how to get own place?

turtleneck

I have a small flat with a residential mortgage with 50% equity and consent to let which has been let out for nearly a year, while I'm in my early 30s living with parents.

It's time I lived in my own place, and I'm wondering the best way to go about it.
I will add that the flat has a short lease of 65 years, which isn't a problem in terms of a mortgage yet, but has an affect on the value. The options are:

1. Ask the tenants to leave with 2 months notice (as per AST) and move back in. Straightforward, but tenants may not be happy being asked to leave after a year. I get my own place back but no longer have a rental income.

2. Leave flat let out and rent somewhere myself. I stay on the property ladder with my mortgage paid for and tenants can stay as long as they want. I have the flexibility of moving about with renting and am single so this isn't a problem.

3. Leave flat let out, re-mortgage it as buy-to-let (25% equity), buy a second property to live in, putting down the other 25% equity released from the flat as a deposit. I now have 2 properties.

4. Sell the property to a cash buyer/investor with tenants in place, then use the money released to start again and buy somewhere to live myself (long lease/freehold), or put the money away and rent until prices come down (a big if!).

I appreciate your thoughts and advice!

Pixie5740

I'm getting d!jà vu. Have you not asked these questions before?

1) yes you could do this. Do you really need the rental income?

2) Also a possibility. However you will be paying income tax on your rental income and then paying rent using your taxed income. Might not be the most tax efficient way to go about things.

3) yes this is also possible. Would the rental income be 125% or greater of the BTL repayments? Is the 25% released equity enough for a deposit on another property you'd like to live in?

4) that will limit your market so you'll get less for the property compared with selling it to residential buyers too. Better to sell with vacant possession. Don't base your decision on whether to buy or not based on what house prices might do. Nobody has a crystal ball that gives the answer. Besides you're looking to buy a home rather than investment. A home that means that as an adult you will no longer be living with your parents.

turtleneck

1. I would have to say no at this moment in time, the rental income is less than what I get from 2 weeks net wages, so I wouldn't really miss it.

2. Agree about the tax implications of option 2.

3. The rent would cover the 125% required and the 25% equity release should be just enough to buy a one bedroom place. This option means lots of fees, but two properties at the end of it.

4. Agree with all your points here, plus a new owner might decide to give the tenants notice asap anyway so it's not really any security for them.

chrishar

You need to decide if you really want to be a landlord or not, why did you rent the place out in the first place?

turtleneck

I am leaning towards option 3, re-mortgaging the let flat as buy to let, releasing some capital, with which to buy a second property to live in as residential.

I'm not too bothered about being a landlord anymore, but my tenants aren't giving me any hassle and I think they want to stay long term. I'm not sure about having 2 properties but with 25% equity in each of them I think it's not too much of a risk.

The question is can I buy anything I like in the price range I will have doing things this way? Prices are so high and most properties are selling within days.