Selling family home to fund buy to let

Wee_Willy_Harris

I have some magic beans if he's interested?

ferox666

BTL is not the magic "money maker" you and many others think it is. It's no wonder the majority seem to think that though after years of media forcing it down our throats with all these TV shows about people buying/selling, renovating, renting out etc properties.

The housing market does not have very good prospects for at least the next 4-5 yrs IMO, and I would not be surprised if we see price drops of a further 10-20% from CURRENT prices (which have already dropped from 2007 prices)

Dealing with periods of no tenant (with no rent to cover the mortgage payment), or tenant being late/not paying rent, or damaging the property, or you having to suddenly pay for an unexpected repair e.g. new boiler, roof repair etc can make it a complete pain. And after the massive house price appreciation over the last 10yrs, prices still have a long way to go down so there will unlikely be any capital appreciation on the property's value from today's price unless you're willing to wait decades.

Look at what's happened in Ireland and America and what's happening elsewhere - including here - , "easy money" from the property market is finished unless you absolutely know what you're doing and how to find a TRUE bargain.

So - avoid BTL, you'd be much better in my opinion instead to put your money in a diversified spread of stock market unit trust funds.

geoffky

I was talking to a m8 of mine who is a landlord and has been since the 1980s and he told me he has one tennent who owes hm 2k in rent arrears. I asked him why did he not kick him out and his reply was that this guy will pay some of it back but who knows how much the next guy would try and rip me off for? it made sense to me in the end.

real1314

G_M wrote: »

Read Tessa Shepperson's book or a similar one. Amazon or your local library.
AI bigger mortgage on the BTL lets you offset the interest against income for tax purposes.

You don't have to have the mortgage on the BTL to claim the mortgage cost.

OP has (in theory) £250k mortgage and £75k "cash" available.

Going on a 75% mortgage on main home, that would need £62.5k cash for 25% deposit.

Leaving £12.5k cash. However that's barely enough to meet 17% of a £75k BTL, so it wouldn't stack up.

A more realisitic proposal would be a £200k property at 75%, requiring £50k; leaving £25k to use £20k for deposit at 25% on a £80k property and £5k contingency fund. £210k mortgagges + £70k cash.

However OP could manage the funds any way they chose. If they could get a better homeowner rate at 80% than the BTL rate they could use £40k deposit on the £200k home and use £30k on the BTL. Still £210k mortgage and £70k cash.
A decent 15% deposit homeowner rate would have them at £30k home deposit; £170k mortgage and £40k BTL deposit £40k mortgage.

They would be able to claim tax against the full cost of the mortgage on the BTL and the on the home mortgage for the difference between the BTL mortgage and the BTL purchase price.

They could have used all the deposit money (£70k ignoring the contingency fund) on the home and had a £130k mortgage. They would instead have an extra £80k of mortgage, mixed between the BTL and the home, all of which is eligible for tax relief.
It's simply a case of raising a business loan secured against a private property.

martindow

real1314 wrote: »

They would be able to claim tax against the full cost of the mortgage on the BTL and the on the home mortgage for the difference between the BTL mortgage and the BTL purchase price.

Is this correct? I would have thought they could only claim the interest element of the BTL mortgage as a business expense.

real1314

martindow wrote: »

Is this correct? I would have thought they could only claim the interest element of the BTL mortgage as a business expense.

You're right, i was trying to refer to the full cost of the BTL property, i.e £80k of mortgage being allowed against tax (rather than the actual amount of mortgage ont he BTL), but as you say, only the interest element would be allowed.