rent or buy second property?

jamels2

Hey all,
I am looking to find my own place in the new year as I have to be out of the shared house I live in and want somewhere to myself.
I already own a flat which is let to a nice woman and her two kids and I would prefer to leave this as an investment.
The ltv on my flat is about 30% (58k left flat value 180k).
I can re mortgage up to 70% which would give me 68k.
Thats enough to buy a second flat for 200k with a 60k deposit and to cover stamp duty and fees.
So, my question is should I do this or should I just rent and pay off one mortgage first?

Lloyd90

I would buy personally over renting yourself but be aware you'll pay an extra 3% stamp duty.

If you can afford both why not? Your tax liability on your current rental would remain the same regardless I believe.

bigfreddiel

Lloyd90 wrote: »

I would buy personally over renting yourself but be aware you'll pay an extra 3% stamp duty.

If you can afford both why not? Your tax liability on your current rental would remain the same regardless I believe.

Surely anyone buying a second property knows about the extra 3% stamp duty? fj

jamels2

thanks lloyd i am just trying to make up my mind.

i am aware of the stamp duty, which on 200k works out at 7.5k. with my 68k this is pretty much factored in.

i am in it for the long term its just getting my head around paying all the fees etc

i have been used to paying off my mortgage with the aim of being mortgage free on one property.

however it appears to be better to leverage and buy a second in the long term as i doubt property prices will fall long term.

Lloyd90

bigfreddiel wrote: »

Surely anyone buying a second property knows about the extra 3% stamp duty? fj

You'd think so but I've spoken to several people so far who rent out property and don't understand the changes to their taxes due to S24.

Lloyd90

jamels2 wrote: »

thanks lloyd i am just trying to make up my mind.

i am aware of the stamp duty, which on 200k works out at 7.5k. with my 68k this is pretty much factored in.

i am in it for the long term its just getting my head around paying all the fees etc

i have been used to paying off my mortgage with the aim of being mortgage free on one property.

however it appears to be better to leverage and buy a second in the long term as i doubt property prices will fall long term.

Where in the country are you looking?

What is your job, do you move a lot and how secure is it?

As long as you can afford it I would buy personally but maybe you'd like to speak to an indepdnetant advisor? I would have thought it's a no brainier though to buy rather than rent something exactly the same.

jamels2

im in the south east. job is quite secure and i have no plans to move at the moment.

at current rates ( 2.54% ) i am looking at interest only mortgages of £270 on my existing flat and rent £750.

the second property would be £300 interest only, so instead of paying £800 to rent somewhere i could live in the new flat and overpay.

Thrugelmir

Unlikely you'll obtain an interest only mortgage on a residential purchase. The other issues you may face are the realising of equity and the source of the deposit. Leveraging is all very well. With interest rates at record lows and more likely to be heading only one way. Perhaps not the best of timing.

nubbins

How much are you renting your flat for?

jamels2

750 per month no agents fees

Bossypants

I'm of the 'buying is almost always the way to go' school, but if you do buy you would need to have a fairly watertight plan for what to do if you lose your job and interest rates rise a few points at the same time. Otherwise you could find yourself in deep trouble.