Tax Advice on 3x BTL Properties (Rent Income & Deductions)?

MrWebDesign

We are looking to buy 3 newly built apartments at a very attractive bulk discount, they will be ready for tenants Jan16. The three apartments are £155k, £110k and £165k and will provide rental income of c£11k, £8.5k and £11k pa (before agency fees, maintenance and mortgage B2L mortgage repayments). Total income will be c£30k with deductions of (maint/mgt: £5k, Agency: £2k, B2L Repayments £6.5k)

We have been told by an Broker today that we can secure B2L Mortgages in joint names with 40% cash payments down on each of the three which we can just about manage to do. I am a 40% tax payer and my wife earns c£5k pa currently. `I'm told we therefore must put the property in joint names also.

My tax question is relating to the amount of tax we are likely to pay given the scenario above and income of c£30kpa through rental and with potential deductions of c£14k. I have read several articles and am confused by the recent changes in this years budget, as in what is allowed to be deducted before calculating the tax and when this actually comes into force (which tax year etc?)

Appreciate any advice... Thx.

booksurr

MrWebDesign wrote: »

I have read several articles and am confused by the recent changes in this years budget, as in what is allowed to be deducted before calculating the tax and when this actually comes into force (which tax year etc?)

same question asked yesterday > read answer:
https://forums.moneysavingexpert.com/discussion/5343053

big_trev

Honestly, if you need to ask these questions, you should not be buying 3 BTL properties.

Kynthia

Surely if you're going to be spending this much money you would pay for some tax advice. You need to know about the allowable deductions, ownerships percentages/split, capital gains tax, etc.

Lungboy

If my maths is correct, before deductions, you'll be looking at ~7% yield. After deductions, less than 4%. Is it really worth it?

ognum

Lungboy wrote: »

If my maths is correct, before deductions, you'll be looking at ~7% yield. After deductions, less than 4%. Is it really worth it?

You have not factored in any capital growth, maybe it is worth it if the value of the property grows.

Lungboy

ognum wrote: »

You have not factored in any capital growth, maybe it is worth it if the value of the property grows.

Very true, although around these forums everyone seems to say that new builds lose a big chunk of value as soon as you get the keys.

tomtontom

How much are the service charges? Have you a contingency for if/ when the tenants don't pay?

If this is your first venture into property investment I would think again, it's an awful lot to take on, and new builds can be far more costly than you imagine.

ognum

Lungboy wrote: »

Very true, although around these forums everyone seems to say that new builds lose a big chunk of value as soon as you get the keys.

Very true, of course it depends on the length of time the OP is prepared to keep the properties and how much discount he is getting and the location of the properties.

Now I have looked at the original cost of the properties it is hard to believe they are in an affluent area but I may be wrong. Op what location are these properties in?

Op, please look very carefully at the leases of these properties and check for escalating ground rents and enormous service charges.

ognum

You have also made no mention of voids in your calculations. I always work out my calculations on an 11 month base.

I seldom have voids, keep tenants for a fairly long time always longer than their first renewal and keep my rents just below market rent and always maintain property and respond to requests quickly but a void can lose you 10% of your years rent.

MrWebDesign

Thanks for the replies, I was offline yesterday so just catching up. The apartments are in a waterfront position and are c£20k less (per apartment!) than the prices the developer is selling to the public at. We have seen MOS also that show completions at the developers prices.

I've made contact with an accountant yesterday afternoon and will get advice, but the capital appreciation alone is appealing to us. The rental market currently in the area is such that these will let at the rental rates above given the current demand. Our view is therefore quite short term; to secure the B2L mortgages, secure Tennant's for 2 years and look to sell in 22 mths time as we near the end of the mortgage term.

Thanks again for the comments.