Is A Financial Advisor My Best Option?

newbieni

Hi All,

I have recently bought a new home that is currently undergoing some repairs. I hope to move in at the end of September. I have not yet put my current home on the market, but a quick discussion with the estate agent has prompted the idea of renting it out. 

Due to having a second home, I have had to pay a tax of £14k which is due to be refunded if I sell the property within three years. The property is mortgage-free and I have owned it for over 11 years and it has almost doubled in value since purchase. Initially, selling makes the most sense as it is a clean break and I can bank the gains. I also do not have a mortgage on the new property.

Renting is more complicated; I will be subject to capital gains tax if I sell in the future, and the second home tax could be lost if I don't sell within three years. That's without taking into consideration some of the pitfalls of renting (Northern Ireland), monthly estate agency letting fees of 8%, self-assessments etc. With my job having been a little uncertain in the recent past (internal restructuring/redundancies), I thought the monthly income might offer some future security. 

With all this in mind, I thought it would be worthwhile approaching a financial advisor for some advice, is this my best option?

Thanks in advance.

dunstonh

Renting is more complicated; I will be subject to capital gains tax if I sell in the future, and the second home tax could be lost if I don't sell within three years.

Not just CGT.   You are subject to income tax on the rental income.  You will have tax returns to do and need to log all costs.   

With all this in mind, I thought it would be worthwhile approaching a financial advisor for some advice, is this my best option?

FAs are agents of the insurance/provider that they represent.   You are not looking to buy a product that they sell.  So, an FA is unlikely to be suitable.     An IFA represents you and could discuss it but in reality, a let property is closer to a business decision than a financial planning decision.  So, even an IFA is not likely to be able to add much value.

Renting out is not the easy money it once was.   Decent rental yields can still be obtained but you have to have the right type of property, in the right area and access to low cost trades for repairs and refurbishment.    You have to think of it with a business head and not everyone can do that.

Yorkie1

I doubt a FA would know enough about the intricacies of landlord and tenant law to assist much.

If you do decide you want advice, then use an Independent FA, not just a FA.

But I think really you have set out the pro's and con's of the issue. The question is really whether you want to take on all the risks that a landlord brings with it, especially with the somewhat uncertain future from the RR Bill, whenever it is passed and then brought into force.

Sam_666

If you have never been landlord before, you are entering into business you know nothing about and very likely to burn some good cash. You would need very good accountant and even better property solicitor.

Albermarle

An IFA would be more useful in advising you what to do with the money after you sell the house ( which seems the best idea).

poolboy

I would work out the net yield on rental income and if a fair premium over cash returns, go for it.  I really don't want to be a landlord but agent has got me a decent return, so gone from cba to ba.  It is a long term investment, I bought 20 years ago so cumulative rental has paid for the initial purchases.

boingy

Sell it. Being a landlord of just one property is a high risk game. Loads more rules than there used to be and one bad tenant can cost you big time, not just in lost rent and legal fees but in repairing the property after you eventually get them out.

Eyeful

1. Make sure you understand the difference between an FA & an IFA.
https://www.moneysavingexpert.com/savings/best-financial-advisers/

2. If you want to keep it simple, will not touch the money for at least 10 years, depending on your risk tolerance, you might consider investing.
https://www.kroijer.com/