House Buying - FTB, solo or joint? BTL or renovate?
Discussion
Hello all
It's been some time since I've contributed to the forums, but appreciate the collective knowledge available here.
My girlfriend and I are looking to invest and feel property will yield better returns than our current ISA/Savings. We're undecided between Buy To Let, or purchasing a property which requires renovation work. We're in a fortunate position to have tradesmen in our family, and my partner works in lettings.
In terms of income - I don't feel we can rely on property prices going up, so it's slightly more weighted towards a regular income.
We'd obviously like to maximise returns and use the system to our full advantage. There are a few options available as far as I can see. I've outlined some of the facts which might preempt your questions.
We have ~£40k deposit, increasing by ~£1k pcm.
We are currently renting.
I pay 40% tax and my partner pays 20%.
And this is what I've come up with...
Buy to Let: We maximise deposit available to get the best interest rate. We continue to rent. We will probably look at buying cheaper properties that need a little work.
1) My partner buys the property herself (her funds, her name).
2) We buy a BTL together.
3) We buy our own BTL mortgages.
I understand there are tax implications on BTL mortgages, and I'd have to pay 40% tax on income if it's in my name versus my partner only paying 20% if it was in hers.. Appreciate I can offset tax on the interest, mgmt fees etc. What happens if it's in both of our names? Where do we stand tax wise?
Purchase a property which needs 'work' (kitchen, bathroom, carpets etc; nothing structural per say).
1) We collectively buy together, using maximum available deposit. We look to turnaround work in 6 months and sell. We wouldn't be in a rush to sell, so if we're unable to shift in 6 months we would still have a home we're happy with. No CTG to consider as we would be living in the property.
I purchase a (cheaper) property which needs 'work' (kitchen, bathroom, carpets etc; nothing structural per say) and we live there, whilst my partner invests in a BTL.
1) I guess we're spreading risk and investment? The property I buy and we subsequently live in wouldn't suitable for us long term, so we'd want to shift it at some point but this wouldn't be essential.
We really want to make full use of the options available to us for maximising return. I understand there are ways to reduce taxable income, and 'schemes' we can take advantage of (first time buyers, buying in separate names?)
Feedback and suggestions more than welcome. Even if it's advice on BTL mortgage paying off equity or just looking at interest.
It's been some time since I've contributed to the forums, but appreciate the collective knowledge available here.
My girlfriend and I are looking to invest and feel property will yield better returns than our current ISA/Savings. We're undecided between Buy To Let, or purchasing a property which requires renovation work. We're in a fortunate position to have tradesmen in our family, and my partner works in lettings.
In terms of income - I don't feel we can rely on property prices going up, so it's slightly more weighted towards a regular income.
We'd obviously like to maximise returns and use the system to our full advantage. There are a few options available as far as I can see. I've outlined some of the facts which might preempt your questions.
We have ~£40k deposit, increasing by ~£1k pcm.
We are currently renting.
I pay 40% tax and my partner pays 20%.
And this is what I've come up with...
Buy to Let: We maximise deposit available to get the best interest rate. We continue to rent. We will probably look at buying cheaper properties that need a little work.
1) My partner buys the property herself (her funds, her name).
2) We buy a BTL together.
3) We buy our own BTL mortgages.
I understand there are tax implications on BTL mortgages, and I'd have to pay 40% tax on income if it's in my name versus my partner only paying 20% if it was in hers.. Appreciate I can offset tax on the interest, mgmt fees etc. What happens if it's in both of our names? Where do we stand tax wise?
Purchase a property which needs 'work' (kitchen, bathroom, carpets etc; nothing structural per say).
1) We collectively buy together, using maximum available deposit. We look to turnaround work in 6 months and sell. We wouldn't be in a rush to sell, so if we're unable to shift in 6 months we would still have a home we're happy with. No CTG to consider as we would be living in the property.
I purchase a (cheaper) property which needs 'work' (kitchen, bathroom, carpets etc; nothing structural per say) and we live there, whilst my partner invests in a BTL.
1) I guess we're spreading risk and investment? The property I buy and we subsequently live in wouldn't suitable for us long term, so we'd want to shift it at some point but this wouldn't be essential.
We really want to make full use of the options available to us for maximising return. I understand there are ways to reduce taxable income, and 'schemes' we can take advantage of (first time buyers, buying in separate names?)
Feedback and suggestions more than welcome. Even if it's advice on BTL mortgage paying off equity or just looking at interest.
Edited by Teddye4687 on Wednesday 11th March 16:09
You don't tell us what the main aim of all this is, how long the plan is for etc... also we don't know how much you can borrow and therefore buy, so many unknowns. Having a BTL and still renting could net you enough to cover your rent so your rent free so thats a bonus. Buying renovating living in it and selling has it's own issues (You living in a building site) but you can move up the property ladder if you sell for a profit.
What happens if it's in both of our names? Where do we stand tax wise?
If your both on the deeds and rent the BTL you both pay tax 50/50 on your self assessment, you at 40% her at 20% so I see your point about putting it in her name and reducing the tax etc..
What happens if it's in both of our names? Where do we stand tax wise?
If your both on the deeds and rent the BTL you both pay tax 50/50 on your self assessment, you at 40% her at 20% so I see your point about putting it in her name and reducing the tax etc..
I currently rent because I've never considered buying and have been saving for the deposit. I have only one income from my job - My missus the same.
BoRED S2upid said:
You don't tell us what the main aim of all this is, how long the plan is for etc...
The BTL properties would be longer term (min 5 years). If property prices were to substantially improve, we'd look to sell. Re buying for ourselves, I mentioned the view to turnaround in 6 months to sell but this isn't essential.BoRED S2upid said:
Also we don't know how much you can borrow and therefore buy, so many unknowns.
I can borrow ~£200k, my partner ~£100k. £250k if we were to combine.BoRED S2upid said:
If your both on the deeds and rent the BTL you both pay tax 50/50 on your self assessment, you at 40% her at 20% so I see your point about putting it in her name and reducing the tax etc..
Thanks. So we effectively split income and tax returns 50/50? I didn't think HMRC would approach it so logically!!Edited by Teddye4687 on Wednesday 11th March 16:42
I currently rent because I've never considered buying and have been saving for the deposit. I have only one income from my job - My missus the same.
BoRED S2upid said:
You don't tell us what the main aim of all this is, how long the plan is for etc...
The BTL properties would be longer term (min 5 years). If property prices were to substantially improve, we'd look to sell. Re buying for ourselves, I mentioned the view to turnaround in 6 months to sell but this isn't essential.BoRED S2upid said:
Also we don't know how much you can borrow and therefore buy, so many unknowns.
I can borrow ~£200k, my partner ~£100k. £250k if we were to combine.BoRED S2upid said:
If your both on the deeds and rent the BTL you both pay tax 50/50 on your self assessment, you at 40% her at 20% so I see your point about putting it in her name and reducing the tax etc..
Thanks. So we effectively split income and tax returns 50/50? I didn't think HMRC would approach it so logically!!Edited by Teddye4687 on Thursday 12th March 15:56
Claudia Skies said:
Buy yourselves a house to live in.
Capital gain on your owned home is free from CGT.
If you have the inclination, your work and that of tradesmen in the family can be deployed very tax-efficiently.
This. All over! Capital gain on your owned home is free from CGT.
If you have the inclination, your work and that of tradesmen in the family can be deployed very tax-efficiently.
Why would you buy a buy to let, and pay tax on the income, only to pay rent yourself? Why not save the rent and invest into a property of your own? Obviously a house needing work will be cheaper, it also gives you an ability to make it 'yours'. Makes very little sense to do otherwise, especially with tradesmen you know and who will probably charge mates rates.
Claudia Skies said:
Buy yourselves a house to live in.
Capital gain on your owned home is free from CGT.
If you have the inclination, your work and that of tradesmen in the family can be deployed very tax-efficiently.
Buy one where you can rent out a room with an ensuite and get £4570 (or something close) TX free in rent. Capital gain on your owned home is free from CGT.
If you have the inclination, your work and that of tradesmen in the family can be deployed very tax-efficiently.
Condi said:
Why would you buy a buy to let, and pay tax on the income, only to pay rent yourself? Why not save the rent and invest into a property of your own? Obviously a house needing work will be cheaper, it also gives you an ability to make it 'yours'. Makes very little sense to do otherwise, especially with tradesmen you know and who will probably charge mates rates.
Consider this hypothetical example.OP might choose to rent for example a nice old cottage, market value of lets say £250k for £900 per month. He is paying his landlord a gross yield of 4.2% on the landlords money and he gets to live in a lovely place for not much cash.
OP takes his 250k instead and buys 10 houses up north for example, valued at £100k each with £25k deposits on each. With a net cashflow after mortgage/costs of £200 per property, he is earning £2k a month from his portfolio. Easily enough to pay his rent and reinvest the rest.
So sometimes renting is not such a bad choice - it can be arbitrage between areas of high and low rental yield.
Of course there is less risk when buying your own home as you are getting a guaranteed "return" in the form of the saved rent each month. Plus you don't really care too much if house prices drop because you intend to live there long term.
If OP does his calculations on his prospective btl investment return VS his savings on rent by buying a house - it might make sense to put his money to work harder in BTL.
Pit Pony said:
Buy one where you can rent out a room with an ensuite and get £4570 (or something close) TX free in rent.
This is a good plan also. Just make sure your mortgage lender and buildings insurer allow lodgers or you could be in breach of your terms.If all goes well with this approach you could even branch into HMOs!
trowelhead said:
Pit Pony said:
Buy one where you can rent out a room with an ensuite and get £4570 (or something close) TX free in rent.
This is a good plan also. Just make sure your mortgage lender and buildings insurer allow lodgers or you could be in breach of your terms.If all goes well with this approach you could even branch into HMOs!
trowelhead said:
Consider this hypothetical example.
OP might choose to rent for example a nice old cottage, market value of lets say £250k for £900 per month. He is paying his landlord a gross yield of 4.2% on the landlords money and he gets to live in a lovely place for not much cash.
OP takes his 250k instead and buys 10 houses up north for example, valued at £100k each with £25k deposits on each. With a net cashflow after mortgage/costs of £200 per property, he is earning £2k a month from his portfolio. Easily enough to pay his rent and reinvest the rest.
So sometimes renting is not such a bad choice - it can be arbitrage between areas of high and low rental yield.
Of course there is less risk when buying your own home as you are getting a guaranteed "return" in the form of the saved rent each month. Plus you don't really care too much if house prices drop because you intend to live there long term.
If OP does his calculations on his prospective btl investment return VS his savings on rent by buying a house - it might make sense to put his money to work harder in BTL.
Hypothetically fine, but firstly the OP doesnt have £200k, he has £40k. And secondly, no lender is going to lend that amount of money on a BTL basis with such a small capital investment. 2 or 3 houses vacant for even a short period of time is going to cause issues. OP might choose to rent for example a nice old cottage, market value of lets say £250k for £900 per month. He is paying his landlord a gross yield of 4.2% on the landlords money and he gets to live in a lovely place for not much cash.
OP takes his 250k instead and buys 10 houses up north for example, valued at £100k each with £25k deposits on each. With a net cashflow after mortgage/costs of £200 per property, he is earning £2k a month from his portfolio. Easily enough to pay his rent and reinvest the rest.
So sometimes renting is not such a bad choice - it can be arbitrage between areas of high and low rental yield.
Of course there is less risk when buying your own home as you are getting a guaranteed "return" in the form of the saved rent each month. Plus you don't really care too much if house prices drop because you intend to live there long term.
If OP does his calculations on his prospective btl investment return VS his savings on rent by buying a house - it might make sense to put his money to work harder in BTL.
If it was a choice between - should I buy outright, or should I invest in multiple BTL properties, then you'd be right, but that wasn't the question.
Condi said:
This. All over!
Why would you buy a buy to let, and pay tax on the income, only to pay rent yourself? Why not save the rent and invest into a property of your own?
Because everyone wants to be a clever pwoperty developer with a portfolio of heavily leveraged low yield investments. It's a guaranteed money for nothing safe bet too, dont you watch daytime TV?Why would you buy a buy to let, and pay tax on the income, only to pay rent yourself? Why not save the rent and invest into a property of your own?
No status in doing something sensible like using your saved deposit to buy a house to live in, why would you?
Condi said:
Hypothetically fine, but firstly the OP doesnt have £200k, he has £40k.
I know, just making a point. OP could choose to use his 40k as 2x deposits for low value properties (50k terraces) mortgage at 75% LTV. He would need to work out the numbers and assess his own attitude to risk of course!Condi said:
And secondly, no lender is going to lend that amount of money on a BTL basis with such a small capital investment. 2 or 3 houses vacant for even a short period of time is going to cause issues.
You're saying BTL lenders don't lend at 75% LTV??Good point on the "may need own home to get btl mortgage" - there are some that don't require this - virgin money if i remember correctly etc...
Apologies if this has been said already, it is nigh on impossible to get a BTL mortgage without owning a residential property.
Buy a small flat for £100k with a £15k deposit, you should get about £600 per month from it when/if you rent it out
Use that as your prime residence, while living in it use the remainder of your cash to get BTL mortgage on another property. Once BTL is purchased, at that point if you want to let the £100k flat and go back to renting you can.
If you buy something that needs work, the money you spend is real cash rather than mortgage money so if you spend £10k on renovations and get £1000 per month after renovations you need to factor in the lost month(s) rent while work was being done and mortgage money still going out.
Once let and paying mortgage etc it will take you at least 18 months to see that £10k plus lost rent back, although you probably will have increased the capital value of the property.
Ideally you should buy something for yourself to live in rather than renting unless you have some mega deal from Council/Housing assoc, otherwise you are just paying someone elses mortgage.
Where in the country are you??
Buy a small flat for £100k with a £15k deposit, you should get about £600 per month from it when/if you rent it out
Use that as your prime residence, while living in it use the remainder of your cash to get BTL mortgage on another property. Once BTL is purchased, at that point if you want to let the £100k flat and go back to renting you can.
If you buy something that needs work, the money you spend is real cash rather than mortgage money so if you spend £10k on renovations and get £1000 per month after renovations you need to factor in the lost month(s) rent while work was being done and mortgage money still going out.
Once let and paying mortgage etc it will take you at least 18 months to see that £10k plus lost rent back, although you probably will have increased the capital value of the property.
Ideally you should buy something for yourself to live in rather than renting unless you have some mega deal from Council/Housing assoc, otherwise you are just paying someone elses mortgage.
Where in the country are you??
trowelhead said:
Condi said:
And secondly, no lender is going to lend that amount of money on a BTL basis with such a small capital investment. 2 or 3 houses vacant for even a short period of time is going to cause issues.
You're saying BTL lenders don't lend at 75% LTV??Gassing Station | Finance | Top of Page | What's New | My Stuff