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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk
Tel: 0345 345 6788
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Question
Stamp duty surcharge on portfolio landlords
I am thinking of increasing my property portfolio and becoming a full-time landlord. At the moment I have two buy-to-lets but I would like to build up gradually over the next few years. My question is regarding the stamp duty.
Will I need to pay the 3% surcharge on every property or is there a ceiling on the number of properties on which this is charged? Are there any benefits to structuring as a limited company in terms of tax breaks?
Answer
Sorry, I am going to be the bearer of bad news here. Under the current tax rules, stamp duty surcharge will apply on each purchase you make, even if you do this through a limited company.
People are using limited company structures, not to mitigate stamp duty but because of the way the rental income is taxed. If you are considering making a new purchase, I would strongly advise you to speak to an accountant or tax adviser, who will be able to advise on the best option for you which is specific to your financial circumstances.
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Question
Am I too young for a buy-to-let?
I am a student but have come into some money through an inheritance and would like to invest this money into rental property.
I am 20 and I work part-time doing admin for a radio station, which I fit in around my studies. My earnings are low but, apart from my student loan, I don’t have much debt as my parents have supported me through university.
I have £70k to put down on a property and am hoping to buy something worth around £150k. Will I be eligible for a buy-to-let mortgage?
Answer
Your age is not really the problem here, as there are mortgage lenders who can offer a buy-to-let for someone of your age.
However, buy-to-let lenders tend to want to lend to those who own a property, ideally their own home. If you are a first-time buyer, there are lenders who can offer you a buy-to-let mortgage, but the amount that you can borrow will generally be driven by how much you earn, just like if you were buying a property to live in.
The reason for this is that the lenders would be concerned that you may move into the property, so they want to be sure that if this is the case, you could afford the mortgage repayments. I would add that there are a couple of lenders who take a slightly different approach, but they would want you to be earning more than you do.
Another option to consider would be to team up with a family member, who may help you to meet criteria based on their financial circumstances. If you do go down this route, just be sure to get advice on how this may affect them from a tax and stamp duty position.
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Question
Broadening into commercial property
I am a landlord with four properties at the moment. I am considering expanding my portfolio into commercial properties – nothing grand, maybe just a small retail unit to start.
Will I need a different kind of mortgage and are there any potential problems of having a mixed portfolio of residential and commercial properties?
Answer
At the moment we are seeing so many of our landlord clients looking to diversify – and mixed use is definitely in vogue.
Yes, you would need a different mortgage – it would need to be a commercial mortgage, which is basically just like any other mortgage but a lenders suite of commercial products rather than residential or buy-to-let.
I have never known a lender be unhappy that a client has a range of property classes within their portfolio. So, from what you have said, I do not think you will find this causes you any issues for obtaining a mortgage down the line.
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Question
Transferring a buy-to-let to family member
I would like to transfer a property I currently let out to my son. He is 35 and has never owned a property but he has kept up the rental repayments on his home and has no debt.
The property would be purely an investment for him, he couldn’t live in it, but I want him to benefit from this lucrative investment. Is this something which we can do?
Answer
Yes, in principle you can do this. I am guessing he will need a mortgage and you will be gifting him the equity (i.e. he is not putting any money into this himself).
If this is the case, lenders are generally comfortable, subject to him meeting their underwriting requirements – particularly his income as he is a first-time buyer.
However, please do note that the property needs to be transferred at full market value.
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