Buying a house

SavingStudent1

Hi there,

I just had a few questions regarding buying a property in the UK.

Suppose I want buy a home simply to get rental income, what would be the best approach to buying that house?

I am asking because I have been looking at the Help to Buy Schemes, Equity Loan Schemes and these are all regarding houses that you can only buy to live in after. In this case, are you not allowed to rent them at all (e.g. not even 1 room etc.)? If that is the case, then I can't use them to buy a property for rental income.

But then, I assume that if I buy a property for rental income, I can't take advantage of the above schemes if I want to buy another house simply for living - so I lose out on the benefits they offer. 

P.S. I have not bought any properties yet - so any one I buy would be my first purchase.

Thank you!

grumiofoundation

The schemes designed for first time buyers are designed to help people buy a home to live in, not to rent out. And yes these are only for your first purchase, so can’t use if already own a rental property. 

If you do buy a rental property as your first purchase you also sacrifice first time buyer stamp duty relief (eng/NI - different taxes on Sco/Wal). 

You can however use the schemes to buy a property for you to live in and rent out a room in that property (ie get a lodger). 

gozaimasu

I asked this question of my broker when I was an FTB as I wanted to buy an HMO whereby I would live in one room with a self-contained kitchen/bathoom and rent out the others. Would well have paid for the mortgage and more. Apparently you need a massive deposit for such properties. Higher risk of non-payment of mortgage when relying on tenants to pay it.

canaldumidi

As explained, those schemes are not designed to help people make property  investments ie start a property business. They are designed to help people get a home for themselves.

If you buy a property for investment purposes (renting it out) then not only will you not be eligible for FTB schemes when you later buy a property to live in yourself, but you'll also pay the additional 3% 2nd property SDLT.

For more on being a landlord, see

Post 7: New landlords (1):advice & information :see links in next post

Post 8: New landlords (2): Essential links for further information

Post 9: Letting agents: how should a landlord select or sack?

dimbo61

The words FTB ( first time buyer ) and HMO ( house of multiple occupation ) with 5 or more tenants will be almost impossible to get !
BTL lenders nearly always want a borrower to already own a residential property and even more so with the very few lenders for HMO,s 
You also need at least 25% deposit and extra funds to pay fees and costs associated with HMO,s 
EPC, EICR, GSC, PAT Testing, HMO licence and Interlinked smoke alarms and carbon monoxide alarms.
You can't live in your own HMO 
You might be able to buy a home once you have saved a deposit and take in a lodger or two IF you have the room and there is the demand where you live

SavingStudent1

grumiofoundation said:

The schemes designed for first time buyers are designed to help people buy a home to live in, not to rent out. And yes these are only for your first purchase, so can’t use if already own a rental property. 

If you do buy a rental property as your first purchase you also sacrifice first time buyer stamp duty relief (eng/NI - different taxes on Sco/Wal). 

You can however use the schemes to buy a property for you to live in and rent out a room in that property (ie get a lodger). 

So, if you are planning to own a house to live in at the end of the day (e.g. I might rent a house, but in the future want to live in it), then it does make sense to make your first purchase using one of those schemes and live in it right, and then make any future property investments for rental income? But, the first purchase to live in it to take advantage of these schemes?

SavingStudent1

gozaimasu said:

I asked this question of my broker when I was an FTB as I wanted to buy an HMO whereby I would live in one room with a self-contained kitchen/bathoom and rent out the others. Would well have paid for the mortgage and more. Apparently you need a massive deposit for such properties. Higher risk of non-payment of mortgage when relying on tenants to pay it.

Thank you - yes, it is a problem if tenants don't pay the mortgage too.

SavingStudent1

canaldumidi said:

As explained, those schemes are not designed to help people make property  investments ie start a property business. They are designed to help people get a home for themselves.

If you buy a property for investment purposes (renting it out) then not only will you not be eligible for FTB schemes when you later buy a property to live in yourself, but you'll also pay the additional 3% 2nd property SDLT.

For more on being a landlord, see

Post 7: New landlords (1):advice & information :see links in next post

Post 8: New landlords (2): Essential links for further information

Post 9: Letting agents: how should a landlord select or sack?

dimbo61 said:

The words FTB ( first time buyer ) and HMO ( house of multiple occupation ) with 5 or more tenants will be almost impossible to get !
BTL lenders nearly always want a borrower to already own a residential property and even more so with the very few lenders for HMO,s 
You also need at least 25% deposit and extra funds to pay fees and costs associated with HMO,s 
EPC, EICR, GSC, PAT Testing, HMO licence and Interlinked smoke alarms and carbon monoxide alarms.
You can't live in your own HMO 
You might be able to buy a home once you have saved a deposit and take in a lodger or two IF you have the room and there is the demand where you live

Thanks guys, but is there any way to eventually rent it in the future. For example, suppose I want to purchase a home to live in and I used one of the schemes, then am I able to rent it out in the future? Suppose, after 5 years, I want to go back and live with my parents in their house, am I able to rent it out then?

Am I able to rent it out when I've fully paid of the mortgage?

Or are these homes designed such that once you buy them, they're for residential purposes and owning a home and you can't necessarily rent them out in the future once your preferences changes?

EDIT: In the above, I don't mean a lodger scenario - I mean not living in the house and renting it out: whether that is the whole house, or part of it - but renting it and not living there anymore.

grumiofoundation

SavingStudent1 said:

canaldumidi said:

As explained, those schemes are not designed to help people make property  investments ie start a property business. They are designed to help people get a home for themselves.

If you buy a property for investment purposes (renting it out) then not only will you not be eligible for FTB schemes when you later buy a property to live in yourself, but you'll also pay the additional 3% 2nd property SDLT.

For more on being a landlord, see

Post 7: New landlords (1):advice & information :see links in next post

Post 8: New landlords (2): Essential links for further information

Post 9: Letting agents: how should a landlord select or sack?

dimbo61 said:

The words FTB ( first time buyer ) and HMO ( house of multiple occupation ) with 5 or more tenants will be almost impossible to get !
BTL lenders nearly always want a borrower to already own a residential property and even more so with the very few lenders for HMO,s 
You also need at least 25% deposit and extra funds to pay fees and costs associated with HMO,s 
EPC, EICR, GSC, PAT Testing, HMO licence and Interlinked smoke alarms and carbon monoxide alarms.
You can't live in your own HMO 
You might be able to buy a home once you have saved a deposit and take in a lodger or two IF you have the room and there is the demand where you live

Thanks guys, but is there any way to eventually rent it in the future. For example, suppose I want to purchase a home to live in and I used one of the schemes, then am I able to rent it out in the future? Suppose, after 5 years, I want to go back and live with my parents in their house, am I able to rent it out then?

Am I able to rent it out when I've fully paid of the mortgage?

Or are these homes designed such that once you buy them, they're for residential purposes and owning a home and you can't necessarily rent them out in the future once your preferences changes?

EDIT: In the above, I don't mean a lodger scenario - I mean not living in the house and renting it out: whether that is the whole house, or part of it - but renting it and not living there anymore.

For Help to buy equity loan you have to pay off the equity loan before you can rent it out.

For lifetime ISA you need to but it to live in it but if your circumstances change you are allowed rent it out in the future. 

For any property with a mortgage you need consent to let or need to remortgage to a buy to let to rent it out.

canaldumidi

SavingStudent1 said:

canaldumidi said:

As explained, those schemes are not designed to help people make property  investments ie start a property business. They are designed to help people get a home for themselves.

If you buy a property for investment purposes (renting it out) then not only will you not be eligible for FTB schemes when you later buy a property to live in yourself, but you'll also pay the additional 3% 2nd property SDLT.

For more on being a landlord, see

Post 7: New landlords (1):advice & information :see links in next post

Post 8: New landlords (2): Essential links for further information

Post 9: Letting agents: how should a landlord select or sack?

dimbo61 said:

The words FTB ( first time buyer ) and HMO ( house of multiple occupation ) with 5 or more tenants will be almost impossible to get !
BTL lenders nearly always want a borrower to already own a residential property and even more so with the very few lenders for HMO,s 
You also need at least 25% deposit and extra funds to pay fees and costs associated with HMO,s 
EPC, EICR, GSC, PAT Testing, HMO licence and Interlinked smoke alarms and carbon monoxide alarms.
You can't live in your own HMO 
You might be able to buy a home once you have saved a deposit and take in a lodger or two IF you have the room and there is the demand where you live

Thanks guys, but is there any way to eventually rent it in the future. For example, suppose I want to purchase a home to live in and I used one of the schemes, then am I able to rent it out in the future? Suppose, after 5 years, I want to go back and live with my parents in their house, am I able to rent it out then?

Am I able to rent it out when I've fully paid of the mortgage?

Or are these homes designed such that once you buy them, they're for residential purposes and owning a home and you can't necessarily rent them out in the future once your preferences changes?

EDIT: In the above, I don't mean a lodger scenario - I mean not living in the house and renting it out: whether that is the whole house, or part of it - but renting it and not living there anymore.

https://www.theguardian.com/money/2016/apr/21/help-to-buy-rules-mean-i-cant-rent-out-my-flat

[Deleted User]

Best thing is not to buy it. Owning someone else's home is a major responsibility and immortal.