Making money off a 2nd home

Simms92

Hello I've always been relatively proactive with saving, and increasing my income - I would like to pursue an opportunity that I have thought of, but have some questions.

Current monthly situation is:

Job income: £2250
x3 Lodger/tenant income: £1090
Total: £3340

My mortgage is only £580, and I've overpaid £2000+ every month since I bought my house nearly 3 years ago.

The house is currently worth around £215,000, but I still owe £92,000. My original plan was to get the house paid off by the time I'm 30 (currently 27), but I've looked at the numbers and I'll probably need another year. For reference my mortgage is a tracker and is currently 1.79%

I have an opportunity to move work location that is well over an hour away. I don't want to sell my house yet, as I feel I've hit a good spot with the income it provides. I have an idea that I could buy another property, close to my new work location - for around £150,000, that I could live in during the week, but also take in 2-3 tenants in a house share situation.

Now obviously I'd be paying additional tax, but even with the outgoings of a 2nd property I feel that this would increase my equity/income long term rather than sitting still and plodding on with my mortgage. I'd have to remortgage my current house to provide funds for a second home. Would getting a 2nd residential mortgage be an issue? It surely wouldn't be a buy to let as I'd be living in both property each week? Are there any other issues I have overlooked?

Appreciate your thoughts.

wesleyad

Highly unlikely to get a second residential mortgage, they will ask you to choose a "main" residence. That said BTL mortgages are very good value at the moment so I wouldn't personally worry.

When you say X3 lodger income, do you mean you have 3 lodgers? I assume you know you cant do that, the house automatically becomes a HMO which then becomes a PITA as the rules for HMO are countless. If I've misunderstood ignore that.

You just need to run the numebrs and see if it works for you. I started my BTL in the same way, keeping a house when I moved to a new one to "test the waters".

The last thing I'd say (I'm sure others have more info on this), I very much doubt you can maintain a portfolio of houses with "lodgers" by claiming you sometimes live there. That would seem like a huge loophole to get round all sorts of tenancy laws, regulations, tax etc.

G_M

You cannot have two main residences.

As wesleyad says,

* one of those properties will need to be BTL (unless you get CTL on current property)
* Your 2nd property would be liable for 3% additional SDLT
* the current occupants of your current property would become tenants, with tenants rights (see links below)
* you say you have "x3 Lodger/tenant income: £1090" - I'm assuming you live wih them, so they are lodgers. Are you using the Rent a Room Scheme? If so, you exceed the income limits.
* With 4 separate households (you + 3 lodgers) you have an HMO. Check if licencing is required with your council




see also

** Tenancies in Eng/Wales: Guides for landlords and tenants


Topics covered:

* Repairing Obligations: the law, common misconceptions, reporting/enforcing, retaliatory eviction & the new tenant protection (2015)

* Deposits: payment, protection and return

* Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

* Rent increases: when & how can rent be increased?

* Repossession: what if a LL's mortgage lender repossesses the property?

* New landlords (1):advice & information :see links in next post

* New landlords (2): Essential links for further information

* Letting agents: how should a landlord select or sack?

* Lodgers: advice & links for landlords & lodgers

Soundgirlrocks

Just to add capital gains tax will come into play when you sell if you have let out more than one room to multiple lodgers.

Simms92

So if you've had two lodgers in your home, even for one month over a 5 year ownership period, you pay capital gains tax?

silvercar

Simms92 wrote: »

So if you've had two lodgers in your home, even for one month over a 5 year ownership period, you pay capital gains tax?

If one sixtieth of the gain in property value is more than the capital gains allowance (if not used elsewhere) then potentially you would be liable for CGT. Then again a gain of £720,000 in 5 years is dramatic unless it’s value was high to begin with.

Crashy_Time

I think you are unlikely to make any profit on a house bought three years ago.

hazyjo

Crashy_Time wrote: »

I think you are unlikely to make any profit on a house bought three years ago.

At least find out the area first lol. A one bed flat round the corner from me increased by £35k in 2 years (sold last year and in 2016)!