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Help! switch to BTL or sell up?!
GS1228
Posts: 3 Newbie
Hi all, thanks in advance to anyone who can offer some well-needed advice on the below.
Background:
My partner and I are currently in the process of buying a house together, after having lived in my flat for a number of years. As part of buying the new property, I had initially decided to also keep hold of my flat - switching it over to a buy-to-let mortgage for the purpose of renting it out. The flat is in a well-sought area, with potential for good rental income (c.£1100K p/m) and potential for appreciation over some time.
The Issue:
In having calculated the estimated monthly returns from rental, I naively forgot to add tax into the equation. Now having considered this, it has dwindled my possible returns as it will take me into the 40% tax band for the majority of the proceeds. After all costs (mortgage, service charges, tax), I now predict to make c.£300-400 p/m profit. This of course does not take into account any months that the property is without a tenant, nor any maintenance that might be required (minimal as is a 4-year-old flat).
It should also be noted, the money retained in the flat is not needed in the next couple of years and is there to be invested. However, I do not have a diversified investment portfolio and the majority of my money would be tied up in property if I were to go forward with the above.
For any more experienced heads out there, does this seem like a worthy investment given the current climate?
Thank you!
Background:
My partner and I are currently in the process of buying a house together, after having lived in my flat for a number of years. As part of buying the new property, I had initially decided to also keep hold of my flat - switching it over to a buy-to-let mortgage for the purpose of renting it out. The flat is in a well-sought area, with potential for good rental income (c.£1100K p/m) and potential for appreciation over some time.
The Issue:
In having calculated the estimated monthly returns from rental, I naively forgot to add tax into the equation. Now having considered this, it has dwindled my possible returns as it will take me into the 40% tax band for the majority of the proceeds. After all costs (mortgage, service charges, tax), I now predict to make c.£300-400 p/m profit. This of course does not take into account any months that the property is without a tenant, nor any maintenance that might be required (minimal as is a 4-year-old flat).
It should also be noted, the money retained in the flat is not needed in the next couple of years and is there to be invested. However, I do not have a diversified investment portfolio and the majority of my money would be tied up in property if I were to go forward with the above.
For any more experienced heads out there, does this seem like a worthy investment given the current climate?
Thank you!
0
Comments
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Don't forget the extra 3% charge of the stamp duty on your second house if you keep your current flat.3
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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?
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Thanks @cana@canaldumidi, very helpful :-)canaldumidi said: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?0 -
Which is not what I understand. I think you might have to pay the extra regardless as it was your resident home. Can someone here clarify that?GS1228 said:0 -
GS1228 said:Yes, you are wrong.You currently own 1 property. After you and partner purchase new house you will own 2 properties. You are not selling (replacing) your main residence.The additional 3% will apply7
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Anyone know if this 3% extra is the same for Wales? I'm planning on renting out my current main residence and then buying a new property to live in?canaldumidi said:GS1228 said:Yes, you are wrong.You currently own 1 property. After you and partner purchase new house you will own 2 properties. You are not selling (replacing) your main residence.The additional 3% will apply
Thanks ( Ps sorry to hijack thread! )0 -
Yes it's the same for Wales but it's worse as it's land transaction tax and the band's are lower than England, making the amount due significantly higher...Dave46049 said:
Anyone know if this 3% extra is the same for Wales? I'm planning on renting out my current main residence and then buying a new property to live in?canaldumidi said:GS1228 said:Yes, you are wrong.You currently own 1 property. After you and partner purchase new house you will own 2 properties. You are not selling (replacing) your main residence.The additional 3% will apply
Thanks ( Ps sorry to hijack thread! )
There is a calculator on the Welsh government website.
You are getting another house and not replacing your main residence. Unless you sell it you will have to pay the extra tax.0 -
Rental is more about the long term gains. That is a good return on the rent, but you need to plan to keep it 10 years really to make a good return on sale price.GS1228 said:Hi all, thanks in advance to anyone who can offer some well-needed advice on the below.
Background:
My partner and I are currently in the process of buying a house together, after having lived in my flat for a number of years. As part of buying the new property, I had initially decided to also keep hold of my flat - switching it over to a buy-to-let mortgage for the purpose of renting it out. The flat is in a well-sought area, with potential for good rental income (c.£1100K p/m) and potential for appreciation over some time.
The Issue:
In having calculated the estimated monthly returns from rental, I naively forgot to add tax into the equation. Now having considered this, it has dwindled my possible returns as it will take me into the 40% tax band for the majority of the proceeds. After all costs (mortgage, service charges, tax), I now predict to make c.£300-400 p/m profit. This of course does not take into account any months that the property is without a tenant, nor any maintenance that might be required (minimal as is a 4-year-old flat).
It should also be noted, the money retained in the flat is not needed in the next couple of years and is there to be invested. However, I do not have a diversified investment portfolio and the majority of my money would be tied up in property if I were to go forward with the above.
For any more experienced heads out there, does this seem like a worthy investment given the current climate?
Thank you!0 -
It is an additional 4% in Wales, 3% in England if the previous property is retained.housebuyer143 said:
Yes it's the same for Wales but it's worse as it's land transaction tax and the band's are lower than England, making the amount due significantly higher...Dave46049 said:
Anyone know if this 3% extra is the same for Wales? I'm planning on renting out my current main residence and then buying a new property to live in?
Thanks ( Ps sorry to hijack thread! )
There is a calculator on the Welsh government website.
You are getting another house and not replacing your main residence. Unless you sell it you will have to pay the extra tax.0
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