Want to buy a house but keep existing property and rent it out, need advice please.

Hammyman

cooliegirl wrote: »

Thanks. How did it work for you timing wise? i don't think we could do that, we will need to find a new house, then spend some time making sure that our old house is in tip top rental condition. The income from rent may be a few months later.

Sorry for not getting back earlier...

We got the Let to Buy mortgage first. We had an idea of the price ceiling we were prepared to go to for buying the new house and the amount of equity we'd need to release. Getting the LTB in place before we found somewhere gave us more flexibility and meant the deposit money was sat there waiting. You can still live in the house with a LTB mortgage in place.

It was about a 3 month gap between getting the LTB and completing on the new house.

westlondonbuyer

It's very tax-efficient to keep the majority of equity in your own home (your primary residence) because it's not subject to capital gains tax as your rental flat would be. Interest payments on the let property can be offset against rental income, so it's tempting to keep the borrowing to the highest level your lender will allow. However, if you have an interest-only mortgage for your rental property, you will still have to re-pay the capital sum at the end of the mortgage term, so will need another investment which can clear the capital sum.

There are several models of property investment - some people are interested only in income yield, whilst others are content to break even on operating costs and are interested only in capital growth. Some people buy shares in property funds but never actually own property themselves.

The usual financial advice for amateur investors is to have 1/3 of your money in property, 1/3 in shares and pension, 1/3 in cash or cash equivalents. For most people, the primary residence is going to represent a lot more than 1/3 of their net asset wealth, and would therefore leave them over-exposed to one investment category. It's up to you to decide whether you're prepared to take that investment risk. Successful landlords are professional investors in the property sector - it's just that the recent (and atypical) increases in property prices have misled amateurs into thinking anyone can enjoy the same success. I wonder how many of us would contemplate becoming day-traders with the same alacrity?