First time buyer - looking to rent out rooms

jack5r · 26 July 2016 at 2:09PM

Hello everyone. I have some questions which I hope you can help me with.

I have just graduated and am looking to get on the property ladder with a 2 bed flat asap. London prices are forever increasing and I feel if I wait a few more years I will massively limit my options.

I am lucky enough to have a dad who has recently retired with large lump sum and so I have 150-180k for a deposit on a property. My starting salary at present is low at 25k and so I am looking to buy in the suburbs for 200-250k. The mortgage for this will be low and I'd likely look to pay it back on a 5-10 year plan rather than 25 years.

My plan was to rent out one of the rooms to cover the majority of the mortgage. I would say I am living in the other room, but likely just live with my dad in central London as it is nearer my work and friends. From what I gather this would be completely legal as I am not renting out the second room? And I would not be taxed on the first £7500 from the rental income. I would pop in from time to time to collect the bills etc.

In a few years time once on a higher salary and with another lump sum from my mum's retirement, I would look to sell the suburban flat and buy another 2 bed flat more locally to my upbringing for around 500k. This would then be my permanent home to start a family in.

Does this sound reasonable?

Thoughts?

Thank you in advance for any advice offered!

Pixie5740 · 26 July 2016 at 2:14PM

Hello and welcome to the forum.

Are you being serious? From where did you gather that renting out one room whilst living elsewhere would be completely legal? Legal in what sense? Legal to obtain a residential mortgage through deception i.e. when you have no intention of living there? Legal to rent a room to an excluded occupier when in reality you'd be creating an Assured Shorthold Tenancy? Legal to claim the rent-a-room allowance when you wouldn't be a resident landlord i.e tax evasion?

beecher2 · 26 July 2016 at 2:18PM

You need a Buy to Let mortgage and you can't just 'pop in' when you feel like it.

Don't your parents need their lump sum for their retirement?

jack5r · 26 July 2016 at 2:32PM

Pixie - From what I read you can rent out a room in your home for up to £7500 tax free. If that is the case would it be legal if I lived there for one day a week? Surely I can stay at more than one property? I know that the second lodger would not be legal and this is not something I would risk. I am aware that a lot of people do not declare lodgers though.

Beecher - If I was staying there for one night a week and paying the mortgage with my wages, would this be an issue? No. They have good retirement schemes and will likely downsize their houses (they are separated) once my sister and I have left home.

Pixie5740 · 26 July 2016 at 2:43PM

Yes you can live in more than one property. However, to be a resident landlord the property must be your only or main home. Given that you'd spend the majority of your time living somewhere else close to work, family and friends can you really claim this property which you would only have ever stayed in for a handful of nights is your main home?

Bluebirdman_of_Alcathays · 26 July 2016 at 2:44PM

You are obliged to tell the truth. If you live with your father in Central London, then that is your primary residence, and you'll require a BTL mortgage. You also won't be able to claim the rent a room allowance. It is a matter of fact, not interpretation. Any attempt to do otherwise (as Pixie said) is defrauding your mortgage lender and committing tax evasion.

Of course, you may get away with it, but that's another matter entirely. Personally, too risky for me.

beecher2 · 26 July 2016 at 2:46PM

Just to back up what Pixie is saying

https://www.gov.uk/government/publications/letting-rooms-in-your-home-a-guide-for-resident-landlords/letting-rooms-in-your-home-a-guide-for-resident-landlords

How exactly is a landlord considered to be ‘resident’ in law? Does it make a difference if I don’t live in the property all the time?
For lettings started from 15 January 1989, the important point is whether you are using the property as an only or principal home, both at the start of the letting and throughout it.

It is accepted that, for short periods, a landlord may not live in the property yet still be considered to be resident: so long as he or she intends to return and this is apparent, for example if he or she has left belongings. However, only a court can say for certain whether a landlord has maintained enough residence in the property to count as a resident landlord: if not, then it is possible that the letting arrangement may be deemed to have become a regulated or assured tenancy, depending whether it first began before or from 15 January 1989. The definition of ‘residence’ for determining how the landlord must give notice or can evict an occupier is slightly different (see section 1.4).

jack5r · 26 July 2016 at 2:51PM

Pixie - Is there a legal definition of 'main home'. Is it actually defined by where you spend the majority of your time? Could you not argue that I stay as a guest at my dad's during the week and then live in my main home, which I actually pay to live in, over the weekend? I know a lot of people who have homes outside london and then rent in central. Does that mean that the homes they own outside london are not their main homes?

Bluebirdman - So someone who works away from home cannot rent out one of their rooms to a tenant and claim the rent-a-room allowance?

Pixie5740 · 26 July 2016 at 2:58PM

Make up your mind. From your OP we've gone from you not living in the property at all to staying their once a week and now we're up to every weekend even though the property will be far away from your friends and family. Is it a tenant or an excluded occupier that will be living in the property?

You can argue what you like with HMRC or a county court should you have difficulty evicting a tenant/excluded occupier. Let them decide if you are a resident landlord in this little rouse.

Boatdweller · 26 July 2016 at 3:17PM

jack5r wrote: »

Pixie - Is there a legal definition of 'main home'. Is it actually defined by where you spend the majority of your time? Could you not argue that I stay as a guest at my dad's during the week and then live in my main home, which I actually pay to live in, over the weekend? I know a lot of people who have homes outside london and then rent in central. Does that mean that the homes they own outside london are not their main homes?

If you rent somewhere that is not your 'main home' you don't have an AST as it falls outside the scope of the 1988 Housing Act.

jack5r · 26 July 2016 at 3:21PM

Pixie5740 wrote: »

Make up your mind. From your OP we've gone from you not living in the property at all to staying their once a week and now we're up to every weekend even though the property will be far away from your friends and family. Is it a tenant or an excluded occupier that will be living in the property?

You can argue what you like with HMRC or a county court should you have difficulty evicting a tenant/excluded occupier. Let them decide if you are a resident landlord in this little rouse.

I wasn't aware that my initial idea was against the law so I've changed my plans in the later posts to see if they are within the law. Thank you for the infomation once again. Please do not take my replies as ignoring your advise. I am just trying to assess the situation for what it is, hence my tedious questions.

The property would likely be less 30 minutes away from my dad's. I would have belongings and my bills sent to the property. I'm not sure how an eviction of a tenant would be any different if I was there 2 nights a week as apposed to 5? I won't have anyone dodgy living in my home either. Likely a young professional in an honest career like myself. I can't see a tenant recording how often I stay at the house with video proof and then going to the authorities? How else could any court determine that I am not living there 7 days a week.

As for tenant vs extended occupier. I'll have to read up on that.

PLEASE READ BEFORE POSTING

First time buyer - looking to rent out rooms

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