Sell and upsize or buy second property and rent current

Annisele

attila_ wrote: »

I make that 3.6% or have I missed something?

Oops - thanks. I think I got the right yield, but the wrong sale price. OP says £850pcm or £240k if they sell. My fat fingers increased the value of their property quite a bit!

ViolaLass

attila_ wrote: »

Consent to to let should be fine provided you've been in your existing agreement more than 1 year. Tax is only payable on profit, so once you've paid mortgage interest, fees etc. there is very little profit.

Corrected for you. I would be concerned if interest and fees ate up the vast majority of the rent. What about interest rises? Repairs and maintenance?

Pixie5740

attila_ wrote: »

Consent to to let should be fine provided you've been in your existing agreement more than 1 year. Tax is only payable on profit, so once you've paid mortgage, fees etc. there is very little profit.

CTL isn't a sure thing. If you're moving to a larger property in the same area then it's quite obvious to lenders that you have no intention of moving back into the property you're requesting CTL on.

If you're not making a profit (don't confuse profit with cash flow) then what is the point in letting out the property? Why start a business that makes no money? How are you going to fund repairs, maintenance, void periods?

attila_ wrote: »

I make that 3.6% or have I missed something?

A 3.6% gross yield (which assumes 100% occupancy) isn't very good. You can do better elsewhere, in more tax efficient ways, that are more passive investments than letting property.

Before the £ signs blind those thinking of becoming a LL please see G_M's guide for NEW LANDLORDS.

Daniel54

Bazs wrote: »

.
Do you know if you pay CGT on the value of the property price at purchase or at the point you start to let ?

The amount subject to CGT is the difference between the price at purchase ( in your case £150k ) and the price at disposal

The current rules are that you can claim private residence relief ( PRR) for the number of days it was your home ,plus 18months

Yu can also also claim letting relief,which is the lowest of £40k,the capital gain while let or the PRR.Fuller details as per this link
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323679/hs283.pdf

Simply put,as the time you lived in the property becomes a smaller percentage of the total time you have owned it,so your liability for CGT increases.

Hope this helps

clw1

Personally I would go for option 2, but I admit I'm quite risk adverse and wouldn't want the hassle and admin of renting out a house.

You mention that you have done alot of work to your house and if you rent it you need to be prepared for tennants to treat the house badly - ie break / mark things, not keep it clean, have pets etc. If you (or your partner) are emotionally attached to the property you might not like this and find it hard to deal with.

Another option - could you buy a 3 bed house in a good location near a good school for c£300k, overpay as much as possible in the next 5 years and then extend that house as your family grows ? (obv would need a house with good space at the side / large garden / large loft etc). This way you could save a huge amount of interest over the next 10 yrs. If you go for that look at offset mortgages where you can keep money in a savings pot to fund the extention but save interest on the mortgage at the same time.

Bazs

clw1 wrote: »

Personally I would go for option 2, but I admit I'm quite risk adverse and wouldn't want the hassle and admin of renting out a house.

You mention that you have done alot of work to your house and if you rent it you need to be prepared for tennants to treat the house badly - ie break / mark things, not keep it clean, have pets etc. If you (or your partner) are emotionally attached to the property you might not like this and find it hard to deal with.

Another option - could you buy a 3 bed house in a good location near a good school for c£300k, overpay as much as possible in the next 5 years and then extend that house as your family grows ? (obv would need a house with good space at the side / large garden / large loft etc). This way you could save a huge amount of interest over the next 10 yrs. If you go for that look at offset mortgages where you can keep money in a savings pot to fund the extention but save interest on the mortgage at the same time.

Valid point on the other option. I suppose I would always look at future expansion as a possibility on any house I purchased I think.

The more I think about it the more it seems option 2 is the most sensible.

Bazs

Out of interest do you think the goverment will put the sqeeze on people that buy to let in the future ?

MisterB1959

Bazs wrote: »

Out of interest do you think the goverment will put the sqeeze on people that buy to let in the future ?

who knows? but the question is valid and needs to be considered by anyone thinking of getting a buy to let. if the margins from the property are VERY low, then any meddling will have a big impact. I think the matter is complicated if anyone decides to meddle with it, as tax is already paid on property purchase price, fees etc, income and on property price increases on subsequent sales. cost of living indices would also rise as rents rise to cover any additional costs.


the reality is that rental costs would probably increase, so after the initial 'hurrahs' of the anti landlord lobby, the real losers would be those who continued to rent as their rents would rise! I know I would certainly be looking to pass on any increase in costs that might occur.


many landlords reinvest the money they earn so keep recycling it within the system and lots of others who are employed profit from their purchases and they also pay tax on their income.


all those matters would need to be considered through a cost benefits analysis and weighed up to see if any changes are going to be cost effective. private landlords kept the house buying process moving when it came to a standstill, some bought repossessed properties which helped the banks/building societies clear some of their debts and provided a valuable service of social housing provision.




I think the govt would be better off reversing the RTB process and let (fund?) councils build their own properties. the increase in affordable social housing would potentially lead to a diminishing need for private rented family properties.




back to the OP, I think your margins are too small on your 'considerations', you can get the same sort of returns by making smaller property investments elsewhere or even finding a good savings scheme (not a great return but a lot safer). it all comes down to future planning, ie what do you want to achieve, when etc? it might help by writing a 'business plan' which will let you explore all the possibilities on paper before you spend any money!!

getmore4less

Bazs wrote: »

Out of interest do you think the goverment will put the sqeeze on people that buy to let in the future ?

Stopping people setting up a business how they going to do that.

penguine

We still own the first property we ever bought. This wasn't by choice – we actually wanted to sell but due to a problem with the freehold the time wasn't right so we moved out and let it instead. We have been lucky with very good tenants who have been renting from us continuously for over 3 years and look after the property very well, including recently painting the flat (with our permission) to a high standard. So being a landlord has not been too much of a hardship for us, and we are also lucky in that property values in our area have increased dramatically over the past few years.

However ... setting up business as a landlord was never on my list of things I wanted to do with my life, and as soon as our tenants are ready to move on we plan to sell the property and put the equity towards our residential mortgage. I would rather free up a property that could be purchased by a first-time buyer than continue to own it ourselves and have the low-level anxiety of worrying about what unexpected repairs and expenses might arise in the future and whether interest rates might increase dramatically while we're doubly exposed to the property market.