Buy Main Residence or Buy to Let?

adray

Hi Folks,

Just looking for a bit of advice - We currently have 1 BTL (our old flat) and rent a 4 bed detached cheaply from my mum (750/month on 250k house). We have been offered to buy the house from my mum but because of the new 3% surcharge on stamp duty (LBTT for us in Scotland) would likely need about 40K for deposit, LBTT and lawyers fees so take about 3 years to get to that point.

The other option is to buy a couple cheaper <70k BTLs on interest only and use the income from the BTLs as well as saving myself to put towards a buying this house or another around the same value or depending on availability of self build mortgages look to build ourselves.

Long term plan is to get to about 10 BTL properties but over my lifetime so plenty years as I am only 27.

What do you think buy the house or BTLs then a house?

dimbo61

10 BTL,s is a big investment and the new 3% extra stamp duty and all the other buying costs means you need a very good income.
Why not sell your old flat and buy the house

scottishblondie

I would sell the old flat and buy yourself a main residence now. The 3% surcharge isn't going to go away, so by investing in more BTL properties at this point you wouldn't be helping the situation.

Any that you buy in the future will presumably be of a lesser value that your main residence would be, so the 3% will have less of an impact on those purchases over an extended period of time than on a single large residential purchase.

Plus by getting your own home sorted first you will avoid the possibility of being denied a residential mortgage because you already have overexposed yourself on the BTL side.

caronoel

scottishblondie wrote: »

The 3% surcharge isn't going to go away

Never say never.

I suspect we will see Hammond roll back on some of the Tenant taxes proposed by his predecessor.

Ireland has twice tried a tenant tax, once in the boom times in 1998 and again in recession times in 2008. On both occasions, the tax was quickly withdrawn, as it just led to rising rents and tax evasion.

Are you listening Mr Hammond?

My advice to the OP is to hold off on a firm decision until after the budget

Pixie5740

Hammond can do what he like in the budget. The OP is in Scotland where the LBTT rates are set by the Scottish government and not No 11.

Pixie5740

OP, why has your mum offered to sell you the house? Does she need the money? Is she trying to limit the amount of CGT she will need to pay when she eventually disposes of the property? Perhaps it has something to do with the income tax she is paying on the rental income.

caronoel

Pixie5740 wrote: »

Hammond can do what he like in the budget. The OP is in Scotland where the LBTT rates are set by the Scottish government and not No 11.

... Who will very likely follow suit on the matter, as they did when the punitive rates of SDLT were introduced in England.

You're welcome.

wolfplayer

So you only want to own 10 homes of other people?

You take your chances, but don't complain if you crash out.

scottishblondie

caronoel wrote: »

... Who will very likely follow suit on the matter, as they did when the punitive rates of SDLT were introduced in England.

You're welcome.

In Scotland the tax LBTT bands are different to the stamp duty bands, and very much penalise people buying in higher price brackets even more so that in England and Wales. The sort of house we would like to purchase next will cost us around £28k in LBTT, vs £17k of SDLT on the same purchase down south (and that is at today's prices, not the price it would be in 5 years time).

With that in mind, I feel it unlikely that the Scottish government would follow suit and rescind something that makes them money off of people who are able to spend more on property. Of course, I would absolutely love to be proved wrong!!!

Thrugelmir

adray wrote: »

The other option is to buy a couple cheaper <70k BTLs on interest only and use the income from the BTLs as well as saving myself to put towards a buying this house or another around the same value or depending on availability of self build mortgages look to build ourselves.

The rental income won't be considered unless the property is unencumbered i.e. mortgage free. Days of leveraging with debt are over. As it it creates is a House of Cards. Which very quickly comes crashing down at the first gust of wind. .

adray

Pixie5740 wrote: »

OP, why has your mum offered to sell you the house? Does she need the money? Is she trying to limit the amount of CGT she will need to pay when she eventually disposes of the property? Perhaps it has something to do with the income tax she is paying on the rental income.

She isn't looking to sell currently however is happy to sell to me and will just look to buy another property instead. Only offered as we are settled and happy with the house.