Discussion
For our 3 year old twins we want 2 small property's (we have none now) we can afford to buy 2 small ones outright and will study areas and market for best fit but my query is, if we buy 2 outright and want more later do we use them as collateral or should we mortgage and keep money. (Can't see why keeping £ would be. Good idea) but I may want to add to the 2 in future.
Probably best to put down a 40-50% deposit, or whatever will get you the best interest rate, than to buy outright. Might allow you to buy better houses in better areas, and maybe better long term capital appreciation.
That'll leave some money for refurb/any work that might need doing, if necessary. And means you can keep the extra to use as deposits later down the line. Might need to speak to a mortgage person do double check that.
For the long term, I still think buying something that is a dump, doing it up and then letting it is the best thing to do. Obviously, it depends on the properties, where you are and how much of the work you could do yourself.
Buying something that is already nice and let, or just nice and then letting, normally don't make that much money, or at least not round here.
That'll leave some money for refurb/any work that might need doing, if necessary. And means you can keep the extra to use as deposits later down the line. Might need to speak to a mortgage person do double check that.
For the long term, I still think buying something that is a dump, doing it up and then letting it is the best thing to do. Obviously, it depends on the properties, where you are and how much of the work you could do yourself.
Buying something that is already nice and let, or just nice and then letting, normally don't make that much money, or at least not round here.
Buy the two outright and raise money later on if needed.
If you spend for example £100k on two properties, that amount is what the BTL business owes you personally from a tax point of view. If you mortgage your own house or the rentals it doesn't matter, £100k is what is deductable in interest. It changed from years ago when you had to raise the mortgage on the property in question.
If you spend for example £100k on two properties, that amount is what the BTL business owes you personally from a tax point of view. If you mortgage your own house or the rentals it doesn't matter, £100k is what is deductable in interest. It changed from years ago when you had to raise the mortgage on the property in question.
AndrewO said:
Buy the two outright and raise money later on if needed.
If you spend for example £100k on two properties, that amount is what the BTL business owes you personally from a tax point of view. If you mortgage your own house or the rentals it doesn't matter, £100k is what is deductable in interest. It changed from years ago when you had to raise the mortgage on the property in question.
It does matter if you want to offset the interest. If you buy outright, then mortgage later, you can't offset the mortgage. Its the purpose of the loan, not what its secured against, that counts.If you spend for example £100k on two properties, that amount is what the BTL business owes you personally from a tax point of view. If you mortgage your own house or the rentals it doesn't matter, £100k is what is deductable in interest. It changed from years ago when you had to raise the mortgage on the property in question.
98elise said:
It does matter if you want to offset the interest. If you buy outright, then mortgage later, you can't offset the mortgage. Its the purpose of the loan, not what its secured against, that counts.
Correct.If you mortgage the properties to purchase them, then you can offset the interest costs.
If you buy them outright and then raise money against them, the reason for the mortgage is no longer to purchase the property, it's for another reason which would mean you can't offset the interest costs.
AndrewO said:
I'll hunt down a link.....
It also works for remortgaging/raising more cash. The amount of capital/interest can only be deducted that equals the valuation of the property when its taken into BTL (first tenant moves in).
If you remortgage the unencumbered properties to raise cash to purchase another property then it can be offset. If it's for any other reason it won't be allowable.It also works for remortgaging/raising more cash. The amount of capital/interest can only be deducted that equals the valuation of the property when its taken into BTL (first tenant moves in).
http://www.landlordzone.co.uk/forums/showthread.ph...
This one covers it
http://www.landlordzone.co.uk/forums/showthread.ph...
better one.
This one covers it
http://www.landlordzone.co.uk/forums/showthread.ph...
better one.
Edited by AndrewO on Monday 11th March 20:26
"If you remortgage the unencumbered properties to raise cash to purchase another property then it can be offset. If it's for any other reason it won't be allowable."
Not my understanding see here:-
http://www.hmrc.gov.uk/manuals/bimmanual/bim45700....
http://www.accountingweb.co.uk/anyanswers/letting-...
There is much confusion round this, I have been to inland revenue with it on behalf of clients to get written confirmation, even then you have to quote BIM at them and speak to some one high enough to understand, but example 2 in Bim 45700 is authoritive!
Not my understanding see here:-
http://www.hmrc.gov.uk/manuals/bimmanual/bim45700....
http://www.accountingweb.co.uk/anyanswers/letting-...
There is much confusion round this, I have been to inland revenue with it on behalf of clients to get written confirmation, even then you have to quote BIM at them and speak to some one high enough to understand, but example 2 in Bim 45700 is authoritive!
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