Complicated situation!

lookstraightahead

brianposter said:

Slithery said:

Surely it's easier to just sell the property now and go into rented yourselves? You'll be in a much better purchasing position.

Normally this might be perfectly sensible, but given the current possibility of substantial inflation in the near future, moving into rented accomodation would seem to be strategically unwise.

So instead, you want to start up a completely new business which will quite possible mean losing money in the first couple of years. 

Do you work part time and have hours a week to spare on being a landlord? 

saajan_12

Orangey1234 said:

First of all thank you for helping! 

So we currently own a property it is where we live. We would like to move house, however the market is moving so fast, it is proving difficult to have a buyer for our house, and then find somewhere and have an offer accepted (did this, and then our buyer dropped out as they weren’t willing to wait for us to find somewhere). 

So we think the best way forward would be to change this house into a buy to let, - do you have at least 25%equity currently? and save up quickly for a deposit of 5% so that we aren’t dependant on this house being sold to buy somewhere else. Aside from the issue of being a landlord, what are the stamp duty implications? - additional 3% on the new value, only refundable if you sell the old house within certain time limits
Is the additional stamp duty to be paid on the value of the new house? If so how can this be incorporated into a mortgage or temporary lending so we don’t need to save up for that as well? - It can't. As in you can spend the mortgage funds on whatever, but the LTV will be based on the house value excluding SDLT. 
We would sell the buy to let ASAP releasing equity and we can get the sdlt refunded. Thanks 😊 

d

brianposter said:

Slithery said:

Surely it's easier to just sell the property now and go into rented yourselves? You'll be in a much better purchasing position.

Normally this might be perfectly sensible, but given the current possibility of substantial inflation in the near future, moving into rented accomodation would seem to be strategically unwise.

Well one side you have sale prices potentially increasing between the sale and purchase. Against that, you have 

• BTL interest rates higher than residential and not fully deductible as expense for tax
• BTL mortgage application fee and ERCs unless you limit your options to 0 minimum term
• LL checks eg gas report, EICR, deposit protection
• Repair costs & refreshing property from fair wear & tear
• Agent costs or time to manage tenancy (find tenant, negotiate, reference, inventory, deal with call outs, etc)
• Income tax on rental income
  
• Interest on 3% extra SDLT and BTL deposit which could instead lower your main mortgage until you sell
• CGT on house sale (after allowances for the % of time it was your main residence and some extra buffers)
• Voids: no rent, costs for bills & while you search for a tenant and go through eviction (can be uncertain timing with courts so you have to evict and then sit on an empty house or risk failed purchases)
• Eviction court costs (technically can sue the tenants, but if you can trace them)
• Lower sale price if you limit market by keeping tenant in situ

Also less quantifiable but a major consideration:

• Risk of something going wrong -
  eg imperfect deposit protection -> penalty of 1-3x deposit,
  eg imperfect tenancy paperwork -> long delay in eviction, scuppering a  house sale or rental voids
  eg house sale takes over 3 years since move out -> no refund of 3% stamp duty

theoretica

Orangey1234 said:

So we currently own a property it is where we live. We would like to move house, however the market is moving so fast, it is proving difficult to have a buyer for our house, and then find somewhere and have an offer accepted (did this, and then our buyer dropped out as they weren’t willing to wait for us to find somewhere).

Yes, it is difficult.  How scarce on the ground are houses you want to buy?  If your property is a good one for BTL were you getting any interest from investors in buying it?  Selling at a lower price might be one way to secure a patient buyer.