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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
Moving on: Can we turn our current home into a buy-to-let?
We are just about to buy a new home in a more rural area but we want to keep on our current home to let to tenants.
It is currently mortgaged and we have about 50% equity. We want to transfer 25% to our new home (which will be 15% of the new home) and get a buy-to-let mortgage on the rest. Do you know if this is do-able?
For info: My husband is a builder and runs his own business and I am a teacher, earning £43,000 annually and I do tutoring on the side so can earn more. My basic yield calculations suggest we could be making 6% to 7% as the rental market is really strong where we live.
Answer
In principle, you can do this – many lenders are comfortable lending on a buy-to-let basis against a property which you currently live in but will vacate to purchase a new home.
What would require a more informed response is whether the numbers work. When looking at buy-to-lets, the lender will require the rent to cover the mortgage payment with an amount to spare.
The actual metrics here vary between lenders and even products, so your best next step is to speak to a mortgage broker who will be able to do the calculation for you, and make sure that the numbers hang together.
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Question
What costs should we factor into buy-to-let purchase?
My son is looking at entering the buy-to-let market in a joint venture with my husband. This is new to us so we are a little bit apprehensive about taking a wrong step.
We are thinking back to when we purchased our first home and I remember there were lots of costs involved. Is this the case with buy-to-let and what fees etc – other than the mortgage interest rate – should be prepare for and how much does this usually amount to?
Answer
Ok, so there are some fees you will pay as a matter of course (these tend to be tax and legal costs), and others that may/may not be payable (which tend to be mortgage related) – all of these will vary in their amount depending on the purchase price of the property.
Stamp duty and legal fees are unavoidable, and don’t forget that you will pay a 3% surcharge on your stamp duty bill.
When setting up your mortgage, you may also pay a valuation and arrangement fee; however, each deal is different in terms of the costs here.
It’s also worth considering the cost of finding a tenant, referencing, gas and electrical certificates and the other things you need to do to get the property ready to let – a letting agent will be able to talk these through with you.
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Question
Buy-to-let in 2022: Am I mad to become a landlord?
I read somewhere recently that the rental market was booming and lots of people needed homes to rent.
However, whenever I mention to friends I am considering buying a place to rent out, they say I am mad. I realise house prices are probably at their peak so may not be the ideal time to buy.
But they have also told me there are many regulations which will cause problems. Are things tailing off? Or is now a good time to get involved?
I am a 45-year-old homeowner with £100k in savings to invest so I am in a good position financially. Thanks for any advice.
Answer
I believe that buy to let is still a great investment path. There has certainly been a raft of changes that some landlords would view as negative, whereas those implementing the reforms would say they’re there to drive up professionalism in the industry.
I think this has been a harder adjustment for those who have been letting property for a while, rather than those who join once the changes are in and thus accept them as ‘part of the deal’.
In terms of your investment, house prices are expected to largely plateau this year, with a small amount of growth for each of the next few years.
The rental market is under-serviced, and thus rental yields have been growing and are forecast to continue to do so.
Moreover, voids are at a low, and the time taken to re-let a property is the shortest it’s been for years. All of these indicators would imply that the Private Rental Sector is robust in the challenges we currently face.
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Question
Can I set up a limited company with only one property?
I have one buy-to-let property which I have owned – with an interest-only mortgage for nine years. Can I transfer it to a limited company?
I understand there are many benefits but I wasn’t clear on whether I needed a portfolio of properties in order to open one.
Answer
Without wanting to sound like a nit-picker, you can sell it to a limited company, but you cannot transfer it. The sale would need to be done at arm’s length, e.g., the company pays a fair market price of the property, plus stamp duty as normal, and you would pay capital gains tax if due.
A company can be set up today, and used to acquire a property tomorrow, and you can do this just once, or a hundred times, as there are no restrictions on the number of properties you have. I strongly recommend you speak to a professional tax adviser to check that this is the right option for you.
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