Hi All
Is anyone out there a landlord ? I am think of buying another house to live in and renting my current one. The idea is to be able to give my kids a start when they are old enough (at least 15yr to go) to have to worry about such matters and the house would be theirs to split.
I hear all sorts of stories, but is anyone on here doing this and would you recommend it ?
Last edited by: bottomlesspit on Wed 8 Jun 11 at 21:05
|
Could try here:
www.landlord-forum.co.uk/
A google search will throw up other fora and associations - take your pick.
|
|
Brilliant until that crap tenant comes along. They have all the rights and you have fog all.
|
"Is anyone out there a landlord?"
Yes - I am. I have been for about 11 years.
In my case, I had no mortgage for either the house I was letting or the one I was living in (still don't). This made the finance a no-brainer. Unless you're in the same position, you need to do the maths carefully. You must know what you are likely to be able to achieve in terms of income and what your costs are likely to be. You do want to make a profit, don't you?
First, if you haven't yet bought the property, ensure you are buying in an area where letting will be easy - near shops, bus routes, train stations, motorways or other "quality of life" amenities etc. You may end up with a property that needs some capital expenditure to bring it up to scratch, as tenants now have increasingly high expectations, and in any case the better the property the higher the rent you can charge.
Second, decide how the property will be let: either as a whole house (i.e. for a family), or as individual rooms with shared areas (kitchen, lounge, bathroom), as for students or young single people. In the latter case, you will have to put locks on each bedroom.
Third, decide how the property will be managed. If you do it yourself, you avoid charges, but will have to deal with the considerable amount of paperwork involved and will need to be able to drop everything at times to deal with emergencies. The alternative is to use a property management service, which will provide different levels of service (from an introduction right up to complete management) in return for a varying percentage of the rent.
If you do it yourself, you will need to read up on such things as vetting prospective tenants, (references etc), dealing with deposits, drawing up tenancy agreements, inventories, arranging inspections, collection of rent etc. You will need to know tradesmen (plumber, electrician) to call on as needed, unless you are qualified in such areas. You will need to familiarise yourself with your legal obligations in such areas as gas and electrical safety. You will need to keep comprehensive financial records (including all receipts) for tax purposes and will need to complete a tax return each year, with knowledge of what you can claim by way of expenses.
As regards the whole experience of letting - don't do it if you will get emotionally attached to the property and will feel outraged if, or rather, when damage occurs. Over the time I've been a landlord I've had every kind of tenant from one who avoided paying the rent, leaving with debts of around £900, the one who I kicked out because he repeatedly broke the tenancy agreement, most notably by smoking cannabis, the one who was never there and who eventually disappeared, right through to the model tenants who are there at the moment, who change their shoes for slippers inside the front door and who have redecorated various rooms and have never missed paying the rent. Bless 'em - they're every landlord's dream!
I could go into some detail about almost all of the above - please contact me via my e-mail address as in my profile if you wish.
FocalPoint, formerly ChrisPeugeot
Last edited by: FocalPoint on Wed 8 Jun 11 at 23:48
|
A teacher acquaintance of mine took on a couple of rental properties after she split from her husband.
Genuinely pleasant woman, I reckon she may have lacked the businesslike attitude needed to deal with some people.
"I can't throw Dennis out," she once told me. "He's not paid for a while, but he's got nowhere to go."
She sold both houses after three or four years and I think the bottom line was she didn't do much more than break even on the rent, but did make a nice few quid at sale time.
I think this was partly because she spent a lot of the rent on the houses, I heard of a new roof going on one.
Landlords around here won't replace the roof unless the old one literally falls off, and then only if it's winter.
|
The simplest answer is to use a guarantor with every tenant. If the tenant can't provide someone with assets and a decent background ie not criminal or with CCJs then they're probably no good. The guarantor is jointly liable for any missing rent or damage repair so they will badger the tenant for unpaid rent so you don't have to. Most buildings/contents insurance for landlords can have legal cover on top too so there is no need to spend a fortune on getting a property back.
If you do the DIY route prepare to spend a long time studying up on landlord and tenant law as they're always changing it. Far easier to get a decent agent who will take a percentage but they'll be the ones that have to know all this stuff. The tenant will ring them when something breaks and they will deal with most of the annoying little problems tenants tend to have. You will lose rent but gain peace of mind.
|
...The simplest answer is to use a guarantor with every tenant...
I'm sure FocalPoint can advise, but I understood many letting agents now take out an insurance policy to guarantee the first six months rent.
It means they can make a more attractive offer to the landlord.
|
|
Read the landlordzone.co.uk forums to get an idea.
|
|
I would definitely recommend a good agent. My father had no end of problems with various properties with tenants from hell. Not worth the aggro and heartache IMHO
|
>> I would definitely recommend a good agent.
I don't agree, Captain. You will pay between 10% and 15% (plus VAT), with further charges for all manner of other services, if you use an agent. My advice would be to recruit your own tenants; spend as much time as possible talking to them to generally weigh them up before carrying out a full online tenant check.
Last edited by: Clk Sec on Thu 9 Jun 11 at 13:29
|
Ok I get more specific on my situation
Current house is all paid for.
At todays rate a mortgage on the new house will be around the £800 - £850 per mth, and I should have no problems borrowing the sort of figure I need as I earn a reasonable income and have more than the golden 25% as a deposit that gets you a good rate these days.
What are you thoughts on this
There is a nationwide company (franchise) that gaurantee you rent, not an insurance scheme for defaulters, but a gaurateed payment every month from the time you sign with them, even if the house is vacant.
Sounds to good to be true, but I suppose they work it out that the fee they charge on all the properties rented in that manner will more than cover any costs where they are paying out and the property is empty or tenant defaulting.
Sound great but "What do they charge" I hear you say.
They work out the gauranteed figure as follows:
Rental value of my house £800-
Average mth mgt charge of a letting agency 10% +vat £ 96
Sum I would receive every month = £704
Yrly income £704 x 12 = £8448
£8448-
Average agt setting up fee £ 175
Yrly income = 8273
Now this is where he takes his risk, in that he allows for 1 mth of the property being empty therefore:
£8273-
£ 704
= 7568 / 12 = 630 he uses this figure as the gauranteed monthly income.
So unless I have missed something obvious it will only cost me about and extra £70 per mth (704 - 630) to get a gauranteed income.
I presume they would make very detailed checks on any prospective tenants as they are taking on the risk
They will also cover any damage, beyond wear and tear.
Now at those figures I would only have to add about £300 per moth to cover my new mortgage, taking into account tax on the rental income.
I am being naive here or is it a no brainer as my current property will serve as a great offset on the new property ?
I know interest rates can only go in one direction and it is only a mtter of time, but they cannot raise too drastically as that would completly mess things up for most of us.
Forgot to add I am wrong side of 40 but right side of 45 so have a few yrs left to work, hopefully.
|
Sounds to good to be true. There will be a catch. Stepson renting his house and it took two months to find tenants. Agency looking after it all and first month's rent eaten up by fees etc.
And it looks like most of the second month's gone somewhere too! Waiting for his monthly statement/letter.
|
I may have failed to grasp something here, but it seems you are saying that a mortgage will cost you £800 - £850 monthly and your expected income from rent will be either £704 or £630 monthly, depending on how the letting is managed. In addition, you will have to pay tax on that income, after deduction of allowed expenses.
I can't see the point of doing this. You should expect to make a reasonable profit of around 5% p.a. or near.
Also, beware the possible assumptions here: "They will also cover any damage, beyond wear and tear." Are you saying you will not take out your own insurance on the house? It will be covered if it burns down? And "wear and tear" can be tricky. In letting property, a far greater amount of wear and tear is regarded as acceptable than I would expect in my own home; for example, many landlords expect to renew carpets every five years. Redecoration is also required far more frequently than in an owner-occupied property.
|
Hi Focal,
My intention is to use the rental income to offset my new mortgage. Overall I will not be making any money as I will now have a mortgage but having the two properties will only be costing me around £300 in mortgage costs.
Yep I agree and the agent even made it clear that I will have to allow £200 - £300 yr to cover for maintenance etc.
For sure I will insure the building itself, but when he says damage he means beyond normal wear and tear, now I know this could be subjective, but things like doors being hole and the such is what he means. For my property approx 300 photos would be taken for inventory !
The intention would be to pay off any mortgage as soon as I could and if things go Ok I reckon I could do it within 10yrs by over paying. I would then have two properties no mortgage and the other (current) house can be split between my two chidren in whatever way is most efficient when the time comes.
|
FP,
Also forgot to say, another main reason is that I want to move from my current house and have for several yrs now, but could not find the right house to move into.
Now I could try and sell my current one and be mortgage free, but the way I see it is, for the figure of say £300 per month I would have two properties and all going to plan my children would be able to have an "easier" start in life, god know it's hard enough now for FTB so in 15yr time !!!!!
|
I think I get your drift now. But why not aim to make a reasonable profit? Surely you can, if you choose your new property carefully. Have you done your research and sums carefully?
Buy-to-let seems back on the agenda and that means making a straight profit now, not later.
I'm glad you understand the likely expenditure to cover wear and tear and insurance. Certainly a hole punched in a hollow door by a tenant is not wear and tear!
I think you may be too cautious about what you can achieve.
In my case, the one house I let at first, ten years ago, produced £750 a month rent - let as a whole house. Subsequently I put locks on the bedroom doors, had three independent tenants and now take £950 in total, though all expenses apart from telephone are paid by me. I reckon if I had a mortgage I could still make a modest profit, though I am hands-on and save money that way.
|
The real money is in student lets. Little more up front to meet the multiple occupancy requirements, but a higher yeild in rents.
Of course the place needs to be near a campus. Hospitals tho are a good source for multiple occupancy tenants.
|
>> The real money is in student lets. Little more up front to meet the multiple
>> occupancy requirements, but a higher yeild in rents.
>>
>> Of course the place needs to be near a campus. Hospitals tho are a good
>> source for multiple occupancy tenants.
>>
I think the student lettings market is facing an uncertain future to be honest. Hospitals make more sense and will be more of a consistent demand.
|
|
Look after it yourself, bottomlesspit. If you have a property that is well presented and in a good area, etc, it will let very easily. You could ask an agent to point some prospective tenants in your direction, for which there is a one-off fee, but you (not the agent) need to show them around your house, and get them chatting. You'll soon pick up the vibes.
|
FP,
I suppose if you look at is individually then the house I would be renting will make me at most around £650pm profit (self managing, tax consdiered)
An then you could say my current house has a monthly mortgage of around £800 which I suppose in not unheard of these days. So yes I am making a nice little profit hence my plan to offset the new property.
Doing what I plan, I think I would be very hard stretched to have the rental income clear any new mortgage, actually it could not be done as my house could not command more than £850 currently.
House is not near town centre for student or near hospital, and I do not really want to consider multi-occupancy.
Same house 4 doors away from me was on the market for sale, lots of offers but chains kept breaking for whatever reason, they decided to rent asking £850 pm and was fighting them off and it was signed up on the first day, so I should not have any issue finding tenants.
I could self manage as I know the house inside out as I did almost all the work on it when I moved in, plumbing, eletrics etc, but I know of how long it can take to get someone out if needed and all that is lost income which again, fees to and agent tend to sway me to this agent on this gaurateed scheme.
Anyway I am off to see the potentail new property again tomorrow and will make a decison on an offer or not, now there is another thread !!!!!!
|
|
If you do self manage, dont move too far away from your let property.
|
Either way, the new porperty I am looking at is about 10mins walk away.
Current house is a 3 bed semi with garage and one tiny bathroom, hence why I want to move. New one is 4 bed detached with 3 toilets ( I do have 2 females in my household so need I say more) ensuite etc, but more interestingly it has a triple garage.
Now I have always wanted a double garage so I could buy a toy of sorts, but the irony is the one thing putting me off the property is the way the triple garage is laid out, as it is sort of staggared.
|
>>but the irony is the one thing putting me off the property is
>> the way the triple garage is laid out, as it is sort of staggared.
>>
Used for home brewing perhaps!
|
>>Yep I agree and the agent even made it clear that I will have to allow £200 - £300 yr to cover for maintenance etc.
Perhaps a lot more Sir. Perhaps a lot more.
|
>> The simplest answer is to use a guarantor with every tenant. If the tenant can't
You go find a decent letting agent then. Haha. Thankfully I have one, but I have never met another. bunch of 12.5% wasters......................Plus vat of course.
MD
|
|
...And that's for little more than collecting the rent.
|
>>and the agent even made it clear that I will have to allow £200 - £300 yr to cover for maintenance etc.
You just might get away with that on a good year. An extremely good year!
|
|
By maintenance, it only meant a lick of paint, not the bolier packing up !!!!!
|
|
Or a broken glazed unit or a plumbers call out or a.....................................
|
|
Glazed unit, easy just replaced 11 of them around the house, worked out at half the price quoted by some of these companies, mind you was a pain having to take each type out, take to glazer to get measured 100% correct, put back in and then take out again one new on was ready !
|
Ever since reading CP's long and helpful post I have been worrying about something.
CP may well have perfectly sound reasons for kicking a tenant out for smoking cannabis in contravention of the terms of the lease. So I have stopped myself from wondering why he gives a toss (please don't explain CP).
But how in God's name did CP find out that this was going on? I lived in rented flats all over London for many years in my youth, and never did I have a landlord who gave a damn about anything like that or would have bothered to try to detect it.
In the very stylish bachelor pad I shared with four or five others and a shifting population of girl friends in the early sixties (I wasn't the leaseholder), there was a list of persons not to be admitted posted inside the front door. At the top of the list, which otherwise consisted of notorious junkies, thieves and PITAs of our acquaintance, pride of place was occupied by
'1. The landlord or any representative of the landlord.
2. The fuzz.'
etc.
Of course I would never have had anything to do with accommodation whose owner was going to snoop, and then gripe at every little thing. Is that what it's like everywhere these days?
Last edited by: Armel Coussine on Thu 9 Jun 11 at 20:30
|
"But how in God's name did CP find out that this was going on?"
I'm not an intrusive landlord, AC. However, during one of my inspections I noticed the smell of tobacco (a blatant contravention of the terms of the lease) and another smell I didn't recognise. (I have limited experience of such matters.) I gave a warning about the smoking of tobacco, as I had done before.
Then one of the other tenants phoned me and, in effect, grassed the first bloke up. (I know, awful joke.) Put another way, he complained about the other guy. "The place stinks of cannabis," he said. (A later visit to Amsterdam confirmed the distinctive odour.)
Added to which, there had been the frequent overnight stays of the girlfriend etc, etc. The one thing he never did was miss rent payments.
So I got rid.
FP/CP
|
>> I'm not an intrusive landlord,
I'm sure you aren't. You certainly don't seem that sort of person.
But I am still amazed that there could be a flat whose lease forbids smoking. Of course if it's a furnished room in someone's house they can specify that (but they never used to that I can remember). What one wanted usually was an unfurnished place. No one could mess with you there.
Times have changed. I imagine just hearing the size of the rent these days would loosen my bowels.
Last edited by: Armel Coussine on Thu 9 Jun 11 at 22:46
|
.
>> But I am still amazed that there could be a flat whose lease forbids smoking.
>> Of course if it's a furnished room in someone's house they can specify that (but
>> they never used to that I can remember). What one wanted usually was an unfurnished
>> place. No one could mess with you there.
Common now - I think you will find any lease written over the last few years will exclude smoking in the property - I know mine does, and its a standard "cut and paste" type agreement
|
>> >> But I am still amazed that there could be a flat whose lease forbids smoking.
>>
>> Common now - I think you will find any lease written over the last few years will exclude smoking in the property
>>- I know mine does, and its a standard "cut and paste" type agreement
>>
No smoking is a must clause. My daughters flat has such a clause and if I found the tenants smoking in there they would be out immediately.
One of the tenants smokes but only outside so we are expecting little impact overall.
State that previous tenants were smokers and say bye bye to quite a few new potential tenants so it is a straight commercial decision.
Daughter will be returning in a couple of years so it is of prime importance it does not pong.
IMO smokers have little idea of how the smell travels etc. I often have to take a couple of paces back from smokers when in a check out queue-- UGH!!!
|
...there had been the frequent overnight stays of the girlfriend...
Spoilsport.
|
>>Added to which, there had been the frequent overnight stays of the girlfriend
I'm surprised that overnight stays of a girlfriend would bother you in the least. When a house is let to male or female sharers it is almost inevitable that they will be joined by members of the opposite sex within a few weeks, if not immediately. The only way of avoiding this is to let to a couple or a family.
There are advantages in having a mix of male and female tenants in my opinion.
Last edited by: Clk Sec on Fri 10 Jun 11 at 09:13
|
"I'm surprised that overnight stays of a girlfriend would bother you in the least."
It depends how far it goes. When you get to the situation where the stays become so frequent you have in effect a double tenancy then I think a landlord has every right to be involved.
With only one - shared - bathroom the demand on its facilities first thing in the day, when other tenants are trying to get to work, with four people rather than three in the house, became an issue which the other tenants felt less than happy about.
I don't have any moral views about sex taking place in the house - it's the practical issues that concerned me.
|
I have let property for the last 10 years.
The house I let now has been a nice little earner for me - new build house so a quick completion at year end ensured a bargain buy.
I used an agent to find a tennant, but not manage it for me. Cost me half a months rent in fees, and a small fee each year to extend the tennancy. I have been lucky in that I have had the same tennant for 8 years and she has been fab so happy days.
If I had paid the agent their 10% + VAT over the last 8 years then I would have coughed up somewhere around 7K in fees for very little.
Now the house is 8 years old the maintenance bills are starting to rise a little - odd bits like exterior paintwork fencing etc now need attention, but as I make a healthy profit each month no problem.
I wouldnt consider letting anything out where I had to contribute to the mortgage to break even - Think you could make far more investing the money wisely, and avoiding the risks associated with renting
|
Forgot to add that I pay for a british gas maintenance contract each month which covers the heating system, and plumbing and electrics. They carry out the needed safety checks each year and issue the certificate direct to me.
I have had a few issues with the heating system, but the tennant can (and does) call BG direct and they fix it.
|
There's nothing which ruins a house, (or a car) internally, than being occupied by smokers.
The walls, curtains, ceilings and carpets quickly get covered with yellow smoke/tar stains and the place smells awful.
If I was a landlord I would certainly exclude smokers.
|
>> There's nothing which ruins a house, (or a car) internally, than being occupied by smokers.
What rubbish. Sugar soap, laundry, paint, replacement, as if it had never been.
God how I hate modern people with their little sharp pink noses. Thank heaven there's still abroad.
Tchah!
|
>> What rubbish. Sugar soap, laundry, paint, replacement, as if it had never been.
Far cheaper though for the letting agent not to do half of that if a non smoker previously occupied the property. You will not 100% get rid of the smoke smell - yes you can mask it with air fresheners, but its noticeable as soon as your Glade plug in (or whatever) runs out.
|
|
To get rid of tobacco smoke smells you need to target the places that hold them most - fabrics. Unfortunately that may mean not just attempting to clean the carpets and curtains, but replacing them.
Last edited by: FocalPoint on Fri 10 Jun 11 at 01:23
|
...Unfortunately that may mean not just attempting to clean the carpets and curtains, but replacing them...
I think FP must use different standards to many landlords I've seen in the North East.
There's a lot of rental properties around here which never have a shilling spent on them from one year to the next.
Curtains smell of smoke?
"You change them if you want to," would be a likely reply from the landlord.
|
"I think FP must use different standards to many landlords I've seen in the North East."
You said it.
And I'm not in the north-east. We're civilised down here, you know - we have expectations. :-))
Seriously - I have always taken the line that you offer tenants a well-presented property and charge accordingly and I think that tends to result in better tenants... but there's no guarantee!
Last edited by: FocalPoint on Fri 10 Jun 11 at 11:07
|
...We're civilised down here, you know...
I think the main reason for the difference is the value of the asset.
Some houses up here are worth next to nothing, particularly if they are in a poor condition in a poor area.
Whole streets were bulldozed as slum clearance as recently as 10 years ago.
Even today, it's not unknown for a house to be abandoned by the owner because fixing it/demolishing it will cost more than it and the land it stands on is worth.
I can't see that ever happening in the south east.
|
OP. Beware tax.
You are expecting rent of £750 per month and have no mortgage. That will give you an annual tax bill of £1,800/£3,600.
|
He can offset some of that income with legitimate expenses - e.g. any fees for management, any interest on mortgage/loans (so it would be wise to ensure that any money borrowed can clearly be seen to be exclusively for the purpose of buying/refurbishing the property), insurance premiums, maintenance bills, gas/electricity safety certification, advertising etc.
In my case, as I manage the property myself and pay all bills, I can also put utility bills, council tax and water rates down as legitimate expenses and even petrol for visits for the purpose of inspection. Likewise the cost of any emergencies, like drain clearance on a Sunday! (Now that one was expensive!)
|
>> any interest on mortgage/loans
But the OP is suggesting renting the house that has no mortgage and buying one to live in. I would imagine the mortgage/loan on the new house has no bearing on the rented property. Perhaps better to remortgage the existing house to buy another?
Down the line, if the intention is to sell the property so the children have their share of the proceeds won't there also be capital gains tax to pay on any increase in house value?
Last edited by: rtj70 on Fri 10 Jun 11 at 11:43
|
"Perhaps better to remortgage the existing house to buy another?"
That was what I was thinking, but did not make clear.
If a separate loan of some kind is needed for refurbishment he may be able to put the interest on expenses too, but I seem to remember the Revenue may not look kindly on expenses incurred BEFORE letting starts - you need to check.
And yes - I would have thought capital gains come into this, though the OP may be able to make the let house his home address for the requisite time period before selling it and reverting to his other property.
Last edited by: FocalPoint on Fri 10 Jun 11 at 11:57
|
>> though the OP may be able to make the let house his home address for the requisite time
>> period before selling it and reverting to his other property.
Just like an MP ;-)
|
>> And yes - I would have thought capital gains come into this, though the OP
>> may be able to make the let house his home address for the requisite time
>> period before selling it and reverting to his other property.
Perhaps you can explain how this would work?
|
If you sell your main residence then there is no capital gains to pay when you sell. So he'd have to live there for a period to make it his main residence before selling it. And then switch to living in the other house. I believe the rules say you have to live in it for 2 out of the 5 years before the sale to avoid CGT. And you're only exempt if the profit is £250k for an individual anyway (double for a couple).
Personally, if you own a second home for rental purposes then you should have to pay the CGT and be unable to avoid it. It's an investment in a house after all to make money.... and thinking about it the CGT problem could be a lot bigger because it will be paid on the price difference from when it was bought and when it was sold. The OP's house was probably bought a while ago because the mortgage is paid off. So the CGT amount could be substantial if the house isn't sold for a number of years.
Last edited by: rtj70 on Fri 10 Jun 11 at 12:18
|
I don't want to appear to be some kind of expert on taxation. My understanding is based on what I've read. However, the following (from HM Revenue & Customs website) may be relevant:
In the section entitled "Capital Gains Tax relief on your own home" -
"You may still get the full relief even if you didn't live in your home all of the time that you owned it. The final 36 months (three years) that you own it will be treated as if you lived there, even if you didn't, as long as the property has been your only or main home at some time during the time that you owned it."
Last edited by: FocalPoint on Fri 10 Jun 11 at 12:20
|
>>and even petrol for visits for the purpose of inspection.
I think you will find that you can only claim for mileage incurred between rental properties, not for journeys to and from your own home.
|
|
My accountant advises me otherwise, for what it's worth!
|
Clk Sec>> I think you will find that you can only claim for mileage incurred between rental
>> properties, not for journeys to and from your own home.
Not so. You can claim for mileage www.hmrc.gov.uk/rates/travel.htm (rates here)between the "place of business" and the rental property.
So:
1. If you have a letting agent you can only claim as a maximum the mileage from their offices to the property - even if the distance form your own home is greater.
2. If you run the business from home, then you can claim for mileage to the property.
3. HMRC like running the argument that - if you have no letting agent - the rental property itself is the place of business, so no mileage claims at all are possible. If there is only one such property and it's a long way from where you live, then expect them to like this point of view.
4. If you fall within '2' and drop in on the property when you are going that way anyway, then no mileage claim is possible - except to the extent it takes you out of your way.
As for the CGT point:
1. There is no point moving back in as FocalPoint suggests as the last three years of ownership are deemed CGT free anyway.
2. In addition to the final three tax-free years, you also get 40k of gain extra free through "letting relief". If there are two of you as owners then that doubles to 80k provided you both lived there when you became owners of it.
3. You have your annual 10k free annual exemption as well.
4. There is quite likely to be tax to pay if you gift it to your children in fifteen years time. However you can gift just enough each year for several years to use up your 10k free.
And the interest deductibility point:
1. A mortgage on the new home is not deductible against rental profit on the old house.
2. If however you get a mortgage on the old house before you move out then the interest on that one IS deductible.
3. If subsequently to '2' you take out a larger mortgage on the new house in order to pay off the mortgage on the old house then that one should be tax deductible.
And the income:
If you are married/have a partner and one pays tax at a lower rate than the other, then you can take advantage of this point by - with a bit of paperwork - using the lower-rate taxpayer to receive the income.
Get an accountant, it's very easy to go horribly wrong.
Last edited by: Mapmaker on Fri 10 Jun 11 at 13:11
|
Hi All
Ah Tax !!
Yes I know I will need to consider which is best, to take out a mortgage as an interest only mortgage on the rented house would not incurr tax, but the BTL mortgages don't look too appealing.
"£1800 - "3600 in Tax !!!! Would it not be simply 20% as that is the rate of tax that is being paid on any income if below the higher tax bracket, So yes that figure cover both tax brackets.
How does it work when the house is in my name for ownership, but it will be my wifes name for it being rented, without stating the obvious here, it that efficiency allowed ? Otherwise I will simply xfer the house to her and hope she does not leave me !
|
>> but the BTL mortgages don't look too appealing.
>>
So if the BTL rates are not too appealing, what type of mortgage did you have in mind in when in you second post you said "At todays rate a mortgage on the new house will be around the £800 - £850 per mth, .... "?
If not BTL then you may find that the lender prohibits letting.
If they do allow letting, won't the rates will be higher than an for an owner occupied home?
Last edited by: John H on Fri 10 Jun 11 at 13:43
|
>>2. If you run the business from home, then you can claim for mileage to the property.
>>3. HMRC like running the argument that - if you have no letting agent - the rental property itself is the place of business, so no mileage claims at all are possible. If there is only one such property and it's a long way from where you live, then expect them to like this point of view.
I'm not sure that it would be worth the effort of keeping mileage records for the small amount the average landlord would be able to claim, assuming his properties are not a long distance away from his home - although every little helps, I guess.
Thanks for the information, Mapmaker.
|
|
I had forgotten the 20p per mile for using a bicycle. Excellent wheeze that one.
|
|
One can carry a pot of paint or two on the handlebars...
|
|
Or presumably make multiple journeys with small loads for each journey?
|
I must cycle to my nearest IR office to investigate, as I'm not one hundred percent convinced of this generosity, despite Mapmakers excellent post.
:)
|
The advice (from an accountant) I received several years ago was that it was possible (and allowable by HRMC) to take out a mortgage secured against your principal property and use the money for the purchase of a second property i.e. the BtL. The interest payable is allowable to be set against the letting income.
You only have to show what the money is being used for, the security used is of no interest to HRMC.
It only gets difficult if you take out more money than is required for the purchase of the second property.
|
>> The advice (from an accountant) I received several years ago was that it was possible
>> (and allowable by HRMC) to take out a mortgage secured against your principal property and
>> use the money for the purchase of a second property i.e. the BtL. The interest
>> payable is allowable to be set against the letting income.
That is absolutely true.
However OP proposes keeping his current property and buying a new one, with mortgage, to live in. The loan in his case has nothing whatsoever to do with letting the property. The loan in your case is take out in order to acquire a property.
OP. Mortgage your current house on a residential mortgage BEFORE you move out. Obtain consent to let from the mortgage lender. Let it out. The at some later point extend the mortgage on the new property (which is, as you say, cheaper) and use it to pay off the mortgage on the old house. That way interest payments on an amount up to the level of debt you managed to raise on the old property should be tax deductible.
|
Hi All
To Clarify
I want to move, we have outgrown our current house which has no mortgage.
So I buy a new house which will mean taking out a new mortgage.
I rent my old house and income will subsidise my new mortgage.
So buying another house as an investment to rent is not the idea it will be a family home, but I am I lucky enough to be in position whereby I have a large deposit towards a new house so need not sell my current house to raise a deposit.
I am speaking to an account later today on the subject, but I think I have a good idea of what is involved regarding taxes an mortgages etc, well I hoipe so anyway. and all said on this thread so far has crossed my mind.
BTL or LTB are running at around 4 to 5 % where as a standard ones (where you have a good deposit) I can get for around 2.89% so I reckon that difference is big enough to warrant a standard mortgage and pay tax on the rental income ?
Also I would only be able to take out a certian percentage against my current house, and would not wnat to have the hassle of looking for another smaller mortgage on the new one.
I will borrow at MAX 150K
|
pmh, he OPs situation is different. He want to let his current property which has no mortgage. It sounds to me he wants to take out a mortgage on a new house and move into that. But then he'll get no relief on the interest.
If he takes out a mortgage on the existing house (not buying it to let because he already owns it) he would need a mortgage that allowed letting the house - so presumably needs the more expensive BTL mortgage.
Would this not be simpler to buy another house with BTL mortgage and rent that one?
|
>>Would this not be simpler to buy another house with BTL mortgage and rent that one?
No, because transaction charges - agents fees 2%ish, SDLT, two sets of legal fees etc. etc.
Moreover, a home that was formerly a main residence comes with very generous CGT exemptions.
|
But isn't the CGT exemptions based on living there in the few years before it is sold?
Don't see why there would be two sets of legal fees buying a BLT house though. And agents fees of 2% will happen if he buys another house anyway surely?
Last edited by: rtj70 on Fri 10 Jun 11 at 15:10
|
>>But isn't the CGT exemptions based on living there in the few years before it is sold?
He has been living there for years.
>>Don't see why there would be two sets of legal fees buying a BLT house though.
Because he's selling his old house and buying a BTL. Two transactions, two sets of fees.
>>And agents fees of 2% will happen if he buys another house anyway surely?
No, as the vendor pays the fees.
|
"...he's selling his old house and buying a BTL."
In the end, it may not affect what you're saying, but in the original post it says the guy's keeping two properties until he eventually passes one (or what it fetches when sold) on to his kids.
Last edited by: FocalPoint on Fri 10 Jun 11 at 16:06
|
The OP does not say he's selling his old house though does he. He says he is thinking of buying another house and renting this one which is currently mortgage free.
So if he's renting the house he's lived in for years sometime in the future, CGT is a factor. He is not selling it now.
Or are you not discussing the original OP's question?
|
rtj70>> Or are you not discussing the original OP's question?
No I'm not. I'm explaining why YOUR idea - of selling the current house and buying a new BTL in order to achieve a tax deduction for interest- is not a good idea at all compared to keeping the one he has.
If you click the little arrow in the top corner you can see how this thread has developed in response to your suggestion.
>>So if he's renting the house he's lived in for years sometime in the future, CGT is a
>>factor. He is not selling it now.
I have - predictably - absolutely no idea what you mean. But the CGT benefits of renting a house you have previously lived in are explained here. www.car4play.com/forum/post/index.htm?t=6665&m=148902&v=e
|
Whatever, your aggression is showing again.
I was always mindful of the original posters questions and raising thoughts/questions/issues I see them as a lay person. The purpose of this thread was to assist the OP. Or so I though.
He was never selling his current house,
Don't patronise me about the 'little arrow' :-) I know the forum is still threaded and Khoo systems have some features to make viewing flat easier.
>> I have - predictably - absolutely no idea what you mean
The OP is talking about renting his current house long(ish) term. So automatic CGT exemption won't apply surely? This would not be his primary residence.
|
...Whatever, your aggression is showing again...
People think accountants are timid little fellows hiding behind their ledgers.
The best ones need an aggressive streak.
The likes of the Inland Revenue can play hard ball, and a good accountant may occasionally need to respond in kind.
|
|
Good point iffy. Apologies mapmaker. I might need your advice one day.
|
....apologies mapmaker...
rtj,
Fair play to you for that, but I don't think anyone need reproach themselves.
It was a good, robust and well-informed discussion.
Not that I pretend to have grasped much of it. :)
|
>> The OP is talking about renting his current house long(ish) term. So automatic CGT exemption
>> won't apply surely? This would not be his primary residence.
I have pointed you before to this post www.car4play.com/forum/post/index.htm?t=6665&m=148902&v=e yet you keep posting the same old rot! I don't know what more I can do.
My aggression? I am all sweetness and light whereas you keep banging on about something the little that you know is dangerous.
Last edited by: Mapmaker on Mon 13 Jun 11 at 10:40
|
>> How does it work when the house is in my name for ownership, but
>> it will be my wifes name for it being rented, without stating the obvious here,
>> it that efficiency allowed ? Otherwise I will simply xfer the house to her and
>> hope she does not leave me !
Re-read my post above, focussing on CGT point 2 and the final point about income.
|
pmh - that was also my understanding that the source or security of the funding was of no interest to HMRC - you just had to be able to prove that the advance against your exisiting property was to fund the purchase of the rental.
Another option that may / may not work is to buy the property as a residential home, then claim to the lender that you have had a change of circumstances and wish to let the property. They may / may not give permission. If they do you will in effect have a BTL mortgage at residential rates.
|
Hi Mapmaker and all,
Thanks for all your comments, I am going to have a chat with an accountant to see what my best options are, but it does look like a minefield to work through.
|
Best of luck with the discussion. It seems to me it's more complicated because you already own the home you are renting.
When/if I am in a similar position to rent the UK home if we move overseas I don't think I will be able to offset anything. But it's got me wondering about what you find out. Please report back. For us we'd be buying say in Italy (hopefully without a mortgage) but if somehow a mortgage could be taken into account against income I am interested.
Although does it make a difference for income tax purposes if you have no UK income - i.e. you can offset the full annual income tac allowance against it? But I don't wish to hijack the thread. I'll start my own when we have our money put aside in a few years.
|
Anyone out there a Landlord ? - Alastairw
