Want my own place, already have one property, rent or buy?

jamels2

I have a property let out which I bought many years ago and let out with the purpose of being an income later in life. In the meantime I've stayed with family but now I want my own space as I'm mid 30s.

I don't want to live in the property I already have so I'm trying to weigh up whether to remortgage and buy another property to live in or to rent myself instead.

I feel like property is a good investment long term but I live in a town which is very expensive due to crossrail. My buying budget is around 190-200k so i would have 25% equity in each place. If i was to rent my budget is 800 pcm.

Not sure which way to go? Any advice?

jamels2

The outcomes I can see are:
If I buy:
- only 25% equity in each property more risk
- also more gain if prices go up
- more fees to pay and stamp duty
If I rent:
- over 50% equity in a property
- can move easily after 6 months if there's a problem

economic

I'm also debating what to do myself.

my property is in zone 2 London so has gone up quite a bit since I bought few years back. not sure on the potential now. even though I don't mind my area, I want to live in a better area so was thinking of selling and buying. but he transaction costs are so much so maybe its worth when I really do want to move, let out my one and rent somewhere else. however have to consider the capital gains tax which would start to apply soon as I let it out. problem obviously if/when I sell the property.

jamels2

It's a tough decision. On one hand I am on the ladder already so if I rented myself I still know I own a property to fall back on.

On the other hand because I have about 60% equity I am wondering whether to buy another place and take advantage of price rises and pay less a month than if I rented.

martindow

Won't you have to pay an extra 3% stamp duty if you buy a second house?

jamels2

Yes that's another consideration with the stamp duty increase coming.

Maybe I will adopt a best of both strategy. Leave my one property let out and rent somewhere myself.

carpediemspirit

I am in the same boat and it is unfortunate that the SDLT Consultation Paper doesn't make life easy for us.

The situation is that if you own one property and let it out. You are not considered to have a main residence thus if you choose to buy a property to live in, you will end up stumping up the extra 3%.

This in contrast to the landlord who not only has a property he lets out but a main residence. If he moves to a new property to live in. He is not liable for the extra 3%.

It was originally mooted that 'accidental landlords' in our position would be exempt from the 3% as we were buying a home to live in vs rent out but this does not seem to have made it's way into the consultation paper.

My suggestion would be to make your views known to the policy team at the following e-mail address: sdltadditionalproperties@hmtreasury.gsi.gov.uk

To see if it has any impact before the final legislation is unveiled during the march budget

marksoton

carpediemspirit wrote: »

It was originally mooted that 'accidental landlords' in our position would be exempt from the 3% as we were buying a home to live in vs rent out but this does not seem to have made it's way into the consultation paper.

However is the OP an "accidental landlord"

To quote... "I have a property let out which I bought many years ago and let out with the purpose of being an income later in life"

I fail to see why having a BTL first and then a main residence after should exempt someone from the upcoming tax rules.

Thrugelmir

carpediemspirit wrote: »

This in contrast to the landlord who not only has a property he lets out but a main residence. If he moves to a new property to live in. He is not liable for the extra 3%.

Surely that's still a second property. The use of the property is irrelevant. Not something that can be policed either.

jamels2

Not overly concerned about the stamp duty. I mean if house prices rise 10k in the next year it will easily cover the one off stamp duty fee I pay to purchase the place.

My question is really about risk I guess. Should I carry on paying off my existing mortgage and rent myself. Or release equity leaving only 25% and buy another place with 25% equity to live in?

DPDRC90

jamels2 wrote: »

My question is really about risk I guess. Should I carry on paying off my existing mortgage and rent myself. Or release equity leaving only 25% and buy another place with 25% equity to live in?

Only you can answer that. You're aware of the finances involved, you're aware of the position you'll be in regarding equity in the properties and the risk on whichever you decide on.

Comes down to you now, all we can do is give you our opinions which aren't worth going off mostly since we ain't in your 'exact' position.

My opinion for what it's worth, considering your circumstances, I'd buy. I'm a believer that paying rent is dead money unless you move around the country every other year or so. If you plan on staying in this 2nd property for quite some time, you may as well buy something to do up somewhat and maybe make some money off of it.