Buying a Property to Rent Out - How to Own it?

silvercar

So you're a new BTL LL pricing FTBs out of the market ... that's not very nice is it.

Only in as much as STRs push rental prices up and push those not in a position to buy out of decent rental properties.

td

Hi,

|I have been watching this thread with interest. I am looking to buy a few buy to let houses - going to my first auction tomoz- looking at 3 bedroom house, area not the best but I know the area - house guide price is 40-50 grand rental yield is about 7.3 i think if ive done my calcs right and it goes at auction for a higher price. I'll be paying cash and then looking to get btl mortgage with my cousin who im going into the business with and then we can fund the next one. the long term aim is that its an investment for our pensions rather than income now. What does putting it into trust mean? we were intending to just go down the self assessment route but considering our long term aim is this the best route? Am just researching everything and am just trying to prioritise the research I do.

The other question is do we both qualify for the £9k yearly cap gains allowance on one house or would we have to share it? As u can see we're planning ahead.

thanks

td

socrates

td wrote: »

I'll be paying cash and then looking to get btl mortgage with my cousin who im going into the business with and then we can fund the next one.

Have you spoken to a mortgage broker about this?

It is not as easy or as reasonably priced to do this as it used to be.

00ec25

td wrote: »

Hi,
The other question is do we both qualify for the £9k yearly cap gains allowance on one house or would we have to share it? As u can see we're planning ahead.

only if you jointly own it, then yes you each get your annual CGT allowance

if a company owns it then no, personal allowance obviously not applicable
if owned via a trust then no, personal allowance obviously not applicable

princeofpounds

Before you do anything like this understand the concept of gearing or you could nail yourself financially.

If you put £20k down on a 200k house, and prices fall by a mere 10%, you will lost not 10% of your money but *100%*. It is not a low-risk investment if you use gearing, there is nothing safe about houses!

If you search my posts in the past I've made a couple of very long commentaries on some of the financial concepts you should understand before embarking on what is a serious enterprise. Landlording is a finance game much more than it is one of property management. Can't be bothered to dig them up personally as it's not my problem if you dive in with limited knowledge but if you go in prepared or not good luck

James_Trimby

Hi hope auction went well. If you are doing this for the long term with a business partner I would seek accounting and legal advice soonest. YOu need to make sure that the vehicle you choose to trade in is right for both your aims and other activities/income etc... Also you need to be able to know what happens if these aims change for one of you and not the other Business divorces can be messier than the real thing!!

There is too much info missing and too little time for a full analysis of company v private ownership. In simple terms accumilating rental profits for further expansion can be cheaper in a company. BUT normally closing things down and getting monies into your own hands can be more expensive. Trusts are also taxed and have little allowances. If large sums are involved you could look at offshore trusts (taxes will then be cheaper) but they are costly to operate and could be difficult to use if trying to gear up numbers of houses by borrowing. IF I was a trustee I would be very cautious of taking out borrowings! So I would suggest being very wary of the trust route.

Normally I would suggest owning privately. YOu can borrow more easily the paperwork is easier and cheaper. If you have a portfolio of properties as long as you can spread the sale over many tax years the Capital Gains Tax annual exemption (approx £10,000 each person) and current tax rate of 18% makes this look a safe bet.

Just remember advice is based on current tax law, unfortunately this type of business is long term and not easy or cheap to swap between vehicles.