Not sure if this is possible?

jh111111111

Hello,

My Father-in-law who lives in Singapore owns a building in the UK which consists of a commercial shop space downstairs and a three bed flat upstairs. It also comes with the freehold. Both the shop and the flat are currently rented out to tenants through an estate agent. The yield from both is £1900 per month after estate agents fees. There is no outstanding mortgage on the property

The value of both properties combined is approx £450k, and he is looking to sell to us and only wants £300k for it.

I am currently not a homeowner and am looking to buy my first place and have a £40k deposit looking to buy a £400k house.

So in my head I though I could.....

1) Get property is gifted to me by father in law - he would be liable for capital gains but he is in Singapore so not sure how that will work
2) I take out a mortgage against the property for £300k to pay the father in law.
3) The £300k mortgage monthly payments are covered by the £1900 rental yield, although I am not sure how much tax we will be paying on the rental yield or how is best to account for it. Me being on PAYE

4) I use my deposit money to buy a house and any surplus income from flat and shop is savings.
5) in 3-5 years time when we are looking to buy a bigger place we sell the lot and put towards one place. Not sure how much capital gains tax we will be liable for?

My other thought was...

Same 1 and 2 as above but for number 3 we take out as large a mortgage as the lender will allow against the commercial property whilst being covered by the £1900 rental yield (Might be able to top up by a couple hundred a month if necessary)

4) I use my deposit plus remainder of mortgage money to put a huge deposit on a place thus reducing my mortgage on the house and monthly payments. Even if I have to pay some extra on the commercial property mortgage plus the house mortgage, I am assuming it will be net less than having a small deposit on the house and therefore higher monthly payments?

5) Again, when it comes time to move on we sell the lot and I am liable for capital gains on the commercial property.... but would the tax bill be less as outstanding mortgage would be a bigger chunk of the overall value?

Any help would be appreciated

Thanks

Justin

dimbo61

Lots of problems with your idea
1 You do not already own a property of your own so difficulty in getting a BTL mortgage for £300K
2 You are self employed
3 Size of deposit is only £40K even if flat/shop are worth £450K
4 F-I-L is not in the country and how the tax will work is something you should talk to a good accountnant and the HMRC
You maybe better off selling the Flat/shop and having cash for the purchase of the home you want after CGT is paid