BuytoLet changes

Roo2001

Im thinking of doing a buy to let. letting my brother chose the house and as long as the figures stack up, me buying it for him to rent off me.Then when he is in a position to take out a mortgage I agree to sell it to him.
on MSE/mortgages/buy-to-let-mortgage ....It mentions a radical shake up of buy to let...what does this mean, what should I be aware of?
Are there any legal loopholes which would make me better off to take the mortgage out with my brother rather than a buy to let mortgage?
What other costs should I take into account, is rent collected -mortgage payment =profit or do I have to deduct tax from that if so how much will I be left with?
What split of deposit +mortgage do i need to put down to make this a viable investment of my redundancy money?

Pixie5740

Roo2001 wrote: »

Im thinking of doing a buy to let. letting my brother chose the house and as long as the figures stack up, me buying it for him to rent off me.Then when he is in a position to take out a mortgage I agree to sell it to him.
on MSE/mortgages/buy-to-let-mortgage ....It mentions a radical shake up of buy to let...what does this mean, what should I be aware of?
Are there any legal loopholes which would make me better off to take the mortgage out with my brother rather than a buy to let mortgage?
What other costs should I take into account, is rent collected -mortgage payment =profit or do I have to deduct tax from that if so how much will I be left with?
What split of deposit +mortgage do i need to put down to make this a viable investment of my redundancy money?

No, it's not as simple as Rent Collected - Mortgage Payment = Profit.

https://www.gov.uk/renting-out-a-property/paying-tax

As well as income tax you will need to factor in SDLT, possibly at the higher rate if you already own a residential property. Then there's potentially CGT when you eventually dispose of the property i.e. sell it to your brother.

You may find it difficult to obtain a BTL mortgage since you intend to let the property to family.

need_an_answer

Are you already a home owner?
A second purchase as this would be would mean extra stamp duty.

BTL usually requires a deposit of 25% and many lenders have clauses that prevent the renting to family.
You mention redundancy money,are you now in employment? this may also need to be factored in when finding a mortgage provider as they will not automatically count rental income as a stable source of employment.

Just a few things to consider I'm sure someone will come along with some other pointers for you aside from reading up on the importance of being a LL and your onward obligations there.

Roo2001

I have done some calculations of yield, using online calculator. Is Yield % the same as saving interest?

need_an_answer

What are you basing your figures on if you dont even know what property you wish to buy or the income it will generate?

Roo2001

I am just using an example of a property currently for sale and similar rentals in the area.

Property price £137,500
Expected rent £750 pm
B2L interest only mortgage payment £125

Deposit £37,500
Stamp Duty £4,375
Legal etc £1,500
Total Investment = £43,375

B2LYield calculator :
Property Investment - £43,375
Rent minus Mortgage Payment £625
**CALCULATE**
Annual Rent £7500
Yield £17.29%

need_an_answer

Freehold or leasehold property?

Roo2001

Freehold property

need_an_answer

Who's going to be responsible for maintaining the property and/or running repairs or large breakdowns?

Roo2001

well me, unless i rent to my brother and come to some sort of agreement.

need_an_answer

Thank you,

We're finally getting down to the nitty gritty that you have no idea what being a LL entails.

Please read up on it


You cant pick and choose your responsibilities as a LL nor come to any arrangement with your brother over running repairs etc.

I am still very much of the opinion that this is a non starter for you unless you can fund the property purchase without the aid of a mortgage as lending criteria is unlikely to grant a BTL with the conditions you describe.