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can you buy to let while unemployed and on income support?
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# 1
dawn7
Old 08-01-2008, 4:06 PM
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Question .

...........

Last edited by dawn7; 02-02-2010 at 7:55 PM. Reason: plz delete
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# 2
dmg24
Old 08-01-2008, 4:07 PM
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Is this for real?
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# 3
chelseablue
Old 08-01-2008, 4:09 PM
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JUst a couple of questions:

How will you get a mortgage if you are unemployed?

You say you are buying someone else's property but then renting it out; i think this IS a buy to let. And you need about 15% deposit for those.

Sorry if I've got the wrong end of the stick here!
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# 4
dawn7
Old 08-01-2008, 4:19 PM
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yes
it is right, it is a buy to let, and i have a deposit even though im on income support, the buy to let is were the tennants will be paying rent so i wont be funding it thats what a buy to let is.
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# 5
chelseablue
Old 08-01-2008, 4:24 PM
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Quote:
Originally Posted by dawn7 View Post
yes
it is right, it is a buy to let, and i have a deposit even though im on income support, the buy to let is were the tennants will be paying rent so i wont be funding it thats what a buy to let is.
You'd still need a mortgage to purchase the property though wouldnt you?

How much benefit do you get?

I dont think you can get a mortgage while on benefits but an expert will clarify that.
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# 6
dmg24
Old 08-01-2008, 4:27 PM
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You can get a mortgage whilst on benefits, but it would be based on the level of income and the potential return on investment. The rate would not be attractive.

If you have a 15% deposit, surely this would affect your eligibility for income support?

The rent paid on the property would be classed as income, and if you own a property you would not be eligible for housing benefit (except in very limited circumstances).
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# 7
blue_monkey
Old 08-01-2008, 4:45 PM
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Hmmmm, check out the OP's other posts.

If you get a BTL you'll have to fill in a tax return at the end of the year, it could make you self employed if you are making a return on it and then you might lose all your benefit anyway as although you are not out at work you will have an income from the BTL and this has to be declared. I thought you was on DLA and IS? Are you trying to find a way to 'hide' that money so you still get benefits?
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# 8
dawn7
Old 08-01-2008, 6:38 PM
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Default buy to let

im not trying to hide anything im asking if its possible to buy to let while on income support, ive spoken to mortgage brokers they said they can get me a mortgage on my deposit and good credit regardless of my income as buy to let is nothing to do with your income. its based on rent from tennants i keep saying this but you dont seem to grasp it.
also dla is a non meANS TESTED BENEFIT SO THAT DOESNT MATTER.
and because its a buy to let i wont be living in it so it wont be my priciple home as it is BUY TO LET. BUY TO LET. it means you buy a property to let out to tennants who will or should be paying the rent.
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# 9
swanny65
Old 08-01-2008, 7:11 PM
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I'm confused by you intentions as well.

DWP (Income Support) need to be advised if you have capital over £6000.00 and anyone with capital over £16000.00 isn't entitled to Income Support. So you could conceivably have a deposit and be in receipt of Income Support.

However if you spend any capital and request a reassessment because your capital falls below £6000.00 then you will have to tell the DWP why you deemed this to be a reasonable purchase.

Either way you will have to tell them if you buy a property. However one property alone with a small deposit paid is very unlikely to initially disallow your benefit claim because of the capital asset calculation - unless you had capital exceeding the above figures in the first place.

Regarding the income from the tenants i would suggest you post on the benefits board to seek opinion on the effect, if any, of rental income on your Income Support.

If you are likely to be on Income Support a long while and property prices rise then your Income Support will eventually stop because the properties asset value for benefit purposes will eventually exceed £16000.00.

If you take equity out of the buy to let then that would be treated as capital and need be declared to DWP and here is the real problem you will face - eventually one way or the other you are likely to exceed the Income Support capital limit. If you take the equity and purchase another buy to let the DWP could (not necessarily would) then say you are S/E and running a business.

Finally who will be dealing with the administration. If yourself, will it be treated as work and affect any other benefits you claim eg Incapacity Benefit and or DLA.....

The real problem here is the other lady with 4 houses probably had them before she claimed benefit and in all likelyhood her claim to JSA will be a short term claim. She is probably on non means tested JSA. It is an entirely different kettle of fish to your situation. The benefits system isnt designed to make benefit receipients budding landlords.

I would steer well away from this idea.

Last edited by swanny65; 08-01-2008 at 7:22 PM. Reason: grammer
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# 10
Dithering Dad
Old 08-01-2008, 7:34 PM
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I keep seeing similar posts to this and they all seem to have a similar writing style. The style is that of someone who is trying to dumb down their writing such as using 'i' instead of 'I' and dafft Sppellering mistakes.

I think it's mainly a sad individual's attempt at winding people up with such posts as "Hi, im thinking of using munny that i collectid for charity to buy a new car, is this a good idea?".

Really sad if it's true.

Last edited by Dithering Dad; 08-01-2008 at 8:05 PM.
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# 11
pickles110564
Old 08-01-2008, 7:37 PM
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someones got the fishing line out and with no bait on the hook
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# 12
HugoSP
Old 08-01-2008, 8:18 PM
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This may not be as daft as it sounds.....

I don't know if the OP is genuine but as has been said, it is possible to raise a mortgage on a BTL without declairing income - our BTL mortgage is based on the market rent for the house in question, not our annual income.

This was not why we chose it, it was the best deal on the table for us at the time.

So, can you raise a BTL mortgage without an income? Yes.

What about the deposit? I don't know the mortgage market at the moment. The OP claims to have the deposit all sorted out, so one assumes she's not going for a 100% BTL. It could be money that she has declaired, hidden or belongs to a friend or relative, or is at least in their name.

We don't know where the OP lives. She could be living in the cheapest part of the country, hence the required deposit could be well under the £16k or even be under the £6k. If she needed to raise 10% of the purchase price on a £50k investment then she could quite legitimately have £5k in the bank.

So without knowing more info as to what price the property is etc the deposit being small enough to avoid income support problems is feasable.

We are already well on our way to the OP becoming a BTL investor whilst on Income support......

Assuming it all goes well and she gets a tenant in who pays the rent on time exceeding interest payments and other costs and helping with capital repayment, then she will be earning a surplus that is taxable income.

She will need to fill in a tax return. Assuming she furnsihes the property she can claim 10% of the rent received as a deductable for wear and tear on the tax form. This effectively means that she starts with 90% of the income then deducts things such as insurance, maintenance, management costs etc.

She can also claim for the costs of personally managing the property including anything from running a home office (stationary, IT equipment, internet access, purchase of office furniture, share of heating and lighting bills etc etc etc, petrol/bus fares to and from the property to carry out inspections etc.

She can also claim for any injection of personal capital to start up. Before she makes a profit she will draw out the capital she has invested as the venture makes money. Hence paint and other stuff she puts in there (but not everything) or a desk and filing cabinet she turns over to the business can have a value placed on it and be charged back at that value.

She will end up in a situation where the declared profit/income is quite reasonably minimal, and she could still be below her tax threashold, and hence pay no tax.

As it is a means tested benefit she will probably see little difference in the income support she gets in the short/medium term. Indeed the first year is likely to return a loss, so she will probably see no difference at all in her income support.

The first real problem that I see is that her investments in time could increase in value, and ultimately finish her eligability for income support. That is unlikely to happen unless her deposit/equity is close to the £16k now.

Her next problem is remortgaging. The mortgage market is extremely fickel and if lenders decide that she needs her own income in the future then she could be stuck on a poor variable rate and be making a loss on the venture.

As a BTL landlord myself I could quite easily see how she could run a BTL whilst on income support.

As to her friend running 4 on IS, I think this is less likely to work unless she is telling porkies, if only for the savings/investments rule, and that is before we get onto undeclared income. She could be receiving working tax credits though.
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# 13
Skeekwarton
Old 08-01-2008, 9:00 PM
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That's basically what the OP was saying HugoSp........
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# 14
silvercar
Old 08-01-2008, 10:40 PM
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There are very few lenders who will give a BTL mortgage to someone who doesnt own their own home (with or without mortgage).

It may be that the rental figures stack up and it may be that the benefit rules allow you to claim housing benefit for your own rental while receiving rent from others, but if no-one will give you a mortgage you can't get off the starting block.
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# 15
Swift1
Old 08-01-2008, 11:12 PM
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I know people who've done exactly what the OP suggested but I'm not sure how honest they were on mortgage applications. From what I saw though they found it very easy to get funds. They did have savings though as they squirreled their benefits away
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# 16
Skyhigh
Old 09-01-2008, 2:05 PM
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You can't buy a house while on jobseekers as such.

For most benefits types, if you own a second property, then the value of that property is considered as potential income, therefore if you have a second house (in addition to a council property) worth £80,000, then you won't get many benefits since they'll tell you to sell the house.

[That was a very basic breakdown, its a bit more complicated than that]


P.S. Buy to lets should be banned, they only contributed to the rise in house prices and force out first time buyers by pushing prices up. Further to this, rent prices have been increased by people using BTL as BTL'ers want the renters to pay most of the mortage, therefore all the 'standard' or 'normal' renting places are gone, leading just BTL - where the rent is just as much as a mortgage or even more in many cases.
Thanks BTL.

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# 17
Conrad
Old 09-01-2008, 2:35 PM
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In the real world there are plenty of such people involved in B2L.

I had a Turkish recent immigrant on all sorts of benefits that does'nt work and she already has 2 properties let out.
I own a small company providing bespoke information to those wanting to understand the world of mortgages. I have now decided not to be regulated by the FCA. I gladly provide information on lenders that DO NOT PAY COMMISION. The FCA have confirmed my non regulated service complies with all rules.
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# 18
dmg24
Old 09-01-2008, 5:03 PM
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Next they'll be asking if they can get Income Support to cover the mortgage interest too!
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# 19
HugoSP
Old 09-01-2008, 10:19 PM
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Quote:
Originally Posted by dmg24 View Post
Next they'll be asking if they can get Income Support to cover the mortgage interest too!
Now there's an idea.....

However I would point out that...

1) If someone can get by doing this whilst they're on income support and it's all above board, then why not? It's there decision. money etc.

2) If that someone manages to help themselves out of Income Support by doing this - ie running their own business, then where's the harm in that?

When I first started work as a newly qualified graduate we took on a mortgage etc and quite quickly found ourselves over committed. We ploughed all our savings into a BTL and, after a few teething problems we managed to get it to contribute to our monthly income. It made all the difference.

OK so we weren't on income support, but we could have been if I lost my job.

We mustn't assume that the OP wants to keep claiming income support because she can. There are many people who want to get away from income support in the course of making a better life for themselves.

It may be that the OP has found herself out of a job through redundancy, ill health etc and wants to turn her life around, and I think we're all in danger of writing her off as a loon or a scrounger because of the questions she's asking.

Assuming she is genuine (because none of us actually know - we have to take these things on face value), then she's showing much more get up and go than a huge number of claiments that will be staying put on IS just because they can.
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# 20
littlegoldfishie
Old 09-01-2008, 10:26 PM
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HugoSP, I think you should look up spme of her previous posts, she has no interest in coming off Income support. She is a charachter to say the least.
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