Help Wanted for Buy to Let-ters

debpike

My husband and I own our property outright, worth approx £150,000. We are considering buying next door for approx £140,000 and joining them together to make one house. We have already approached the Council about this and they have advised us they can see no reason why these plans would be declined.

Once we have made the improvements there will be 9 en suite bedrooms, with shared kitchen facilities, that we are proposing to let room by room. This would give us a rental income of approx. £900 per week and we want to use the rental income to purchase a new family home for £300,000-£350,000. We also have £60,000 in available savings of which we would use approx. £30,000 to convert the two properties.

I also have a 50% share in a rental property with an £18,000 mortgage, the 50% being worth approx. £80,000.

We have no other major financial committments and we would like to know what is the best way to raise funds for this project, bearing in mind my husband is already a higher rate taxpayer and would probably want to have an interest-only mortgage for tax purposes. What are the long-term tax implications of this type of repayment system. Does it have to be a Buy to Let mortgage? Will we be able to raise a mortgage on rental income to purchase our primary residence?


Debs

Jacster_2

Hi

There are some really knowledgeable people on the House Buying/Property prices board. You may get a better response on there?

Sorry I can't be of more help...

sneekymum

Planning Permission to knock through to next door is one thing but do the council know you plan to make 9 bedsits? Permission may not be so forthcomming and the Planning Fees alone could be very high as the council may charge per dwelling - that's 9 x £265 plus whatever they demand as a contribution to local amenities. Do you have on-site parking for at least nine cars?

Then you'll need Building Regulations Approval - has every window from a bedroom got 500mm clear opening for escape - you'll be needing to change the windows if not. And of course if you have three floors there'll be a fire-escape needed - then back to Planning because you forgot to apply for permission for it...then there's the fully wired fire detection and alarm system, the low energy heating system - probably thermal calculations - low energy lighting - all depending on your Building Inspector's whim on the day.

And of course since you're already involved in Buy-to-Let you know you need to arrange annual testing of all sorts of stuff - fire equipment - gas appliances - although some landlords don't bother although they may end up in prison if there's an accident- and of course Buildings Insurance will be sky high.

Why does anyone want to do this when you can get 10 - 15% annual return on a Commercial Property Fund?

debpike

Thanks for comments, the properties are bungalows, double glazed with fire escape hinges - so no worries on that front.

We were not planning on making them "bedsits", just rooms in a shared house with shared kitchen facilities, but an ensuite bathroom, would this require planning permission? We do have room for 9 cars to park on driveway - aswell as two garages.

Your views would be appreciated.

PS What is a commercial property fund?

Debs

sneekymum

Sorry to be a downer - I'm a professional in the construction industry with wide experience of residential and commercial property lets - I remain baffled why anyone wants to do this - the profits are illusionary - given the amount of time it takes you might as well get a second job. Though we do have a "portfolio" of commercial property which was inherited and we'll get rid of if ever the tennants decide to leave.

Its no suprise you don't know what a Property Fund is as a lack of knowledge about investments seems to be sympomatic of buy-to-letters. I bet there can't be many IFSa with buy-to-lets - there was a brief discussion on them HERE.

To have a look at Commercial Property Funds goto Fidelity - there's one by New Star and one by Norwich Union. Entry fees are 2% for New Star through Cavendish Online - but 5% for Norwich Union. These products are income-tax-free there's only Capital Gains Tax to pay on any profits when withdrawing money (and then there'll be no tax if you keep below the Capital Gains Tax allowance of £8,200 this year). There are other funds in the world these are just a quick example.

Try Martin's link HERE

When you're running round after nine tennants I'll be checking growth on-line while sipping ...

When you say fire-escape hinges I wonder what you mean, - open each window to form the widest possible opening (not always as wide as it can go) and measure if you have more than 50cm CLEAR SPACE. You cannot have less - not even a millimetre.

Planning Permission & Building Regulations Approval - Yes, of course you need these for a shared house - "Shared House" is even refered to in the Building Regulations as a building type. If you can get the Planners to agree Planning Permission doesn't apply to you then Good-Luck-To-You but do GET IT IN WRITING from them. (The girl on the reception desk is always telling people they don't need Permission...) - to get a written response you have to write in. Why not drop a line to Building Control about those Building Regulations while you're at it....

Really

garysletters

On top of all that there may also be the issue of HMO's to consider. All the rules change in October, and each council could take different views on the criteria.
ask about HMO's while your at it.

Windows can have fire escape openers. I'm guessing this is what she means. however, I cant see why they would have been put into a bungalow