Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • troutman
    • By troutman 9th Oct 16, 5:45 PM
    • 29Posts
    • 2Thanks
    troutman
    Keep our house and buy new home
    • #1
    • 9th Oct 16, 5:45 PM
    Keep our house and buy new home 9th Oct 16 at 5:45 PM
    We are exploring options of keeping our house and buying a 2nd home.
    The ideal situation would be to rent our home (currently valued about £625k), rentable value about £2000 and move to a new home, value about £750k my salary is £86k + £3k bonus. We have about £400k equity in our home with about £185k currently outstanding on repayment. Would there be any possible options available to do this?

    TIA
Page 1
    • Thrugelmir
    • By Thrugelmir 9th Oct 16, 5:58 PM
    • 51,268 Posts
    • 43,078 Thanks
    Thrugelmir
    • #2
    • 9th Oct 16, 5:58 PM
    • #2
    • 9th Oct 16, 5:58 PM
    You do realise that the stamp duty payable on the second home purchase is going to be £50k. Going to take a few years of letting to recover that amount.

    £24k rent on £625k value is only a 3.8% yield (before costs and tax). As an observation is this a good property to let as a business venture?
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • troutman
    • By troutman 9th Oct 16, 6:31 PM
    • 29 Posts
    • 2 Thanks
    troutman
    • #3
    • 9th Oct 16, 6:31 PM
    • #3
    • 9th Oct 16, 6:31 PM
    Thanks for your thoughts, we want to move anyway as we need more room so accept the daylight robbery moving tax is unavoidable. This isn't a business venture as such, its more about long term retirement not short term income/rental gain. What would you advise?
    Last edited by troutman; 09-10-2016 at 6:33 PM.
    • mrginge
    • By mrginge 9th Oct 16, 6:36 PM
    • 3,333 Posts
    • 5,305 Thanks
    mrginge
    • #4
    • 9th Oct 16, 6:36 PM
    • #4
    • 9th Oct 16, 6:36 PM
    Thanks for your thoughts, we want to move anyway as we need more room so accept the daylight robbery moving tax is unavoidable. This isn't a business venture as such, its more about long term retirement not short term income/rental gain. What would you advise?
    Originally posted by troutman
    Well if it's long term retirement, 40% tax relief on pension contributions would seem like a sensible place to start....
    • Pixie5740
    • By Pixie5740 9th Oct 16, 6:49 PM
    • 8,861 Posts
    • 11,881 Thanks
    Pixie5740
    • #5
    • 9th Oct 16, 6:49 PM
    • #5
    • 9th Oct 16, 6:49 PM
    The additional 3% SDLT is completely avoidable by selling your current main residence rather than hanging on to it.

    Letting property is a business and should be treated as such. Rental yield is important, banking purely on capital gains is risky.

    You'd need to leave (at least) about 25% equity in your current home if you want to let it out but need to release equity to fund the next purchase. Do you have any other savings or just the equity in your home?

    The rent will need to be 125% of the mortgage payments although some lenders are asking for 145% these days. so that means your monthly mortgage payments on the let property would need to be between £1600 and £1379 a month maximum which could mean releasing less equity than you'd need to fund the new home.
    Last edited by Pixie5740; 09-10-2016 at 7:42 PM.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • Mr.Generous
    • By Mr.Generous 9th Oct 16, 7:13 PM
    • 894 Posts
    • 1,076 Thanks
    Mr.Generous
    • #6
    • 9th Oct 16, 7:13 PM
    • #6
    • 9th Oct 16, 7:13 PM
    as a business proposition the £50k stamp duty kills it dead. Buildings and tenant insurance plus usual costs as a landlord (tenant finder, gas safety, inventory) are going to push you into year 3 before you get to breakeven. That's if its occupied all the time. Sell it and buy whatever you can get in the lower stamp duty ranges if you want to become a landlord, yield will be higher.
    • AnotherJoe
    • By AnotherJoe 9th Oct 16, 7:38 PM
    • 4,159 Posts
    • 4,186 Thanks
    AnotherJoe
    • #7
    • 9th Oct 16, 7:38 PM
    • #7
    • 9th Oct 16, 7:38 PM
    Yep, if you want to be a landlord, what's so special about your current house ? Seems somewhat random to pick that one, its one heck of a coincidence it's your best choice for rental !!

    You'd likely be better off with 2 smaller houses. Spread the risk, lower SDLT and since being a landlord is all about profit, starting off with a completely avoidable maybe £20k loss doesn't seem like the smartest move.

    Though I wouldn't be a landlord anyway, if you think property is where its at, put the money in investments that are property focussed where you can shelter them from taxes (including capital gains) don't get tied up in the legalities and hassle of being a landlord , dont have vacant periods, ongoing costs, tenants that trash your property, and so on.
    • Thrugelmir
    • By Thrugelmir 9th Oct 16, 8:43 PM
    • 51,268 Posts
    • 43,078 Thanks
    Thrugelmir
    • #8
    • 9th Oct 16, 8:43 PM
    • #8
    • 9th Oct 16, 8:43 PM
    This isn't a business venture as such, its more about long term retirement not short term income/rental gain. What would you advise?
    Originally posted by troutman
    Letting is a business it's not an ATM machine. Can be highly profitable. All you need is the tenant from hell and you'll soon be regretting your decision.

    How comfortable would you be with £935k of debt. Interest rates are not guaranteed to remain low indefinately.
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • anselld
    • By anselld 9th Oct 16, 9:16 PM
    • 4,869 Posts
    • 4,319 Thanks
    anselld
    • #9
    • 9th Oct 16, 9:16 PM
    • #9
    • 9th Oct 16, 9:16 PM
    You do realise that the stamp duty payable on the second home purchase is going to be £50k. Going to take a few years of letting to recover that amount.

    £24k rent on £625k value is only a 3.8% yield (before costs and tax). As an observation is this a good property to let as a business venture?
    Originally posted by Thrugelmir
    Totally agree with Thrugelmir.
    3.8% is a pathetic yield to start with and will be further decimated by finance costs especially when the tax changes for BTL kick in.

    Halve your SDLT bill by selling your existing property. Invest the capital released in some other way, stocks, pensions, etc.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

3,626Posts Today

7,515Users online

Martin's Twitter
  • RT @c_newbery: @MartinSLewis Can't bring myself to vote for option A because of lack of apostrophe - some things are too precious! #grammar?

  • MSE weekly email: Soap&Glory, Urgent 2YR cheap energy, free Tesco pts, cheap Easyjet, free TSB £100, £52 Ray-Bans https://t.co/bS4J70hBbx

  • Today's twitter poll: Is it acceptable to use bad grammar in tweets in order to reduce character length?

  • Follow Martin