Buy to Let Advice

Smudger78

Hi,


Looking into getting into Buy to Let and the pro's and cons of doing this as an individual versus setting up a company/special purpose vehicle. We're looking at starting small with properties we can buy cheaply, spend a little on and rent out, probably on interest only basis so we can build up a small portfolio. Whilst we realise it isn't easy and comes with risks we've decided we'd like to give it a go and take a long term view in terms of saving and reinvesting any money made to build things slowly over time.


Does anyone have any experience and/or views on this? Also will need to seek some professional advice locally at some point so if anyone could recommend a good accountant with experience in this area (including setting up SPV's etc..) in West Yorkshire please feel free to PM me details.


Thanks!

Bluebirdman_of_Alcathays

Putting it in company is rarely advantageous. How do you get any profit out of the company? Companies still have to pay the extra 3% SDLT too.

Smudger78

Bluebirdman_of_Alcathays wrote: »

Putting it in company is rarely advantageous. How do you get any profit out of the company? Companies still have to pay the extra 3% SDLT too.

Having read up a little given the changes made recently by the government I thought this may be a way of avoiding paying tax on any profits at the higher rate which I would have to do. Also given we are taking a long term view taking profit isn't an immediate issue for us. Am I wrong in thinking this?

G_M

It only becomes worth setting up a company once you have a significant portfolio.

For 1 or 2 properties, forget it. Reconsider later if all is going well and you expand.

Meanwhile, Read:

Tenancies in Eng/Wales: Guides for landlords and tenants This thread is intended to provide information to both landlords and tenants relating to Assured Shorthold Tenancies (ASTs) in England and Wales.

Topics covered:

* Repairing Obligations: the law, common misconceptions, reporting/enforcing, retaliatory eviction & the new protection (2015)

* Deposits: payment, protection and return

* Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

* Rent increases: when & how can rent be increased?

* Repossession: what if a LL's mortgage lender repossesses the property?

* New landlords: advice, information & links

* Letting agents: how should a landlord select or sack?

Smudger78

G_M wrote: »

It only becomes worth setting up a company once you have a significant portfolio.

For 1 or 2 properties, forget it. Reconsider later if all is going well and you expand.

Meanwhile, Read:

Tenancies in Eng/Wales: Guides for landlords and tenants This thread is intended to provide information to both landlords and tenants relating to Assured Shorthold Tenancies (ASTs) in England and Wales.

Topics covered:

* Repairing Obligations: the law, common misconceptions, reporting/enforcing, retaliatory eviction & the new protection (2015)

* Deposits: payment, protection and return

* Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

* Rent increases: when & how can rent be increased?

* Repossession: what if a LL's mortgage lender repossesses the property?

* New landlords: advice, information & links

* Letting agents: how should a landlord select or sack?

Thanks! Will read through these. Ok so from what your saying its better to accept paying higher rate tax on any profit than incur the costs and complication of setting up an SPV for a small number of properties (i'd like to get up to 4-5 in the next 3 years)?

Smudger78

Another newbie question - is it possible to borrow money against BTL 1 to fund to deposit for BTL 2?

silvercar

We have ours in a company, but only because the money was already in the company and would have incurred a big tax bill to get the money out in order to invest.

I agree with others that it won't make sense to do it for just a couple of properties.

Another newbie question - is it possible to borrow money against BTL 1 to fund to deposit for BTL 2?

If there is sufficient equity then you can do this, subject to the lender agreeing. (Or remortgage to a different lender and take a higher amount to fund the deposit for BTL 2.) You could even take increased borrowing on your residential home to fund a BTL....though your home is at risk if you don't keep up repayments......

Cakeguts

You say you want to buy properties cheaply. If you are thinking of 2 bed terraced properties I would suggest that you look at how many are on the market to rent in the area you are thinking of buying in already. If the market is saturated already who are you going to let to?

My experience is of a town in Greater Manchester so not that far away. There are usually no shortage of 2 bed properties available for rent. What there is a shortage of is 3 bed houses (not 3 bed terraced houses) but more modern 3 bed houses probably because you can't buy them cheaply. What this means is that anyone who has modern 3 bed houses to let gets to choose their tenants. Choice of good tenants means far less hassle.

Tassotti

It all depends on your current circumstances.

If you are just under the 40% threshold now, then one or two properties could push you into the next tax bracket when they remove mortgage interest tax relief.

Need to speak to a good accountant and crunch some numbers

Smudger78

Cakeguts wrote: »

You say you want to buy properties cheaply. If you are thinking of 2 bed terraced properties I would suggest that you look at how many are on the market to rent in the area you are thinking of buying in already. If the market is saturated already who are you going to let to?

My experience is of a town in Greater Manchester so not that far away. There are usually no shortage of 2 bed properties available for rent. What there is a shortage of is 3 bed houses (not 3 bed terraced houses) but more modern 3 bed houses probably because you can't buy them cheaply. What this means is that anyone who has modern 3 bed houses to let gets to choose their tenants. Choice of good tenants means far less hassle.

Thanks and yes you're right, we were thinking of starting with two bedroom terrace so your tip on checking their availability in the areas we are looking at is something we'd already considered. We're trying to get the balance right with starting small but also in an area that we know a bit about and is fairly close to home. Not sure if this is the right approach and obviously would have more options if we looked wider/further afield given our small starting budget so views on this appreciated too.

Smudger78

silvercar wrote: »

We have ours in a company, but only because the money was already in the company and would have incurred a big tax bill to get the money out in order to invest.

I agree with others that it won't make sense to do it for just a couple of properties.



If there is sufficient equity then you can do this, subject to the lender agreeing. (Or remortgage to a different lender and take a higher amount to fund the deposit for BTL 2.) You could even take increased borrowing on your residential home to fund a BTL....though your home is at risk if you don't keep up repayments......

Thanks, its looking like we wont go down the company route then... On the borrowing front the hardest bit is going to be getting started with the 20% deposit requirement to meet a minimum 80% LTV and then funding any refurb work. We were looking at buying somewhere that needs a bit of work but with this constraint we cant afford to get anything too dilapidated!