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

AdrianC

ognum wrote: »

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

Over two years, on new-build flats where the developer's so desperate to get shot that they give "very attractive" discounts of over 10%?

While you're about it, what are next week's lottery numbers?

dimbo61

OMG buying a rental property should be looked on as a 10/15 year commitment in order to cover the buying and selling costs and give Time and a rising housing market.
The mortgage fees, solicitor costs and All the other costs will be very expensive.
Why a 2 year deal ? With 40% deposit and many cheap long term fixed rate BTL deals.

mrginge

it's strange how these seemingly amazing deals always seem to end up at the door of the first time landlords, rather than being jumped on immediately by the experienced ones.

Prothet_of_Doom

big_trev wrote: »

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

Harsh. I'd say if you don't know what questions to ask you shouldn't buy a BTL.

I came across a good book in my local library, and took that out (TVR - All the cars) and then found "Property Tax for Dummies" which is not quite as exciting, but far more useful.

We are taking out a joint BTL, and will be tenants in common, but with a 90/10 % split for tax avoidance purposes.

My wife thinks this is dodgy. :rotfl: I've asked both my accountant and the solicitor to explain it to her, as it's pretty standard practice

ognum

MrWebDesign wrote: »

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.

Good for you life is a learning experience.

A couple of things to note though.

-Tenants are not always ready to leave when you want them to
-It won't be a shiny new build two years down the line
-It will take a few weeks to get the first tenants in
-In two years when the mortgage relief changes kick in their may be many LL like you selling
- Selling all three in the same year will give you a big CGT Bill.
- Selling all three at the same time makes you in competition with yourself
- You will have a long void at the end because you limit your market if you sell with tenants in situ

Letting is a long term strategy.

theartfullodger

MrWebDesign wrote: »

..... 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. .....

Aye, right. (Example of two positives making a negative...)

Think that's lesson 7.3 in the developer salesman's "dummies" book they give to new-boy salesmen...

Prothet_of_Doom

ognum wrote: »

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.

I have done 4 calculations to assess the risks of our first BTL.

1) Break even point. - how many months do I need to break even on the interest and other costs - 6 months.
2) Return on MY investment with 3 month void 5% per year
3) Return on MY investment with 1 month void 8% per year
4) Totally impossible to predict capital increase over 15 years assuming approximately the same capital growth as previous 15 years as a return on my investment about 5% per year.

Have to say we are awaiting the solicitor to tell us he has the contract ready to sign. (He seems very slow) Should be completing before end of November, and I need 1 week end to get it ready, so am expecting that nobody will be moving in until the new year.

Prothet_of_Doom

ognum wrote: »

Letting is a long term strategy.

Our strategy is to think 30 years. got But as you don't know what life will bring, to be flexible, hence the fixed rate BTL mortgage is only 2 years, because IF we have really this wrong, we'll want out.

ajdj

Diversification is also important for any investment type. Buying 3 properties in the same building is not a very bright idea. One increase in service charge could wipe out a years profit (this can and does happen!).

Bear in mind that soon after you complete the Land Registry will publish the sold prices. These are what most experienced landlords use as comparables. If you intend to sell so quickly the only way you stand to gain is if you can find somebody as green as yourself to take it on. Do yourself a favour and get the max discount you can on buying one. Get some experience as a Landlord before you increase the portfolio and view it as a more long term investment.

big_trev

Harsh. I'd say if you don't know what questions to ask you shouldn't buy a BTL.

I came across a good book in my local library, and took that out (TVR - All the cars) and then found "Property Tax for Dummies" which is not quite as exciting, but far more useful.

We are taking out a joint BTL, and will be tenants in common, but with a 90/10 % split for tax avoidance purposes.

My wife thinks this is dodgy. I've asked both my accountant and the solicitor to explain it to her, as it's pretty standard practice

You've clearly done research and taken professional advice, so you know what your getting into. OP hasn't. And he's talking about 3 not one. There seem to be plenty of BTL threads recently. You should also consider the time and expense of actually evicting tennents who do not pay. It may happen...