Discussion
Purely after points of view as this is a hypothetical pending my cancer doing one.
OH has a 3bed she owns 80% of, worth about £270k.
I rent but have approx £200k for house purchase
At some point we'll be buying a family home and I can't decide if we should pull out some equity and keep her place as a BTL.
We have one child so keeping as investment for uni etc appeals but recent health also focuses the mind on wanting to keep mortgage of our place low/covered somehow. New House will be in the £450k range
What would you do? Things I need to be thinking of etc
OH has a 3bed she owns 80% of, worth about £270k.
I rent but have approx £200k for house purchase
At some point we'll be buying a family home and I can't decide if we should pull out some equity and keep her place as a BTL.
We have one child so keeping as investment for uni etc appeals but recent health also focuses the mind on wanting to keep mortgage of our place low/covered somehow. New House will be in the £450k range
What would you do? Things I need to be thinking of etc
When I was a LL we were making 6-7% a year after all fees, taxes, insurance, maintenance etc.
That was with a rate at 0.25 above base.
At that time it was ok.
We also just missed the extra SDLT in 2016 when we bought our current house.
With BTL mortgage rates IRO 5% and SVR being not far off 8-9% in many cases just be aware profits might be not a lot.
The extra SDLT is also something to factor in.
That was with a rate at 0.25 above base.
At that time it was ok.
We also just missed the extra SDLT in 2016 when we bought our current house.
With BTL mortgage rates IRO 5% and SVR being not far off 8-9% in many cases just be aware profits might be not a lot.
The extra SDLT is also something to factor in.
That's £270k you can't put towards your new house.. How much in interest will you be paying to borrow that per month...about £1200 on repayment?
Consider what tax bracket she is in and what the extra income might put her in. If she is a higher rate tax payer then she is looking at 40% tax on the extra income, which makes it unlikely to be yielding a profit every month. You'll have to run the numbers based on her income to see if it works.
Some expenses can be offset to reduce the tax burden. If the mortgage will be on your new home, not the rental property, then you can't get any tax relief on that (you would only get tax relief on a small amount anyway).
It's less tax if you run it as a business, but then I believe you have to "sell" the place to your business and have to pay stamp duty as noted by the above poster.
Also consider:
Void periods.
Paying council tax on void periods.
Redec/cleaning/repair costs/hassle of doing it yourself.
LL insurance.
Annual gas inspection.
Some areas require a landlord license.
If you want a management company to run it they will take 10% + VAT.
Consider what tax bracket she is in and what the extra income might put her in. If she is a higher rate tax payer then she is looking at 40% tax on the extra income, which makes it unlikely to be yielding a profit every month. You'll have to run the numbers based on her income to see if it works.
Some expenses can be offset to reduce the tax burden. If the mortgage will be on your new home, not the rental property, then you can't get any tax relief on that (you would only get tax relief on a small amount anyway).
It's less tax if you run it as a business, but then I believe you have to "sell" the place to your business and have to pay stamp duty as noted by the above poster.
Also consider:
Void periods.
Paying council tax on void periods.
Redec/cleaning/repair costs/hassle of doing it yourself.
LL insurance.
Annual gas inspection.
Some areas require a landlord license.
If you want a management company to run it they will take 10% + VAT.
Edited by AlexC1981 on Thursday 28th December 10:08
Bernie_78 said:
What would you do? Things I need to be thinking of etc
In addition to paying more SDLT on a future house if this one is still held privately:1) How much would it hurt to lose 6-9 months rent and/or pay out for a full refurb? Do you have a slush fund of a few £k for emergency works.
That is the reality of what a nightmare tenant or surprise maintenance (e.g. boiler failure) could cost.
2) What is the emotional connection with the house? Would the OH be hurt if it got damaged in any way?
Personally I would be reluctant to let out a former home. Indeed, I have sold in the past and bought rentals with zero emotion instead.
3) Is the property a good rental prospect?
Not all are… depends on area and where it sits in the market.
4) Are you happy with the potential returns?
They are not as good as they used to be, and you would be wise to consider both rental and capital aspects.
jonathan_roberts said:
Many people will tell me I’m wrong because there’s an arbitrage to be done between stocks/shares/different interest rates etc, but… my personal opinion and experience is that there is a lot of solace to be had in owning your own place outright.
This. Mortgage free. Just think about that. Most people paying 4 figures mortgage payments every month of their lives OP paying nothing. LooneyTunes said:
Bernie_78 said:
What would you do? Things I need to be thinking of etc
In addition to paying more SDLT on a future house if this one is still held privately:1) How much would it hurt to lose 6-9 months rent and/or pay out for a full refurb? Do you have a slush fund of a few £k for emergency works.
That is the reality of what a nightmare tenant or surprise maintenance (e.g. boiler failure) could cost.
2) What is the emotional connection with the house? Would the OH be hurt if it got damaged in any way?
Personally I would be reluctant to let out a former home. Indeed, I have sold in the past and bought rentals with zero emotion instead.
3) Is the property a good rental prospect?
Not all are… depends on area and where it sits in the market.
4) Are you happy with the potential returns?
They are not as good as they used to be, and you would be wise to consider both rental and capital aspects.
I looked long and hard at BTL as part of a pension strategy diversification, but the key point here is diversification. Ultimately I decided against it as capital growth is relatively poor (Point 4) in the local area and considered with the potential hassles (Point 1) I didn't think the risk was worth it.
Sounds like hassle and added expense you don’t need, becoming a landlord on a single unit of higher value and with emotional attachment is really not a good idea when you’s could instead be virtually mortgage free.
If you keep this property you end up paying tax on any profits, additional 3% LDST. Plus the upkeep / maintenance. A lot more paid on mortgage interest. Probably need to transfer existing property to btl mortgage which rates are currently >7%
There’s other ways to look after the child in forms of lifetime isa, s&s isa, pension etc which would be more clinical and more tax efficient.
If you keep this property you end up paying tax on any profits, additional 3% LDST. Plus the upkeep / maintenance. A lot more paid on mortgage interest. Probably need to transfer existing property to btl mortgage which rates are currently >7%
There’s other ways to look after the child in forms of lifetime isa, s&s isa, pension etc which would be more clinical and more tax efficient.
AlexC1981 said:
That's £270k you can't put towards your new house.. How much in interest will you be paying to borrow that per month...about £1200 on repayment?
Consider what tax bracket she is in and what the extra income might put her in. If she is a higher rate tax payer then she is looking at 40% tax on the extra income, which makes it unlikely to be yielding a profit every month. You'll have to run the numbers based on her income to see if it works.
Some expenses can be offset to reduce the tax burden. If the mortgage will be on your new home, not the rental property, then you can't get any tax relief on that (you would only get tax relief on a small amount anyway).
It's less tax if you run it as a business, but then I believe you have to "sell" the place to your business and have to pay stamp duty as noted by the above poster.
Also consider:
Void periods.
Paying council tax on void periods.
Redec/cleaning/repair costs/hassle of doing it yourself.
LL insurance.
Annual gas inspection.
Some areas require a landlord license.
If you want a management company to run it they will take 10% + VAT.
We'd need to remortgage her place to a BTL and would take some equity out for the family home. I'm factoring in the costs to do that but SDLT wasn't something I was aware of so thanksConsider what tax bracket she is in and what the extra income might put her in. If she is a higher rate tax payer then she is looking at 40% tax on the extra income, which makes it unlikely to be yielding a profit every month. You'll have to run the numbers based on her income to see if it works.
Some expenses can be offset to reduce the tax burden. If the mortgage will be on your new home, not the rental property, then you can't get any tax relief on that (you would only get tax relief on a small amount anyway).
It's less tax if you run it as a business, but then I believe you have to "sell" the place to your business and have to pay stamp duty as noted by the above poster.
Also consider:
Void periods.
Paying council tax on void periods.
Redec/cleaning/repair costs/hassle of doing it yourself.
LL insurance.
Annual gas inspection.
Some areas require a landlord license.
If you want a management company to run it they will take 10% + VAT.
Edited by AlexC1981 on Thursday 28th December 10:08
Is there an easy way to estimate average void periods/council tax etc?
LooneyTunes said:
In addition to paying more SDLT on a future house if this one is still held privately:
1) How much would it hurt to lose 6-9 months rent and/or pay out for a full refurb? Do you have a slush fund of a few £k for emergency works.
That is the reality of what a nightmare tenant or surprise maintenance (e.g. boiler failure) could cost.
2) What is the emotional connection with the house? Would the OH be hurt if it got damaged in any way?
Personally I would be reluctant to let out a former home. Indeed, I have sold in the past and bought rentals with zero emotion instead.
3) Is the property a good rental prospect?
Not all are… depends on area and where it sits in the market.
4) Are you happy with the potential returns?
They are not as good as they used to be, and you would be wise to consider both rental and capital aspects.
I'm working through her place now to assess possible risk of failures - new boiler would be a given I think1) How much would it hurt to lose 6-9 months rent and/or pay out for a full refurb? Do you have a slush fund of a few £k for emergency works.
That is the reality of what a nightmare tenant or surprise maintenance (e.g. boiler failure) could cost.
2) What is the emotional connection with the house? Would the OH be hurt if it got damaged in any way?
Personally I would be reluctant to let out a former home. Indeed, I have sold in the past and bought rentals with zero emotion instead.
3) Is the property a good rental prospect?
Not all are… depends on area and where it sits in the market.
4) Are you happy with the potential returns?
They are not as good as they used to be, and you would be wise to consider both rental and capital aspects.
No sentimental attachment at all, largely wants out ASAP as very much outgrown it.
It is a good prospect, schools close, bus stop at the end of the road and a largely problem free bul de sac. Have agents coming to value next week so I can get some firm figures but great points
BoRED S2upid said:
This. Mortgage free. Just think about that. Most people paying 4 figures mortgage payments every month of their lives OP paying nothing.
Honestly its where I'd rather we head. I've had some health issues of late and although covered by company sick pay its a burden I'd like rid of ASAPEdible Roadkill said:
Sounds like hassle and added expense you don’t need, becoming a landlord on a single unit of higher value and with emotional attachment is really not a good idea when you’s could instead be virtually mortgage free.
If you keep this property you end up paying tax on any profits, additional 3% LDST. Plus the upkeep / maintenance. A lot more paid on mortgage interest. Probably need to transfer existing property to btl mortgage which rates are currently >7%
There’s other ways to look after the child in forms of lifetime isa, s&s isa, pension etc which would be more clinical and more tax efficient.
Curious on SDLT and the order of things we'd need to followIf you keep this property you end up paying tax on any profits, additional 3% LDST. Plus the upkeep / maintenance. A lot more paid on mortgage interest. Probably need to transfer existing property to btl mortgage which rates are currently >7%
There’s other ways to look after the child in forms of lifetime isa, s&s isa, pension etc which would be more clinical and more tax efficient.
We'd need to remortgage onto a BTL to release equity so it would happen before we "buy" our primary residence. Does this still mean we incur the SDLT?
In addition, we'd likely only pull £100-£125k out but SDLT is on the value of the house not the mortgage amount correct?
THanks all for the help, been in hopstial over Christmas/New Year hence delay in replies
I think it’s more a second home tax whatever way it’s dressed up, you’ll pay some stamp duty on the new property anyway but if keeping the current one then you pay an extra 3%
Get yourself mortgage free and worry free, i done exactly that last year and it’s a lovely refreshing feeling of security, stress reducing and a delightful addition of unaccounted for monthly income no longer paying down a mortgage. Knowing we could survive on one small income if needed and that no one can chuck us out our home is worth its weight in gold to me.
Get yourself mortgage free and worry free, i done exactly that last year and it’s a lovely refreshing feeling of security, stress reducing and a delightful addition of unaccounted for monthly income no longer paying down a mortgage. Knowing we could survive on one small income if needed and that no one can chuck us out our home is worth its weight in gold to me.
Horrible thing to be thinking but,
If a place is hers & you don’t live in it, would it always be treated as hers as a pre-marital asset in the event of a split?
I’m only aware of this as know some women who’ve kept & rented their own flats out as a form of security, they’ve been given this advice. Just a heads up in case she’s aware of this possibility & views this as removing a bit of security she has.
If a place is hers & you don’t live in it, would it always be treated as hers as a pre-marital asset in the event of a split?
I’m only aware of this as know some women who’ve kept & rented their own flats out as a form of security, they’ve been given this advice. Just a heads up in case she’s aware of this possibility & views this as removing a bit of security she has.
It is worth remembering with a long term BTL that at some point you will incur major expense such as putting in a new kitchen/bathroom/ total refurbishment etc and that you will be paying tax on any rent received that will take a lot of the profit out
Personally in your situation I would be going for a easy mortgage free life
Good luck
Personally in your situation I would be going for a easy mortgage free life
Good luck
Bernie_78 said:
Purely after points of view as this is a hypothetical pending my cancer doing one.
OH has a 3bed she owns 80% of, worth about £270k.
I rent but have approx £200k for house purchase
At some point we'll be buying a family home and I can't decide if we should pull out some equity and keep her place as a BTL.
We have one child so keeping as investment for uni etc appeals but recent health also focuses the mind on wanting to keep mortgage of our place low/covered somehow. New House will be in the £450k range
What would you do? Things I need to be thinking of etc
So between you, you have about £415k?OH has a 3bed she owns 80% of, worth about £270k.
I rent but have approx £200k for house purchase
At some point we'll be buying a family home and I can't decide if we should pull out some equity and keep her place as a BTL.
We have one child so keeping as investment for uni etc appeals but recent health also focuses the mind on wanting to keep mortgage of our place low/covered somehow. New House will be in the £450k range
What would you do? Things I need to be thinking of etc
Personally I'd just buy whatever I can get with no mortgage whatsoever. Ideally something with great potential to extend. Maybe I'd consider a very small mortgage, but I'd want it gone ASAP.
I know all the boring maths arguments spouted by armchair IFAs (and I always have to bite my tongue as they drone on about their calculations, given that do financial models professionally...), but if I was within striking distance of being mortgage free I'd grab that opportunity with both hands.
Bernie_78 said:
BoRED S2upid said:
This. Mortgage free. Just think about that. Most people paying 4 figures mortgage payments every month of their lives OP paying nothing.
Honestly its where I'd rather we head. I've had some health issues of late and although covered by company sick pay its a burden I'd like rid of ASAPThere was a thread on here a year or 2 back where someone was an accidental landlord and it all went to s
t, and I mean completely to st. I can’t remember the exact name or I’d post it here, but I’m sure someone else can in. It’s a very sobering read just to give a bit of perspective.
That said I have a rental property but I have had it > 10 years so have seen capital growth.
t, and I mean completely to st. I can’t remember the exact name or I’d post it here, but I’m sure someone else can in. It’s a very sobering read just to give a bit of perspective.That said I have a rental property but I have had it > 10 years so have seen capital growth.
BoRED S2upid said:
Bernie_78 said:
BoRED S2upid said:
This. Mortgage free. Just think about that. Most people paying 4 figures mortgage payments every month of their lives OP paying nothing.
Honestly its where I'd rather we head. I've had some health issues of late and although covered by company sick pay its a burden I'd like rid of ASAPGassing Station | Finance | Top of Page | What's New | My Stuff