housing benefit / buying a "cheap house" to rent out for income...?

BigAunty

See the section here for information on property that you own but don't occupy to see how it would impact your housing benefit.

http://www.dwp.gov.uk/publications/specialist-guides/technical-guidance/rr2-a-guide-to-housing-benefit/working-it-out/income-and-capital/

Run your proposed idea on the housing forum on MSE. If you are dependent on state support, and have to borrow the money to invest in capital, then I don't think self employment/running a business is for you.....

I'm with real1314 - if these properties are cheaper than a decent family motor, it's because they aren't viable as either residential owner occupier properties or buy to lets. They are either very dilapidated and getting them habitable would cost more than the market value of an equivalent property in the area or there is simply no demand for them by tenants.

Deprived areas means lots of unemployed tenants means housing benefit tenants and these are much riskier from a business point of view than working tenants.

I've done some landlording and refurbished 3 properties. You won't get much change out of 7k for carpets, new decent bathroom and kitchen and decoration, DIY and basic repairs, etc. If you need new electrics, heating, roof, damp courses, double glazing, central heating, garden landscaping then you are looking at doubling or tripling those costs.

Yes, you can do heaps yourself if you aren't working but then it takes many more months to get the property back on the market, time in which you both could have earned at least £400 per week in National Minimum Wage jobs - from a business perspective, you would have to add in lost wages into calculating your return on investment. If it takes you 6 months to refurbish the property and you can't take a wage from it directly, then that's another 12k to the cost of the project, for example, in money you could have earned in employment.

And how can you pay back a loan if the property fails to rent out for long parts of the loan period or you get a tenant who trashes it and doesn't pay rent (can take up to 6 months to get a nuisance tenant out of the property through the courts)?

Some areas and properties are just beyond regeneration, there are structural reasons why they will slide into even worse deprivation and become depopulated - look at Detroit in the US. Whatever happens in the US trendwise, invariably comes to the UK.

BigAunty

Also, you should read up on the Universal Credit system - currently those claimants receiving tax credits can get them despite the level of their capital. Under UC, when tax credits are scrapped, there will be the same means testing of UC applied to things like HB/council tax discount now.

If you get child or working tax credits, now is the time to understand how you will lose them in UC when your future property portfolio starts to have equity in it.

I don't understand if you and your wife will be owners of the property or whether the property will be kept in your in-laws name. If you live there as owners, you won't qualify for housing benefit as this is just for tenants. If you live there as tenants of your in-laws, then you need to understand that the council may reject your housing benefit claim under the contrived tenancy rules - google this to understand why lettings between relatives are subject to closer scrutiny and how you avoid breaching it.

BigAunty

wayne0 wrote: »

im guessing you mean so i have some legal stance if my wife and i split? - legally i do by default: 50/50 but the propery would most likely be registered under a company name...
and set up as a proper business... - which the may effect the gift thing etc... but thats something a tax advisor would advise on at the time in question...

....

I know you plan to take tax advice and do more setting up a company research, so apologies if you know the following.

Behind a limited company which is the main way that landlords with multiple property developments put through their work, there are company directors. The company may own it but the company is run by human beings, it's not just operated anonymously by a company name.

If you wish to increase your benefit entitlement, for example, by not being a company director, then I can't see why you think you would be entitled to 50/50 of the buy to let property in the personal sphere. Yes, it belongs to a company but if your wife is the sole director, then legally you won't be entitled to anything if you split. I don't think you should conflate personal entitlements with the business.

I'm not au fait with taxation and company structures but got the impression that the limited company route, for example, is more suited to multiple properties, could be wrong on that but there is a taxation forum on the Landlordzone website that can guide you on this topic.

Charityworker

Have you ever thought about buying a caravan? You can get one for £13,000 or less and let it out. You still have to register as self employed and declare your income but they can't stop your housing benefit if it's sited on a non residential site.

Tottyshouse

Don't do it unless you have the money to cover the cost of it sitting empty for months. I drive through quite a rundown part of Newcastle on my way to work 5 days a week. Even in an area where HB tenants are the norm and there are good transport links and local amenities, I pass 3 homes that have been up for let for over a year now. That landlord has to pay the mortgage (if they are mortgaged), council tax (although at a reduced rate) utility bills (unless he has gone to the effort of draining down the heating system and is prepared to only do viewings during the day in the summer) pay extra for void insurance and then cover any vandalism the property's suffer. If they are cheap there is a reason. If they haven't already been snapped up by experienced local landlords there is a reason. There are lots of cheap properties in poor condition in "bad" areas - the reason is no one wants to live there. They are a bad investment.

somethingcorporate

I agree with most of the above - if they were worthy of being rented at such a cheap price they'd have been snapped up by local landlords given people have credit card limits high enough to buy one!

It will be a money sink and/or unrentable.

Glen_Clark

I can't imagine more of a culture shock than moving from Stratford on Avon to Middlesboro :eek:

princessdon

Glen_Clark wrote: »

I can't imagine more of a culture shock than moving from Stratford on Avon to Middlesboro :eek:

Tsk you need to read DT - We are privilleged with privilleged upbringings and opportunites ya kna :eek: