Buy to let advice

Jrose1927

Hello

Im in early stages of considering buy to let currently looking to raise money for the 25% deposit.

Just looking for some advice on buy to let and most things il need to know including how the tax worths etc

Im looking to go for an interest only so il be earning the difference of rent to mortgage each month

Currently looked at a property even though I'm not yet in a position, seen a mortgage interest only for £200 a month with the average property in the area renting for £650 a month will I then be taxed 20 percent but have to take in account my current earnings to.

Thank you

dimbo61

So your a basic rate tax payer at the moment.
If the rental income and your earnings push you into higher rate tax that could be bad news
However that is only a tiny part of the education you need before you become a Landlord and the money rolls in ��

Thrugelmir

Jrose1927 wrote: »

Currently looked at a property even though I'm not yet in a position, seen a mortgage interest only for £200 a month with the average property in the area renting for £650 a month will I then be taxed 20 percent but have to take in account my current earnings to.

From the income you'll need to cover maintenance costs and renewals for the property. Together with insurance and other administrative costs. The property might be empty for periods of time resulting in loss of income. Or the tenant might default on payment, which could incur you recovery costs as well. Lastly there's interest rate rises to consider.

That's just an initial snapshot of the financial side of a BTL. You'll be running a business. With it goes all the regulatory requirements.

Nor forget that one day you'll wish to exit. This too comes at a cost.

babyblade41

I think you are pushing yourself to the limit.

Mine were mortgage free and the money never rolled in.. so glad I finished with it all now with just one.

Being a F/T LL is not fun and fraught with pitfalls .. do a lot more research first and see how you will cope with voids, costs of evictions, maintenance etc.

Oh and try to keep off of homes under the hammer !!!

AdrianC

Jrose1927 wrote: »

Hello

Im in early stages of considering buy to let currently looking to raise money for the 25% deposit.

Just looking for some advice on buy to let and most things il need to know including how the tax worths etc

Im looking to go for an interest only so il be earning the difference of rent to mortgage each month

Currently looked at a property even though I'm not yet in a position, seen a mortgage interest only for £200 a month with the average property in the area renting for £650 a month will I then be taxed 20 percent but have to take in account my current earnings to.

You need to read G_M's guides covering most of the basic aspects of the business you're setting up.

I find it very hard to believe that you can really bring in £650/mo rental on a property that you're paying £200/mo on a 75% BtL mortgage. Can you give any more numbers? At 5% interest, that'd be a £48k mortgage on a £64k property, which would mean a yield north of 12%.

I do hope you aren't going by an artificially low initial rate... If we say 1.5% initial, then that's a £160k mortgage on a £210k property, which would give a yield of about 3.7%. By the time that initial rate goes up to 5%, you can (I hope...) you see how you're immediately subdisiding your tenants.

steampowered

Jrose1927 wrote: »

Im looking to go for an interest only so il be earning the difference of rent to mortgage each month

You might not be earning anything.

You may find that, after deducting from the rent:
- Mortgage costs
- Tax
- Letting agent fees
- Costs of repairs
- Void Periods

You are in fact making a loss month to month.

You shouldn't be a landlord if you would struggle to afford this.

Especially since you are taking the largest possible mortgage. Especially if interest rates go up (which is highly likely over the next few years).

Crashy_Time

steampowered wrote: »

You might not be earning anything.

You may find that, after deducting from the rent:
- Mortgage costs
- Tax
- Letting agent fees
- Costs of repairs
- Void Periods

You are in fact making a loss month to month.

You shouldn't be a landlord if you would struggle to afford this.

Especially since you are taking the largest possible mortgage. Especially if interest rates go up (which is highly likely over the next few years).

Good point.