Can I keep this flat

Lewjohn

Hi
I'm nearly 35 with no dependents. I have one property rented out for 9k PA. Current value 180k mortgage 78k.. Needs a lease extension that could cost 20-25k but would make the flat worth over 200k. Currently on a consent to let with a residential mortgage as I lived there previously.
I am renting a room cheap at my dad's and saving money but I now want my own place. My income is 25-30k.
My question here is can I keep hold of the flat I have now? That was what I planned to do but the stamp duty rise has made me think again. A buy to let lender told me I can borrow 130k based on my rental income.
Thanks
Lewis

alchemist.1

Only you or a financial adviser can tell you.

It's a very open ended question without knowing the full facts of your lifestyle, expected lifestyle, expenditure and aspirations together with career prospects.

AdrianC

3% on a £150k property is going to be £4,500. Six months rent.

Can you afford a deposit on your own property AND the SDLT AND the lease increase? Out of the three, I'd say the lease was your priority, especially since the cost versus value increase currently breaks even, while the cost is only going to increase in the future.

If you want your own place, the obvious solution would be to move into the flat you already own.

Lewjohn

Thanks for the replies
My long term plans would be to not have to work as much so some sort of income from property would be nice if the figures added up. Or just ow ing one property mortgage free so I had less expenditure and could work part-time just to pay the bills.
I thought about extending the lease but the cost of this would eat into my deposit money for my next property.
So it might only be worth doing if I was selling to get max sale price.

AdrianC

Lewjohn wrote: »

My long term plans would be to not have to work as much so some sort of income from property would be nice if the figures added up. Or just ow ing one property mortgage free so I had less expenditure and could work part-time just to pay the bills.

You and everybody else.

G_M

You have the wrong plan.

My long term plan[STRIKE]s would be[/STRIKE]was to not have to work [STRIKE]as much[/STRIKE]at all so some sort of income from property [STRIKE]would be [/STRIKE]was nice [STRIKE]if [/STRIKE]when the figures added up.

Lewjohn

I could get a loan at 3.4% to pay for a lease extension

pathtofreedom

Don't forget to factor in the tax changes coming in as well, as that might lower your yield and make voids harder to cover etc if you're having to pay more tax.

Lewjohn

I guess I am trying to decide between:
1. Having one property to live in with a small mortgage, IE low outgoings which means I don't have to earn as much (maybe work part time), or:
2. Leverage as much as possible to have two properties, maybe three later, resulting in rental income and long term capital gains.

littlegreenfrog_2

The longer you wait to extend the lease on the property you already own, the more expensive it will be. I would suggest you carry on living with your dad until you have enough money to extend the lease, and then do that as a matter of priority. Once you've done that, re-evaluate your position. If you can afford to get another property to live in whilst still keeping the buy to let, you could do that. If you can't afford it (or it's not profitable) and you really want your own place, give your tenants notice and move back into the flat you already own. The two options you have outlined above suggest that what you really want to do is establish how to do as little work as possible and get by. Having one residential property and a mortgage which you should pay off while you're relatively young is a good situation to be in, by most people's standards. But you should make sure you are thinking about how to fund your retirement. There are other options than BTL. Are you currently paying into a pension, for example? If what you want is a little BTL empire, bear in mind that it is not really a hassle-free "get rich quick" scheme, especially not with the changes that are coming in now. Is it really wise to take on that much debt? If anything goes wrong (or if rates go up) it could leave you very exposed.

kingstreet

AdrianC wrote: »

3% on a £150k property is going to be £4,500. Six months rent.

<pedant mode on>3% on £125,000 = £3,750 + 5% on £25,000 = £1,250 so £5,000 in total.<pedantmodeoff>