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Cashing In On The UK Property Boom

Cashing In On The UK Property Boom

I’ve always seen myself as a buy-and-hold investor.

I have this romantic idea that I will own my buy-to-let properties for a lifetime, and eventually pass them on to the kiddos.

At the very least, I’d hold onto them for 30 years, cashing them in to buy a red Ferrari when I have my mid-life crisis.

But I was recently presented with an opportunity to sell a property after owning it for just two years.

It was my worst performing property, and here was the chance to offload it for a tidy profit.

Yet, I struggled to sell. My brain reminded me that selling isn’t something we do:

Don’t sell you fool! We never sell! We buy, hold forever, and collect the income – REMEMBER?!?

I’m A Natural Lord

According to the Wealth Dynamics test – which matches your personality to your path of least resistance for building wealth – I’m hard-wired to hold investments.

As a “lord”, I’m best suited to holding and controlling cash generating assets.

According to Wealth Dynamics, I am “the epitome of stealth wealth”. I don’t need to draw attention to myself to build wealth, and I’m better at controlling assets and building systems that generate income.

“Successful Lords know that not only can they be replaced, they want to be replaced. With their assets working for them, they have the time freedom to do whatever they want for the rest of their lives.”

Yep, sounds like me.

Even before I took the test, I’ve always been drawn to collecting assets and banking the cashflow.

I’ve tried my hand at making money with different ventures before – buying and selling on eBay, Airbnb, freelance writing – but they were always a struggle.

Whereas I’m in my element working out how best to maximise portfolio returns on a spreadsheet – anyone else an Excel nerd?

So, not only does buying and holding assets achieve my goals, it also comes naturally to me.

But with all things in life, only doing what comes easy to you can stifle your growth.

Buying and holding isn’t always the best strategy.

You can make significantly more profit by having an element of trading in your portfolio.

And that’s what the “smart money” does.

They move money out of overpriced assets and buy assets that are undervalued. They understand market cycles and sell when the market is good and buy when it tumbles.

They buy high and sell low.

Taking a leaf out of smart money’s book, I recently decided to cash in on the property boom that’s sweeping the UK.

An Opportunity To Sell

The opportunity to sell one of my buy-to-lets fell into my lap.

Callendar Place
The flat in question

My tenant had received a large inheritance and asked if I would sell her the flat she was renting.

I told her I would think about it, but my mind was already made up: NO WAY!

This is an asset that I’ve worked hard for, and it’s a source of passive income – something I’m trying to build, not part with.

But when I thought about it, there were many reasons selling made sense:

  • This was my worst performing property. On paper, it had all the makings of a good investment (good area, close to transport links, quiet cul-de-sac, private garden), but it never done as well as I expected.
  • I could sell for maximum profit with the recent surge in house prices.
  • No estate agency fees for a private sale.
  • I’d release cash for a possible dip in the property market or a stock market crash later in the year.
  • And last but not least; It’s a good deed. My tenant is happy in her home and doesn’t want the stress of having to find somewhere else.

The numbers behind the sale also stacked up…

I bought this property for £62,000 in July 2018, and we agreed a sale price of £79,000. After accounting for all purchase and selling costs, I’ll make £9,500.

Buying and Selling Costs
£79,000 - £69,466 = £9,534 (which is within the £12,300 capital gains tax exemption 😀)

I’ve also collected £9,100 of rental profits (after all expenses) in the 2 years and 9 months that I’ve owned the flat.

The sale plus rental income gives me a combined profit of £18,600 – not too shabby.

Selling would also release £30,200 (profit + equity) for further investment – Sweet!

Preparing For A Market Crash

The sale of the property is set to complete next week.

I’ve slowly come round to the idea of selling it, and also of selling off more properties in the future – maybe even next tax year if the market’s still hot.

My core investment strategy will always be to buy and hold quality assets for the long haul. But going forward, I’ll be adding selling as another tool to my money-making toolbox.

If an asset is trading for prices that make no sense – as is the case with property at the moment – I’ll cash in and look to redistribute my cash into other assets that offer value, or wait for a market crash to buy back in.

Maybe I’ve still to learn that trying to time the market is for fools, and very few people manage it successfully.

But right now, when the property market is this hot, taking some profits off the table makes sense.

The worst-case scenario is that I’ve sold too early in what turns out to be the biggest boom since the 1996-2007 market, but I also get an opportunity to better diversify my buy-to-let heavy portfolio.

And in best case, I have a small war chest to pick up bargains if property or share markets have a wobble in 2021.

Both of which I’m happy with.

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