Advice on property (and life)

Ojb

Hi,
I am looking for some outside advice on how to proceed.
I am 38 and have worked for 20 years , never had kids or long term partner.
I currently earn around 25-35k a year and do a lot of overtime often 12 hours days 6 days a week.
Stupidly I have loaned money to friends and family over many years and in total I am owed nearly 70k. I still hope to get this back eventually one way or another.
Despite this I still have a fair bit of money in the bank/ equity in property.
In my early 20s I bought a flat which I have rented out for the majority of the time I've owned it. In this time I've either lived at the parents or at a mates house. I'm currently at parents.
This is my main issue right now, honestly they do not mind be being here but I know it is pretty ridiculous at my age.
I had intended to buy a second property for me to live in, but it's proving difficult for a number of reasons:
1. Stamp duty and tax changes ( the 3% has an impact when I'm looking at flats close to 250k in my area).
2. Not having as much money for a deposit as I should due to the family/ friends loans. I currently have about 70k in the bank.
3. Due to the deposit I am struggling to actually find a 1/2 bedroom property I actually like .
As I had intended on the second property, a few months ago I remortgaged my flat up to 70% (150k mortgage) and am now tied I to a 5 year deal. This means I've got the maximum loan possible to give me the chance of buying another.
However as I said above I am struggling to find somewhere and don't fancy paying the 3% tax hit.
I also am growing tired of dealing with a tenant who pays late despite the rent being low and causes me unnecessary hassle quute often as I don't have an estate agent involved.
So moving on i need advice on whether to stick with my original plan or an alternative plan such as one of the following:
a. Privately rent a small place myself for the same price I receive in rent for my flat, allow my tenant to stay until the 5 year deal ends and aim to pay off the mortgage by then.(using the 70k + money owed to me and my wages). I can pay 10% a year without penalty , any more is 4% penalty for the whole 5 years. I could pay 15k now and put the other 55k into fixed savings to gain some interest and pay 10% each year then a lump sum at the end.
b. Sell the flat and wash my hands of buy to let. Then move on with a decent deposit for a new place for myself. However I'd have to pay the 4% penalty to redeem the mortgage which would be £5400. I'd also have the potential trouble of evicting a tenant who has money problems and probably no money for a deposit somewhere else.
So there you go , what should I do next? Many thanks for any replies and thanks for taking the time to read this far!

davemorton

Or C. Once the tenants moves out, move into it yourself, then do the second half of plan A?

p00hsticks

what's the impact of Capital Gains Tax if you sell the BTL ? I believe the rules around this are changing in the near future which may influence your decision....(apologies, I'm not familiar with the details)

Ojb

Im 99% sure she won't move out of her own accord in the next 5 years.
No idea about capital gains tax, in what way is it changing?

tom9980

That tenant likely has lots of debts here and there they will sooner or later stop paying completely. Rent/mortgage is #1 priority for most people as soon as someone starts not paying and gives you the hassle you describe you need to bite the bullet and evict them.

As for friend/family loans start telling them you want to find a property of your own and stop living at home so can they start to commit something to repaying the loans on a monthly basis. Chances are you won't be getting it all back.

See if your mortgage company do residential loans and will convert the mortgage on your btl loan then live in it to help reduce capital gains tax before selling and porting your mortgage to a new better property.

Ojb

Thanks Tom , as I have no desire to return to the flat I would rather sell it than move back in.
I believe I would still be charged 3% stamp duty if I bought another place to live in even if I sold my first flat soon after?
So it looks like I'd have to sell it first before buying another.

hincha

Under a) Could you port the mortgage to a new property?

hazyjo

What's changed since this other thread of yours

https://forums.moneysavingexpert.com/discussion/5892296/buying-residential-property-can-i-keep-buy-to-let

I knew I was getting deja vu!

Ojb

If you read the post hazyjo you would see that a remortgage has taken place.
Instead of shutting down the thread with a link to another one. Happens a lot on these forums. Makes me wonder what's a forum for. Refereeing to old posts should be banned. It stifles the flow of threads. Thanks hazyjo.

[Deleted User]

I am sure you are aware, unless you have clear payment terms in writing in some form, you will have little legal standing to get the loans to friends and family repaid. I hope you do, but I learned the hard way, don't loan money to friends and family without saying 'goodbye'.

Given the circumstances you have described, I am another one that thinks evicting the current tenant (which may take longer than expected if they know what they are doing) before you actually NEED to, living in it, redecorating to increase chances of selling it at a good price.

I suspect costs will be less if you sell the flat, so you don't have to pay extra SDLT, inspite of the early redemption fees. Then you will be able to buy the larger place you actually want because of the increased deposit as well (once you sell the smaller flat). Ity sounds like the smaller flat has outlived its usefulness in terms of income.

p00hsticks

Ojb wrote: »

No idea about capital gains tax, in what way is it changing?

https://www.homesandproperty.co.uk/property-news/renting/budget-2018-what-does-the-removal-of-lettings-tax-relief-mean-for-landlords-a125531.html


Basically, by owning a property but not living in it as your main residence you've lost the tax advantage of any capital gains being ignored