Avoiding Stamp duty when renting

Moneygrabber89

I was wondering if any of you guys could offer any ways to get around stamp duty on a second property? 

I currently live in a property which I am considering renting out (still 68k remaining on mortgage). The issue is that I want to buy another property to live in but I will have to pay 6k in stamp duty which would cripple me to be honest. (If new house was my only property I owned stamp duty would only be approx. 1K) 

The only idea I have is to transfer my property into my mams or partners mams name who are both mortgage free. Would this be an option? Would she have to pay the mortgage and I could set her up a direct debit…? 

Our current financial position is we have £25k however to leave current mortgage deal it will cost £2k. We would require £18k deposit on future property plus any extra fees for estate agents and solictors. 

Any advice on this from you guys would be much appreciated. Many Thanks in advance.

[Deleted User]

Moneygrabber89 said:

I was wondering if any of you guys could offer any ways to get around stamp duty on a second property? 

I currently live in a property which I am considering renting out (still 68k remaining on mortgage). The issue is that I want to buy another property to live in but I will have to pay 6k in stamp duty which would cripple me to be honest. (If new house was my only property I owned stamp duty would only be approx. 1K) 

The only idea I have is to transfer my property into my mams or partners mams name who are both mortgage free. Would this be an option? Would she have to pay the mortgage and I could set her up a direct debit…? 

Our current financial position is we have £25k however to leave current mortgage deal it will cost £2k. We would require £18k deposit on future property plus any extra fees for estate agents and solictors. 

Any advice on this from you guys would be much appreciated. Many Thanks in advance.

The way to avoid the higher rate of SDLT is to sell your current residence.  There's an outstanding mortgage so you can't simply transfer the property to your mum.  Even if it was mortgage free transferring the property to your mum wouldn't help as presumably you'd want to collect the rent.

theartfullodger

Wonderfully apt name!

hazyjo

As above, sell it.

If £6k will cripple you, how would you cope if tenants don't pay rent, trash it, or if the boiler breaks down or the roof needs replacing?

Not a great idea gifting your property to someone else. It legally wouldn't be yours. They would then have LL's responsibilities (not you) and could collect any rent. Plus, as mentioned, the mortgage would need clearing. You can't just put it in someone else's name, or keep it in yours. If your partner doesn't own and is a FTB, you would also be removing their FTB's incentive and making them liable for the extra stamp duty if they bought elsewhere later on.

Why move? Do you need more space or to be in a different location? Stand by my first line - sell.

foxy-stoat

Moneygrabber89 said:

The only idea I have is to transfer my property into my mams or partners mams name who are both mortgage free. Would this be an option? Would she have to pay the mortgage and I could set her up a direct debit…? 

Yes your logic is sound, as long as you settle the mortgage at the same time, neither of them have their own properties, they will also have to fill out income tax returns and take out the relevant landlord insurances, if your mam (what ever that is) ever needs to go into care the property will be sold to pay of it.  What else, she or he or it would need to pay CGT if it was ever sold in the future....etc etc....

I think you should just sell it rather than try and think of a scheme to avoid paying the £6,000 as you clearly havent looked into becoming a landlord well enough.

Moneygrabber89

The benefits of being a landlord are great...plus the money...the house would easily rent in its location an current mortgage is £300 a month and others in street rent for £550. 

Moneygrabber89

Why move? Do you need more space or to be in a different location? Stand by my first line - sell.

Different location required.
Due to work future commitments need to move approx. 10 miles

grumiofoundation

Moneygrabber89 said:

The benefits of being a landlord are great...plus the money...the house would easily rent in its location an current mortgage is £300 a month and others in street rent for £550. 

If you have the capital to cover yourself in the event of unpaid rent, repairs, damage, legal costs. As above if 6k will cripple you becoming a landlord seems quite risky. 

Also what are the benefits of being a landlord apart from the money?

[Deleted User]

Moneygrabber89 said:

The benefits of being a landlord are great...plus the money...the house would easily rent in its location an current mortgage is £300 a month and others in street rent for £550. 

That's lovely and all but you wouldn't be the landlord, not if you're trying to avoid having a beneficial interest in the property so that you can avoid the higher rate of SDLT.  Meaning you wouldn't be collecting the rent because it would belong to your mam or your partner's mam.

tom9980

Moneygrabber89 said:

The benefits of being a landlord are great...plus the money...the house would easily rent in its location an current mortgage is £300 a month and others in street rent for £550. 

What benefits of being a landlord? I must of missed the memo with the full list of the benefits I should be receiving, please inform me.

You "think" you will make £250 a month but have you estimated all the costs?
£550 income a month which you need to declare to HMRC and may move you into higher tax bands.
10% of rental income to agent for management fees -£55 + setup fees most likely totalling a months rent.
insurance likely £150 a year or -£12.50 a month.
Regular gas safety checks and servicing £70 a year -£6 a month
electrical safety checks every 5 years.
Any local licensing to pay for.
Repairs typically you should budget at least a months rent per year.
Voids typically budget a months rent per year.
The fact is you are likely looking at less than £100 profit a month.

theartfullodger

Moneygrabber89 said:

The benefits of being a landlord are great...plus the money...the house would easily rent in its location an current mortgage is £300 a month and others in street rent for £550. 

This from "moneygrabber89" who posted a query about being a 1st time landlord in April 2019: So presumably hasn't even done a tax return or calculated how much tax he'd have to pay on his rental income...

https://forums.moneysavingexpert.com/discussion/5993573/first-time-landlord-advice/p1

Ah, the optimism....