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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 overseas and purchasing a buy-to-let in the UK
I am considering moving to Australia next year and want to, before I leave, purchase a buy-to-let property in the UK.
I am interested in understanding more about the tax implications – if any – and also what fees I may need to consider. Also, would a long-term rental or a short-stay holiday let be more suitable for someone in my situation?
Sorry to ask so many questions – I am just trying to get a handle on whether this is a good idea to pursue at the moment. Therefore, any advice would be much appreciated.
Answer
Ok so I can’t give you any tax advice – this needs to be done by a professional tax adviser.
Mortgage fees vary greatly – from literally nothing to a valuation and arrangement fee, which could be up to 2.5% of the amount you borrow – and then there is a whole world of options in between!
A good broker will be able to run through the options with you. In terms of the most appropriate way to let the property, I would consider the fact you will be on the other side of the planet and therefore not able to manage the property personally.
Holiday lets generate more income but have higher running costs, and a standard buy-to-let would generate a lower rent, but is much less maintenance.
It would also depend on where you are buying as to whether a holiday let would make sense. It may be worth joining some landlord forums (e.g., PropertyTribes) where you can speak to other investors and get their thoughts.
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Question
HMO: Will I need a specialist mortgage?
I bought my first buy-to-let before the pandemic and despite the events of the last two years, it’s been a great success.
The whole thing has made me keen to look for another project and I now have my eye on a house, which is split into two flats, and which I think would work well as a HMO. I know some builders who could help covert it and I’ve got a healthy deposit to put down.
The question I have is whether I need to get a specialist mortgage for this type of project. Also are there any other differences when letting out an HMO than a straightforward home.
Answer
It’s great to hear that your landlord journey has been so positive despite the difficult circumstances.
An HMO property does require a mortgage specifically for HMOs, so you will need to find a specialist product. However, as the property is starting off as a multi-unit freehold, you would not be able to mortgage it as an HMO initially.
There are a couple of ways you can finance this, one of which is bridging finance, with an HMO mortgage as the exit – you really need to speak to a broker who will be able to run through your options.
I would encourage you to seek out a broker who specialises in HMOs, multi-units and refurbishments, rather than a standard residential broker, as you need someone who knows this part of the market well.
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Question
What are the costs involved in buy-to-let?
I am considering becoming a landlord. Please can you advise on what monthly rental income versus costs ratio is most ideal?
In other words, what are the monthly costs to consider above the mortgage repayments – for example, estate agent fees, maintenance etc? Also are there any areas of England where it could get more for my money when buying a buy-to-let?
Answer
The costs of running a property can be varied – some things to consider are:
– letting agency fees
– property insurance
– repairs and maintenance
– the tax you pay on the rent (seek professional tax advice for more information)
– void periods
– ground rents
– service charges
But this list is not exhaustive! In terms of yield, some areas definitely perform more strongly than others.
These tend to be, generally speaking, in the north of the country, but you will find there is lots of data available on this if you do a bit of Googling.
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Question
How many people can we put on the mortgage?
My brother and I have been considering very seriously the prospect of getting together to purchase a buy-to-let with some money we’ve been left by our uncle. My brother is an electrician and has lots of contacts in the trade so we are considering buying a doer-upper and for maximum yield.
We also have another brother and we don’t want to leave him out of this opportunity. However, before we speak to him about getting involved we wanted to find out whether it’s possible for three people to be on a buy-to-let mortgage.
It would mean we would have a more substantial deposit if the three of us were to be involved. However, will having a trio of investors complicate matters?
Answer
It does vary between lenders, so the rates you have access to could be limited, but many accept up to four applicants, so I think you will be fine.
A further option (which is very much the vogue) would be to set up a Limited Company, and allocate the shareholdings between you – this may be beneficial, but really, the best person to speak to about this would be a tax adviser or a good accountant.
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