Thinking of a BTL, what have I forgotton?

snowdonia

My 19yr old daughter has been left £20k,we are planning to use this as a deposit for a btl.
We have found the house, have sourced the mortgage via L&C, her name will be on it as she works part time with me a guarantor. This means she can have the rent tax free as it will be under her personal threshold.

Things we know.
She will have to start filling in self assessment forms
We are using an agent to set up the tenancy
We are converting it from 3 bed 1 bath to 2 bed 2 bath (can this expense come off tax?)
Inform council tax office
Insurance (buildings and contents)
PAT testing
Furniture etc must comply
Applying for a 0% credit card for purchases, using savings for building works.


Things we are not sure about.
Do we inform water board the tenant is paying (what happens if they go into arrears?)
Who pays tv license?


I know there is an awful lot more to take into account, can anyone fill me in?
Thanks

googler

She can only be 'tax-free' if the total of her part-time income plus the rental income is below the tax threshold.

However, genuine expenses can be deducted from the rental income before arriving at the taxable figure. Guidance on this at HMRC website.

Depending on the local authority, she may have to register as a landlord.

Is she really ready to be a landlord?

Werdnal

I assume the mortgage you have negotiated is on BTL terms - obviously question but many people don't know that you normally cannot let on a resi mortgage. I am surprised she has been allowed a BTL loan at such a young age and as a FTB, with only part-time earnings and £20K deposit!

Newbie landlord thread here:

http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

read, learn and inwardly digest!

Particularly check out the HMRC link within this thread, as it will explain the expenses and costs that can be deducted from the rental income to reduce the tax due. Note - Only mortgage interest is an allowable expense!

Her income is taken as a whole, so her rental income and earned income is taken together, and any tax liabilty applied to that total. It will also affect any benefits (ie tax credits etc), that she is entitled to.

TV license, utilities etc are all paid by the tenant.

You will need insurance to cover LL use as normal household policies do not include letting.

Is she financially stable enough to cover mortgage if tenants stop paying - it does happen!

Best not to make any credit card applications until the mortgage has started, as they can check credit ratings regularly and may change their offer if they notice new credit being taken!

Your building work and changes prior to first letting cannot be used against tax, as they are normally considered "capital" costs, but can be offset against capital gains tax at the point of sale.

snowdonia

Thanks for the info guys, the mortgage is a btl with Birmingham Midshires and she only has to be employed..there is no minimum wage. In reality I will be dealing more with the landlord side of things as she is in college. The houses we are looking at are around the £70k mark.

Will study the linked thread, thanks

I_have_spoken

she is in college

Won't rental income be taken into account when assessing repayment of student loan? Net gain may be minimal?

My 19yr old daughter has been left £20k

TBH, tying up all the capital in an illiquid asset at 19 doesn't sound like such a great idea to me. I'd be thinking about a balanced portfolio of investments; you can get exposure to residential property via a pooled fund in ISA wrapper.

YMMV, do your own research, this doesn't constitute investment advice etc.

joujou

I_have_spoken wrote: »

Won't rental income be taken into account when setting threshold for repaying student loan? Net gain may be minimal?

Why? she'd be using the money to pay off the debts. Sure she won't have immediate income, but she'll be paying money that she always had to anyway.

MarkBargain

Gas safety certificate?

Won't she want to buy her own house one day though rather than have her mortgage tied up with a buy-to-let mortgage for, what, 25 years?

Also, the income from the rent could affect how she has to pay back any student loans for university as that's based on income isn't it?

joujou

I think this is a good investment.

It's all in her name, and you're a guarantor, if you're perfectly happy with doing this for her with no expectation of reward (well, apart from the fuzzy feeling and priceless familial happiness) then I can't see anything wrong with this. Obviously, be prepared to pay up if payments need to be made.

socrates

TBH this site is very anti BTL and BTL Landlords- take your questions over to LandlordZone.com for answers based on your questions

I would be more interested to know if the figures stack up before I asked anything else

ognum

socrates wrote: »

TBH this site is very anti BTL and BTL Landlords- take your questions over to LandlordZone.com for answers based on your questions

I would be more interested to know if the figures stack up before I asked anything else

I don't think this is true at all, there are plenty of landlords on here. What is objected to by many including me is those who unlike this OP go into it with their heads in the clouds and no buisness plan or idea of how to make it work.

The only person who suffers then is the tenant and that gives landlords a bad name.

socrates

ognum wrote: »

I don't think this is true at all, there are plenty of landlords on here. What is objected to by many including me is those who unlike this OP go into it with their heads in the clouds and no buisness plan or idea of how to make it work.

The only person who suffers then is the tenant and that gives landlords a bad name.

There IS a lot of negativity on this site to BTL LL's - I have been a member longer than you and have seen a lot of them leave or just not post.

I made an exact same post here once as I did on LandlordZone.com - long time ago - the responses were completely different - on here sheer negativity on LLZone - many many thanks

Contrarily - LLZone is more negative towards tenants then this site