Best way to do this?

paulsm

Hi people , at the moment I have a £10k mortgage on a flat with approx 6-7 years left on it. The flat is being rented out and I have approx £250 left after estate agent and mortgage are paid each month. I am living with my mum but am thinking of buying a 3 bed house and letting 2 rooms to friends. My question is whats the best way to do this ? ie: Buy to let / interest only etc. Also I am just looking into setting up as self employed so dont have a proveable income at the moment but know I can "keep" myself. I dont know anytihng about buy to let at all as it seems to be the only thing not to be on the web. I am expecting a 3 bed to cost me around £100,000 . Please feel free to let me know if you are a Independent, Whole of Market Mortgage adviser in the Great Yarmouth area or know of one. Cheers Paul:money:

herbiesjp

What kind of rental yield will those properties give you?

paulsm

The flat is currently renting out at £525p/m giving me approx £250p/m after estate agent fees and mortgage payment , the house I would like to get £350-£400p/m from rental .Please simplify and details as I am a bit new to this.

paulsm

Can anyone recommend a fee free whole of market mortgage adviser or possibly a suitable financial adviser to help me with this , http://forums.moneysavingexpert.com/showthread.html?t=218383
I am in Great Yarmouth area.Many thanks Paul:money:

AndrewSmith

A lot will depend on how much deposit you are looking to put into the property.

Do you intend to live there? If so then you may not be able to do a buy to let as most lenders do not allow live-in landlords. They also prefer the property to be let as one unit on an Assured Shorthold Tennancy (AST), not single rooms or multiple occupancy.

The rental income over and above the expenses will be subject to income tax at your highest rate.

Also, on a buy to let when you sell the property you are subject to possible capital gains tax on the profit.

Where possible you should look to buy this new property on a residential mortgage, thus no CGT on sale, and you are then perfectly at liberty to take in lodgers for the empty rooms.

It must be stated though that without the full case details I cannot say for sure which is best for you.

What deposit do you have, and what is your new business venture and expected revenue etc?

Andy

dunstonh

I'm in Yarmouth later this afternoon to see a client. I would love to help but I don't personally transact mortgages.

AndrewSmith

dunstonh wrote:

I'm in Yarmouth later this afternoon to see a client. I would love to help but I don't personally transact mortgages.

Lovely part of the world, spent many a happy holiday around Yarmouth, Lowestoft etc. Used to hire a boat from a small yard in Loddon a couple of times a year, and spend a week cruising the Broads up to Norwich. Alas, now with small children it is not the most practical thing at the moment.

Andy

paulsm

thanks for the reply Andrew , I was looking at living there myself also , the deposit is the tricky bit as that may have to be a remortgage on my flat to get it (current mortgage 10k flat valued at around 110k) My new venture is buying and selling vintage toys I have done this alongside my day job for the last year and know it can be done but obviously I wont have any provable income apart from the money over from my rented out flat income.

AndrewSmith

paulsm wrote:

thanks for the reply Andrew , I was looking at living there myself also , the deposit is the tricky bit as that may have to be a remortgage on my flat to get it (current mortgage 10k flat valued at around 110k) My new venture is buying and selling vintage toys I have done this alongside my day job for the last year and know it can be done but obviously I wont have any provable income apart from the money over from my rented out flat income.

Seriously? Vintage toys? excellent.

My other half owns a wooden and traditional toy company. She deals mainly in fair trade wooden toys from Sri Lanka, but aslo does occaisionally deal in Tin from Spain and Chzec Republic. I think one of the fims in Spain is called 'Paya'?

It's a fantastic business and I quite often go and help her at summer shows etc where she has her own 30ft marquee and sets up like an old traditional toy shop inside.

Anyway, sorry back to the subject at hand.

To be honest there is nothing wrong with raising capital against your buy to let, as long as the rental income is generally 130% of the mortgage payments (there are some variations on this but 130% is the general rule of thumb).

Doing this you will be able to offset the mortgage payments against tax from the rental income, as you are simply releasing capital that you put in from taxed income.

What sort of figures have you been looking at for the new property?

Cheers

Andy

paulsm

my flat I am renting out at the moment is a normal mortgage (i didnt change it to buy to let as it is only for 10k) the houses I am lookig at are around 100k Ideally I would live there too but earlier in the post it was indicated that buy to let dosent like that.(Maybe I could not move in straight away ? ) In a perfect situation both mortgages would be paid and I would have "free" accomodation and some cash over to take the pressure off me a bit. Another question is would it be easy to find a lender to lend mainly on the letting figures as I cant prove any income at the moment.

AndrewSmith

paulsm wrote:

my flat I am renting out at the moment is a normal mortgage (i didnt change it to buy to let as it is only for 10k) the houses I am lookig at are around 100k Ideally I would live there too but earlier in the post it was indicated that buy to let dosent like that.(Maybe I could not move in straight away ? ) In a perfect situation both mortgages would be paid and I would have "free" accomodation and some cash over to take the pressure off me a bit. Another question is would it be easy to find a lender to lend mainly on the letting figures as I cant prove any income at the moment.

Obviously I do not know the full case details, but I would think that with the rental income, and the proposed income from the new business there would be lenders that would be prepared to have a look.

Andy