Buying to let basic advice

Tucker

poppysarah wrote: »

And how does it affect your tax situation.
You can only deduct the interest you pay, not any capital.

If you're a higher tax payer already you might want to take advice.

Not sure. That's the sort of thing I was hoping to get pointed out, learn from and to then look at.

I am not a higher rate tax payer and my wife is a housewife and has a full unused tax allowance?? Not sure. Probably one for a good account to advise on. I'll be giving her the onus of dealing with matters as I work full time, so I hope we can make use of the fact she has no current income?

Tucker

clutton wrote: »

you may find it diffcult to use the repayments as an allowable expense for tax on your rental income

simply not true... it is the use to which the money is put, not where it comes from that is the criteria for an allowable expense.

As a LL of 12 years, i can well understand your plan, and i think it has merit. i would go over to property tribes forum which is a landlord specific forum where there are professionals from all areas of the property business posting on there. If you are going to do this, you need to get a move on.. there is a European proposal in the pipeline to regulate BTL mortgages (currently unregulated). At the moment a lender will grant you a mortage based on teh relationship between mortgage payments and rental income.. normally a 125-130% ratio... But if Europe gets its way next year, the BTL mortage will come under residential regs and you will only get a mortgage based on your salary.

AT the moment you will need a 25 % deposit to buy a BTL property, and lenders will ask where tge money came from.. they may not be happy with a loan (ie remortgage of your own property) to do that.. but a good whole market mortgage broker can show you the way.

Paragon issued 50 new BTL products this week, so there is some confidence returning. BTL rents are good at the moment, as there are few first time buyers able to buy, so more folks want to rent.

I would agree with not buying an auction property first off... they are in an auction for a reason.. and not usually a god one. Your area is a good one for good yields.. but there are some real dogs of districts.. so due diligence is extremely important.

Once you have researched and chosen an area, near to home if you can, so you can self manage, go to several local agents and ask what sort of property tenants are looking for.. then buy that.. dont buy a house first then look for tenants.


Read up on PT and ask whatever you want you will get a warm and helpful response there

Thanks. I'll have a look at that forum. Cheers.

If I am borrowing against the equity in my own house and I could borrow a sum that gets me started and keeps the overall the loan to value at under 60%, then I am not taking out a specific buy to let mortgage? or am I?

Clearly I could do that and just buy a car with the loan if I wanted, so using it to buy a house then for cash... is that not something different to actually borrowing against the 2nd proposed house and needing 25% deposit?

Southend1

Does your employer contribute towards your pension? If so don't forget to factor in the amount you will be losing from employer contributions into your calculations.

dimbo61

I am also a Landlord with a student property and have had a great time over the last 2 years.
I had lots of equity in my own home and took out a loan ! ( not a mortgage ) to buy my rental property. I dont have to worry about TAX as you only pay that on profit and I lost thousands on bring my property upto spec
New kitchen, rewire, central heating, windows, building works, furniture ETC HMO
Its a long term investment ( hence putting in lots of money) its also my pension in 15/20 years time.
You need to know your market and IF you can make money or break even

Werdnal

dimbo61 wrote: »

I am also a Landlord with a student property and have had a great time over the last 2 years.
I had lots of equity in my own home and took out a loan ! ( not a mortgage ) to buy my rental property. I dont have to worry about TAX as you only pay that on profit and I lost thousands on bring my property upto spec
New kitchen, rewire, central heating, windows, building works, furniture ETC HMO
Its a long term investment ( hence putting in lots of money) its also my pension in 15/20 years time.
You need to know your market and IF you can make money or break even

Dimbo, I hate to disappoint you, but having checked here:

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_10014027

I have confirmed my suspicions that your "bringing your property up to spec" expenses are in fact not allowable against your rental income tax payments. Only repairs and maintenance of the property whilst letting are allowed to offset your tax - improving and modernising the property are not! So perhaps you might want to recalculate your tax and the thousands you have apparently lost!

OP should take note of this too!

gwernybwch

Werdnal wrote: »

Dimbo, I hate to disappoint you, but having checked here:

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_10014027

I have confirmed my suspicions that your "bringing your property up to spec" expenses are in fact not allowable against your rental income tax payments. Only repairs and maintenance of the property whilst letting are allowed to offset your tax - improving and modernising the property are not! So perhaps you might want to recalculate your tax and the thousands you have apparently lost!

OP should take note of this too!

What I understood from my accountant is that some of "bringing your property up to spec" could be deemed as repairs and maintenance and therefore is tax deductable.
I have replaced the windows on my rental property from wooden single glazed to UPVc double glazed and from a back boiler to a new combi boiler and these were deemed as repairs and maintenance, as it was deemed replacing like-for-like (whilst taking into account technological developments).

The other 'upgrade' that I have done is put down further attic insultation (covered under landlord energy saving allowance).

Using the same principle, you might get away with upgrading the central heating and re-wiring as tax deductable. Based on (i) that it was already there and is a repair (ii) it wasn't done prior to rental.

I might get shot down for this, but this is the advice that my accountant has given me.

Furthermore I recently put in fire doors as the property has been reclassified as a HMO, and was a requirement in order for the property to get the HMO licence so hopefully this is 'expenses relating to the rental business'........