John I intend to do nothing, although I'm hoping to make it interesting by seeing the world and maybe writing a book or two.

Happy retirement to those already retired - will be joining you soon!

Fred

Tim Rogers

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9:56 AM, 21st March 2023, About 2 years ago

Reply to the comment left by Yvonne Francis at 20/03/2023 - 17:39
Not being clear as to your situation or goals, I hesitate to comment. There are just too many variables to pontificate effectively.

Mark A does provide an excellent service and his 'team' take a legal and holistic approach. Given that a miss step could cost you thousands, is it not worthwhile to invest some £400 to get a road map for moving forward?

Contendedted

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12:16 PM, 21st March 2023, About 2 years ago

Reply to the comment left by NewYorkie at 20/03/2023 - 12:51
Yes, a lot of us landlords are having this “why exactly am I doing this” moments. We know how to make money. We have got it cracked but when we are considering giving money to our kids who maybe are having two luxury holidays a year and are driving flashy cars and always eating out the first thing we need to do is reverse our frugality. A hard habit to break. Then we need to look at charities where their work seems less trivial than doling out unearned luxury and pampering for our kids. Also it’s quite common to have kids that are just stupid with money. I put it into pensions for them in the hope they wise up later.

David Judd

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12:54 PM, 21st March 2023, About 2 years ago

Same situation, never to old to grow wealth, but you have to enjoy it. Boredom can mean time for change, look for something that interests you even if its outside of property

John Spring

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16:46 PM, 21st March 2023, About 2 years ago

Am I too old to increase my wealth continued… I’ve received thirty five replies so far thank you everybody for the suggestions and advice some of which are:
Buy to sell yes that’s a possibility although I consider myself more of a property investor than a developer
Re: IHT Trusts very complicated and expensive to administer I’ve never been satisfied with the advice given I can always find a reason for not setting up a trust
I’ve already had excellent advise from Mark Alexander the best £400 I’ve ever spent I’ve already gifted 2.5 and lived seven years
Spend it or gift it and hope to live seven years by which time your properties would have increased in value again and you are now faced with the same IHT problem
No point in selling and paying CGT then shortly after IHT will be payable
New Yorker seems to have it right wide circle of friends meeting up to eat drink go sailing golf and skiing a perfect life sad to say I don’t have all of those things in my life
Moving into properties very very very minimal advantage re CGT not worth the hassle
Tom crispin very very interesting I would need that explained to me in minute detail
Isas I know I shouldn’t say this but only m£20,000 each year and a bit boring ??
Happy to chat to anybody further suggestions/ advise most welcome
John S

Tom C

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19:00 PM, 21st March 2023, About 2 years ago

Reply to the comment left by John Spring at 21/03/2023 - 16:46
It is something I have been mulling over for myself for the past six months.

I have two boys (aged 7 & 9). Since birth of the younger, my father and I have been contributing to their junior ISAs. Money has been going into six tracker funds. UK Index, US Index, Japan Index, Europe (exc UK) Index, Pacific (exc Japan) index and Emerging Markets. Over the past seven years the annualised growth has been 9.5%. I.e. on average the total in the combined funds has grown by 9.5% every year. The yield on my five flats by comparison is just 5%. So I thought why not sell up and dump the money in tracker funds. The problem is Capital Gains Tax. The taxman would grab 28% of my capital gain: 28% of approximately £1,000,000, the gain on my portfolio of about £1,500,000.

But I can get some of that cash tax free by remortgaging. 60% of £1,500,000 is £900,000.

So if I remortgage one flat per year on a five year fix, I have set costs for five years. And if the combined tracker funds can beat the mortgage rate I will be quids in.

So over five years I can invest up to £900,000 in worldwide tracker funds. I can take dividends, taxed after the £2000 allowance at 8.75%. The average FTSE dividend is 3.55%. 3.5% of £900,000 is £31,500 less tax is £28,919.

There is likely to be capital growth of the shares. if that exceeds the growth in the value of my portfolio, I can take some of that out too, either tax free or at a very low rate.

There will still be my 5% yield of £1,500,000 property portfolio. £75,000 per year less income tax.

And if the value of my portfolio has risen, I an remortgage after Year 5, one property per year, to withdraw, tax free, 60% of the gain.

Four possible income streams:
1. rent income- taxed normally
2. dividend income- 8.75% tax
3. Share capital gain- low tax
4. Property capital gain- zero tax

The additional cost is mortgage interest payments. There is a small but real risk that this will be greater than 2, 3 and 4 added together above, but this can be mitigated in part by not remortgaging if interest rates are high, and in a worst case scenario, selling part or all of the share portfolio to repay part or all of the mortgages.

There is also a small risk that both shares and property values will crash. This is partly mitigated by using Index tracker funds and different ones from around the world. If US and UK crash, Japan, Emerging Markets, Europe and Pacific might hold up.

So while probably more risky than just leaving your money in property, gain will be there so long as the stockmarket beats the best mortgage rate you can get. And it is very tax efficient. And you will benefit from a 20% tax credit on your mortgage interest payments.

If the best rate you can get is 4.5%, the tax credit would be worth £8,100 per year on £900,000 of mortgages.

Dennis Forrest

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20:23 PM, 21st March 2023, About 2 years ago

My wife and I have built up ISA funds worth around £1 million. We aim to get an overall yield of around 4% tax free. Usually I have reinvested the dividends, but sometimes make withdrawals, but only the dividends.Some are high yielding shares like Legal and General other like Experian are low yield. I usually buy shares in the FTSE 350 and base some of my decisions on personal observations. About 5 years ago at a motorway service station I noticed how busy Greggs was and hardly anybody was at KFC or McDonalds. I have more recently bought shares in Halfords, Dunelms and Wetherspoons because I have either had good service there or believe they have the ability to cope very well with a cost of livings crisis.
I have run down my properties to 2 buy to lets and one holiday let.

cashcow

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9:17 AM, 22nd March 2023, About 2 years ago

Buy a nice classic car and hit the road.
best of luck John.

Andrew Miller

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8:37 AM, 25th March 2023, About 2 years ago

John, there are any number of solutions to deal with your tax position. If this is all you want then I'd do my own research and get a decent property tax adviser (mine is wonderful). Your pension position will be critical to that.

However, I detect you actually want to go on creating homes for people. When we got to that stage (not having to but wanting to) we started creating homes that care for those that need it most. Happy to chat if you want to message me. 😊

Karen Dodd

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9:12 AM, 25th March 2023, About 2 years ago

Reply to the comment left by John Spring at 21/03/2023 - 16:46
Set up your own charity and do something meaningful with your wealth/life. That will keep you busy in many ways and you are giving back to society. Any interests you have can be turned into a charity.

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