Second property with the other half

Thrugelmir

AbiJ11 wrote: »

Does it stack up?

A key question that only you can answer. As you've access to all the numbers. Using a letting agent will diminsh your return considerably. Generating sufficient after tax income to pay down the mortgage isn't always as easy as it may seem.

AnotherJoe

AbiJ11 wrote: »

I mean none of your replies answered my specific question but we had an offer accepted and the ball has started rolling.

Okay so far so good. There is a significant upfront fee for flipping the current mortgage but because my rate was so poor when I first purchased this will save me a significant amount more over the next few years and be a lower monthly cost. I also have to pay additional property stamp duty.

This is a pain but will give us plenty of time to work out whether to keep the house as a start to a property portfolio or to just sell it at a more profitable time. If we sell within 3 years we get the stamp duty back.

I will be using a letting agent to manage the rental of the first property so most of that is covered too.

Now will be the most profitable time to sell. As time goes by the newness of the fittings will rapidly become background and once its been lived in by a tenant for a couple of years and you've had to wait for them to leave before you can sell it, the money you'll lose through no incoming rental will eclipse anything but rampant HPI which is very unlikely at the present time, since the housing market seems to be stalling.

AdrianC

AbiJ11 wrote: »

2 years ago I got a little house on my own and have invested a fair bit into it.

It was bought for £101000 and since has had a brand new kitchen, brand new bathroom, overhauled garden and cosmetic upgrades. Average house price has gone up by £15000 on my road too. So I'd expect my property to be worth £120000 now. There is £91000 left on the mortgage.

However, now I'm making the huge decision to buy a house with my partner for a lot of reasons. We have two viewings at the weekend - £200000-£220000. We have the 10% and then some for upgrades and conveyancing and what not.

Now because of the amount of love and money and effort I put into my house (and for financial security), I would like to keep the first property as a rental ~£650/m

Will I be able to do this? Does it stack up? Do we have enough of a deposit? Any and all advice is welcome

You'll almost certainly need to remortgage the first property to BtL, because two residential mortgages will be massively stretching things. You're only JUST hitting the 75% BtL.
Let's say 5% interest on that (optimistically) - so monthly interest of £375. Oh, and we'll ignore the fees on the mortgage for now. Or what happens when interest rates rise.
That leaves you £275/mo actual income. If you plan on repaying the mortgage from that (remember, mortgage repayments are not offsettable against tax), then that's another £150/mo, so £125/mo to cover the repairs and insurance, tenant finding, etc etc.


If you're not planning on putting the time in to managing it yourself, knock 10% (£65) off the rent. So you're now looking at £60/month.

Oh, and if you figure £200/mo as taxable income, that's £480/yr in income tax if you're a basic rate taxpayer.


Basically, you're going to be doing this for more or less zero in your actual pocket each month. Sure, the property value may go up (CGT payable on the gain). Or it may not. Meanwhile, you've got the stress and tears of your lovely home with tenants in who won't regard it in the same way you do.


And that's all before you consider voids and unpaid rent and damage.


And let's not forget the extra 3% SDLT on your new £210k property - £6,300. How long will it take you to recoup that from the actual income in your pocket?