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Buy to Let with Equity from Home
Comments
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I hadn't really considered that. We've got a young couple renting from us at the moment and they're absolutely brilliant. I've rented out properties in the past and always had a degree of hassle. The AST expires in February but we'd be keen to continue renting up to the point of sale (if that's what we decide to do). Does the exisiting AST prevent us from selling?
The house is 13 years old and has had a lot of money spent on it (i.e. it was my partner's home prior to us buying our current house together). I don't really expect much to go wrong with it.
If we sell this property, we would collect approx £25k/£30k which, from your previous advice, would not attract CGT. We would then put this money into our current residential mortgage thus leaving us with a £140k(ish) loan.
My only concern with this model is that we would lose a potentially increasing asset. Based on evidence, I have little doubt that our rental house will sell very quickly.
The one issue I can't predict here is the one raised previously by MrsS. That really got me thinking though . . . .0 -
I would add: amoungst the youth of today BTL landlords are pretty unpopular, for pushing the price of FTB dwellings through the roof. Sooner or later some political party is going to cotton on to this, & start hammering them with tax.
Right now the chancellor of the exchequer is desperate for more money. All it takes is us idle youth to get our collective act together & start voting or at least looking like we might vote.
We don't want shared ownership houses or the chnace to buy with 3 friends. We don't want "affordable housing" or "keyworker housing", if there wasn't a problem these things wouldn't even be mentioned.
Rant over! *Takes chill pill & goes back into youthful apathy*"Mrs. Pench, you've won the car contest, would you like a triumph spitfire or 3000 in cash?" He smiled.
Mrs. Pench took the money. "What will you do with it all? Not that it's any of my business," he giggled.
"I think I'll become an alcoholic," said Betty.0 -
Guy_Montag wrote:I would add: amoungst the youth of today BTL landlords are pretty unpopular, for pushing the price of FTB dwellings through the roof. Sooner or later some political party is going to cotton on to this, & start hammering them with tax.
Right now the chancellor of the exchequer is desperate for more money. All it takes is us idle youth to get our collective act together & start voting or at least looking like we might vote.
We don't want shared ownership houses or the chnace to buy with 3 friends. We don't want "affordable housing" or "keyworker housing", if there wasn't a problem these things wouldn't even be mentioned.
Rant over! *Takes chill pill & goes back into youthful apathy*
Couldn't agree more! There's been a fair amount in the press about raising Tax on second homes and BTL's in the next Budget. Wouldn't at all surprise me.0 -
It would be a truly excellent way to trigger a house price crash!Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery0
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It doesn't have to be heavy taxes (to begin with) & some people will perceveer. Some won't really notice, there seem to be a lot of people who ask advice on here, that don't seem to know what they're doing - are not aware of what taxes they are subject too, let alone how to mitigate them; what an HMO is & what is required; what rights tenants have etc.
& there's 17 million votes for any party that can bring prices down!
http://news.bbc.co.uk/1/hi/business/6098202.stm"Mrs. Pench, you've won the car contest, would you like a triumph spitfire or 3000 in cash?" He smiled.
Mrs. Pench took the money. "What will you do with it all? Not that it's any of my business," he giggled.
"I think I'll become an alcoholic," said Betty.0 -
Hope the chill pill has had the desired effect Guy!0
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But you get my point, if you're going to tax something, it might as well be something unloved like BTL landlords, rather than say poor, orphaned puppy dogs."Mrs. Pench, you've won the car contest, would you like a triumph spitfire or 3000 in cash?" He smiled.
Mrs. Pench took the money. "What will you do with it all? Not that it's any of my business," he giggled.
"I think I'll become an alcoholic," said Betty.0 -
Tepidwater
If I have it right, you have abour £75K a year coming in - you are about presumably to reduce that by say 10% in the medium term if the wife goes 4 days a week. - so let's call it £70K.
You have no savings - £8K is neither here nor there when you are paying BTL mortgage fees and the like and it's not going to keep you afloat long if your income ceased. You aren't even saving much from your interest only mortgages. if you only have £8K - which indicates to me you are spending it as it is.
You are (by your numbers) looking at £364K of debt (or a 5.2 times joint multiple) - you are looking at yields of less than 5% and you have nothing to cover voids, maintenance (13 years is plenty of time for things to go wrong) at a time of peak property prices (they may go either way) at a time in your life when you will be under significant pressure. In other words, you have £94K of cash and 'equity' and you are looking at taking on £458K of debt - with no buffer - you are braver than me. I'd be making life easy for a couple of years, seeing how wife gets on with a baby and work before extending - the time (IMO) is not right.... and prices are not (again IMO) going to rise that much (if at all) in the medium term except in prime London and SE (cue lots of people telling me they have 50odd new build executive flats and the estate agent tells them they are paper squillionaires....).
And Sukey, your post has just confirmed to me why I don't read books like that - you seem to equate 13 mortgaged properties to 13 properties you own - in fact you own a whole load of debt and you are gambling on capital increases to see you through whilst you get enough rent to cover the debt schedule (there's no way rents will cover interest and capital repayments) - but no, don't tell, property only ever goes up (tell that to people in Tokyo), interest rates never rise and you never get voids..... - good business to be in at the right time and there are always profits to be taken, but fawning adoration and adulation indicates to me you have never experienced a down market....0 -
Many thanks for such a considered response Rachman.
It appears clear (or clearer) to me now that, at this moment, buying another BTL would perhaps not be the most appropriate course of action.
The decision we appear to be arriving at is to keep the rental house (for the short term at least) and take out a fixed rate repayment mortgage for the residential property.
Where I'm not clear is do we invest in shares or increase the payments on the repayment mortgage?0 -
TepidWater wrote:Where I'm not clear is do we invest in shares or increase the payments on the repayment mortgage?
No problem - I am a fan of reduced exposure - I certainly don't see the maniac growth of the last 5 years in many things - or certainly not without risk.
People said gold - but who's to say you won't do a Gordon Brown and sell at a low point - or worse, what if price actually falls.
People say equities, yes, there are stoploss mechanisms now, but is it risk free - even in utility shares or in mining companies (I know a little about how a lot of them work, they are not all as solidly or transparently run as the FT has you believe). Imagine another Sep 11..... what will that do to equities ?
Bonds - pointless if fixed in a time of inflation.
Currency speculation - fine, but risky
If you have big balls, how about contracts for difference (the pessimist's bet) ?
I like to see my debt go down month by month - I can batten down hatches in a slow market - if you work out you pay the interest net of income tax, then in effect you have to make about 7.8% return just to offset the interest and tax you are paying on your mortgage (inc income tax paid) - that's not that easy to consistently achieve without risk..... - I have taken our net exposure down 30% in the last 2 years......0
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