Bigger House + Lodgers, or Buy to Let

[Willeh85]

I own my own house which is a two Bed semi-detached bungalow. It's a nice size but not ideal in my eyes to share with a lodger.

I've set myself a 15-20 year plan which involves putting down deposits for a series of buy to let properties and building up a portfolio.

Which brings me to my conundrum for the early parts of my plan.

I'm currently saving around 800-1000 a month towards the deposit for my first buy to let property, which would see me on target for about three years to save the deposit needed. At this point I would also be due to remortgage my current property.

So for the early stages of the plan what would you do out of the following two options:

• Make over payments to the mortgage (within permitted overpayment allowance) to build extra equity and then look to move to a larger property that would allow myself and two lodgers to live in comfortably, and then continue saving for the buy to let properties or;
• Keep saving and have no lodgers at my current property, and purchase the buy to let, continue saving deposit for the next one.

I'm rather tempted by the first option given that I'd be moving to a bigger property and be covering my own mortgage whilst also saving for the buy to let. Over to you.

[BoRED S2upid]

Do you like the current property? Do you desire to live in a bigger property? Are you single? If the answers are along the lines of no, yes and yes then get a big house you like and a lodger to pay your mortgage if the answer are otherwise then I'd be looking at the BtL. I had lodgers for years but a big house helps and the income from them is tax free! Unlike a BTL.

[Sir Bagalot]

To me there is a huge difference between a home and a house.

With lodgers you don't have a true home (unless you know your lodgers very well). A house is just an investment asset.

If it were me I would keep my home just for me, and buy a BTL for others to live in

[Pit Pony]

There is a point just under £5K pa when you'll have to pay tax on the income from lodgers, minus the costs associated with having them.

If I were in your position, I'd get a BTL and rather than take on a Lodger, I'd register on AirB&B and have the ocsasional guest at home.

If you don't want them in the house, how about a erm glorified shed ?

https://www.airbnb.co.uk/rooms/2669798?checkin=04-...

https://www.airbnb.co.uk/rooms/919169?checkin=04-0...

[anonymous-user]

Personally, there is no way i'd want to share my home with strangers.

Bad BTL tenants will cost you financially, but a bad lodger could temporarily ruin your life.

[Willeh85]

Thanks for the responses chaps, it would seem the general consensus is to go with the buy to let and not get a lodger.

I do like my current house its a suitable size for me on my own, but I have PH aspirations so I would like a house with a larger garden to build a garage in.

Although I do quite like the idea though of the Air BnB and occasionally opening up my home to a guest for a night or two.

It's like having a lodger but can then turf them out after a day or two and I'd technically only need to fill 7 days a month to cover my mortgage. My current spare room is suitable for a night or two but I think a permanent lodger would soon grow tired of it and move on.

[Claudia Skies]

A BTL property will be subject to CGT on any gain, albeit that costs of acquisition and sale (including Stamp Duty) can be offset.

So far as I am aware having a single lodger doesn't affect the CGT exempt status of your home (Principal Private Residence).

[Rangeroverover]

Be a bit careful, don't go down the route of re-mortgaging on your main house and using that cash as a deposit for a BTL, lenders don't like it. If you need to do that leave at least 6 months from drawing the cash down until you apply for a BTL mortgage

[Willeh85]

Rangeroverover said:

Be a bit careful, don't go down the route of re-mortgaging on your main house and using that cash as a deposit for a BTL, lenders don't like it. If you need to do that leave at least 6 months from drawing the cash down until you apply for a BTL mortgage

Oh I wont be remortgaging. The two will be entirely separate and the cash for the deposit will come from savings.

[Condi]

If you can afford to have your own house then I wouldnt get a lodger, but if you want a bigger/nicer house then nothing wrong with a lodger helping. If you get a good one its just like living with your mates, and if you get a female then you might get offered payment in ways you wernt expecting.

[sugerbear]

Willeh85 said:

Thanks for the responses chaps, it would seem the general consensus is to go with the buy to let and not get a lodger.

I do like my current house its a suitable size for me on my own, but I have PH aspirations so I would like a house with a larger garden to build a garage in.

Although I do quite like the idea though of the Air BnB and occasionally opening up my home to a guest for a night or two.

It's like having a lodger but can then turf them out after a day or two and I'd technically only need to fill 7 days a month to cover my mortgage. My current spare room is suitable for a night or two but I think a permanent lodger would soon grow tired of it and move on.

A lodger doesn't have to stay all week, you could try a Monday to Friday let if you are in the right location (near to a train station into a city). Find someone with a professional, get an agreement signed and you can turf them out at short notice.

[sideways sid]

Not sure what kind of value you're considering, but the cost of moving will swallow most of your first year's rent from a lodger and potentially several years worth if up in the 4% Stamp Duty band.

[Willeh85]

sideways sid said:

Not sure what kind of value you're considering, but the cost of moving will swallow most of your first year's rent from a lodger and potentially several years worth if up in the 4% Stamp Duty band.

Next house would be priced £250 000 or less. Right now the prices of the houses I would look to move to are £215-230 000. However, I'd be looking to stay there 10 years minimum.

[Pit Pony]

sugerbear said:

A lodger doesn't have to stay all week, you could try a Monday to Friday let if you are in the right location (near to a train station into a city). Find someone with a professional, get an agreement signed and you can turf them out at short notice.

As a Freelancer, who moves around a bit for work, I usually explain that whilst I would usually be there 4 nights a week, I will leave my stuff in my room (otherwise I might as well stay in a B&B), would usually want to use the washing machine on Thursday night and leave it to dry in my room over the weekend, BUT reserve the right to occasionally stay over the weekend if there is a project need for me to work 7 days. I think in 6 years of doing this I've stayed 4 Sunday nights, in order to not be late for a crucial Meetings on Monday mornings . The last bloke had a really good agreement he'd downloaded, which basically allowed put in writing obligations from both sides, none of which were anything other than reasonable. It was clear that the agreement had an OCD obsession with cleanliness, where as the Landlord was fairly relaxed. I think I only ever pissed him off once because I refused to use the dishwasher, and would wash up not very well in the old fashioned way, but then my worst childhood memories are those related to having to unpack and pack the dishwasher every day. Weird, but I kind of hate them.