Updating post from Reddit.
Hello, I need some advice.
I am looking to buy another property as me and my wife are outgrowing our place. I want to keep the first property as an investment. I have seen the tax on additional property and it’s about 33k tax! As well as deposit of around 44k. I am thinking to put 5% down to just free up some cash.
I need advice on if i’m doing this right or if i’m missing anything? Would it be better to turn the first house into a company name and buy it like that?
Also what are the rules on rent, and mortgage? My mortgage on my first place is coming up can I keep this as a residential mortgage and still rent out?
Appreciate it if anyone has any advice!
Thanks
T
You'll still pay Stamp Duty on the transfer/sale from an individual to a business. The business would come with additional expenses which may make it not financially worth it, especially depending on your and your wife's income tax band.
You would also very likely need to convert from a residential to BTL mortgage within a certain timeframe (it's possible to let out with a dispensation from your mortgage provider but these are normally short-term).
Have you looked into how much you would expect to make, after expenses and tax? It is quite likely that with a single property you would be better off selling it, investing, and drip-feeding the money into ISAs over several years rather than renting it out. The margins are quite fine, and can often be beaten elsewhere.
> I want to keep the first property as an investment
This was very popular "back in the day".
However these days you will be paying SDLT +5% on the "larger" more expencive property, so it puts a lot of people off.
Then you have the problem of owning the BTL in your personal name, which is not very tax efficient these days depending on your tax brackets (landlords have moved to owning them in a company). Selling it to a new company you create, is very tax-inefficient paying SDLT again to avoid future taxation, can work out, but its a long time down the road when that costs is recooped.
You will have to re-finance your current home to a Buy-to-Let Mortgage which requires at minimu 15% down but thats not advisable youw ant to be aiming for 20-25% down. You may be able to get temporary "consent to let" from your existing lender.
You may also find it difficult to find a mortgage with just 5% down, as you are not first time buyers. Not impossible but options are more limited and affordability criteria bit more tight.
For these reasons, its less popular. However this is not me telling you not to do it, but to do the maths and compare outcomes.
A little tid-bit of landlord trends, landlords today are looking for Buy, Refurbish, Refinance, Rent (BRRR). This is the whole "buy low, sell high" mantra, its not been an easy business for years making profit on rent. You make good margins by polishing a turd. You may want to concider selling your lovely current home and finding a turd.