Discussion
We have some poorly invested money which we really need to make more of and buying a property to let seems to offer a reasonable return. Around 6% pa, although there are going to be some expenses to knock of.
I would be v interested to hear of experiences, good or bad from anyone.
We have narrowed the search down to 3 local properties.
No 1, A 2 bed semi in an established and popular area. V good condition in and out.
No 2, A brand new build 2 bed semi for the same money! Nice small development but in a slightly less desirable area.
No 3, A 3 bed semi in the same area as no 1, good condition but this one has a sitting tenant (6month tenancy) who looks like could be a long termer.
At first the appeal of a new build over a 18/20yr old property seemed to make the decision a no brainer but the idea of buying a house with a tenant would surely save hassle and give an instant return.
All 3 seem to offer a similar return on the rent over purchase price. But which is best ?
ETA just seen this very topic in Business so I shall move over there !
I would be v interested to hear of experiences, good or bad from anyone.
We have narrowed the search down to 3 local properties.
No 1, A 2 bed semi in an established and popular area. V good condition in and out.
No 2, A brand new build 2 bed semi for the same money! Nice small development but in a slightly less desirable area.
No 3, A 3 bed semi in the same area as no 1, good condition but this one has a sitting tenant (6month tenancy) who looks like could be a long termer.
At first the appeal of a new build over a 18/20yr old property seemed to make the decision a no brainer but the idea of buying a house with a tenant would surely save hassle and give an instant return.
All 3 seem to offer a similar return on the rent over purchase price. But which is best ?
ETA just seen this very topic in Business so I shall move over there !
Edited by R TOY on Saturday 30th November 23:45
Talk to letting agents in area, get their opinion of which will rent out easiest and for how much? If not much distance and new build is from reputabvle builder buy new. With new build as absolute minimum expect 5% off, they will not want to knock it offprice as it will affect valuations so get it as builders deposit/free legals/ stamp dut paid/ car[pets etc etc.
Use letting agent to rent it out, less hassle, they are more likely to get higher rent which helps to offset their cost. Negotiate on cost!
Get rent guard insurance either through letting agent or with buildings insurance.
I am asssuming you are buying for cash, if so and you think property prices are going to rise in your area consider getting 2 buy to let mortgages and buying two, or even 3! Use gearing to your advantage!
So for example:-
You buy 1 @100K for cash 10 years later its worth 150K you sell it you have made 50K.
You buy 2 @100K with your 100K and 100K interest only mtg. The rent on one pretty much covers the mtgs on both if you are correct in your 6% return, the mtg interest gets offset against rent for tax. 10 years later your 2 properties are worth 150K each as above you have made 100K.
3 and sums above give you 150K profit.
Danger is higher risk of repairs etc!
Use letting agent to rent it out, less hassle, they are more likely to get higher rent which helps to offset their cost. Negotiate on cost!
Get rent guard insurance either through letting agent or with buildings insurance.
I am asssuming you are buying for cash, if so and you think property prices are going to rise in your area consider getting 2 buy to let mortgages and buying two, or even 3! Use gearing to your advantage!
So for example:-
You buy 1 @100K for cash 10 years later its worth 150K you sell it you have made 50K.
You buy 2 @100K with your 100K and 100K interest only mtg. The rent on one pretty much covers the mtgs on both if you are correct in your 6% return, the mtg interest gets offset against rent for tax. 10 years later your 2 properties are worth 150K each as above you have made 100K.
3 and sums above give you 150K profit.
Danger is higher risk of repairs etc!
Edited by Stevemr on Monday 2nd December 15:27
Edited by Stevemr on Monday 2nd December 15:34
And you should allow for voids (periods where the property is empty) in your calculations. Don't forget CGT come sale time too.
Renting isn't a piece of cake though, if you decide to handle it yourself - a bad tenant can make your life a misery and you only have the lengthy court process to get them out.
Renting isn't a piece of cake though, if you decide to handle it yourself - a bad tenant can make your life a misery and you only have the lengthy court process to get them out.
No - there is no specific time period for "living in the house" set out in the legislation. In some circumstances, a taxpayer can claim the CGT exemption even if they NEVER lived in the house.
In fact, a person might have lived OVER six months in a house and might fail the Main Residence exemption tests.
The important word is "intention" - backed up by hard facts and evidence.
One important announcement made during the Autumn Statement speech was that the additional 36 months CGT exemption that is currently available for former Main Residences is going to be halved to 18 months with effect from 6 April 2014.
In fact, a person might have lived OVER six months in a house and might fail the Main Residence exemption tests.
The important word is "intention" - backed up by hard facts and evidence.
One important announcement made during the Autumn Statement speech was that the additional 36 months CGT exemption that is currently available for former Main Residences is going to be halved to 18 months with effect from 6 April 2014.
a) have you EVER lived there?
b) if not, did you ever INTEND to live there?
if the answer to b) is "yes", what steps did you take to show that you intended to live there e.g. did you notify friends, relatives, local authorities, banks, utilities etc that this was to be your main postal address?
Could you provide documentary evidence to that effect?
c) where do you live now? Have you subsequently bought a different main residence?
b) if not, did you ever INTEND to live there?
if the answer to b) is "yes", what steps did you take to show that you intended to live there e.g. did you notify friends, relatives, local authorities, banks, utilities etc that this was to be your main postal address?
Could you provide documentary evidence to that effect?
c) where do you live now? Have you subsequently bought a different main residence?
How often do you come to the UK?
How long do you stay in the UK if and when you visit?
Do you have any income arising in the UK (the answer is yes - of course you do.
You have rental income and possibly have interest income on some of your UK bank accounts).
Do you complete and submit UK Self Assessment tax returns?
How long do you stay in the UK if and when you visit?
Do you have any income arising in the UK (the answer is yes - of course you do.
You have rental income and possibly have interest income on some of your UK bank accounts).
Do you complete and submit UK Self Assessment tax returns?
If you were absent for a complete tax year - then in that tax year you were NOT a UK tax resident.
That doesn't mean you won't have paid UK tax.
The normal procedure for overseas landlords is to have their UK rents handled by an agent. The agent deducts tax at source on the rental income. The overseas landlord is liable to tax on the rent in the country he is tax resident (Italy in your case) but will get a tax credit for the UK tax he has already paid. The same goes for tax on interest received.
I presume that is what has been happening in your case?
That doesn't mean you won't have paid UK tax.
The normal procedure for overseas landlords is to have their UK rents handled by an agent. The agent deducts tax at source on the rental income. The overseas landlord is liable to tax on the rent in the country he is tax resident (Italy in your case) but will get a tax credit for the UK tax he has already paid. The same goes for tax on interest received.
I presume that is what has been happening in your case?
What do you live off?
Don't use the word "earning" too loosely as it has a very specific meaning in tax. "Earnings" are what you receive from doing work - such as being in employment or self employment.
If you are retired, you will probably have no "earnings" as such but you must have some "income" - otherwise you couldn't survive Unless you are eating into your savings).
For retirees - their income is usually a pension or pensions - plus whatever their investments give them such as rental income from property and interest and dividends from financial savings and investments.
Don't use the word "earning" too loosely as it has a very specific meaning in tax. "Earnings" are what you receive from doing work - such as being in employment or self employment.
If you are retired, you will probably have no "earnings" as such but you must have some "income" - otherwise you couldn't survive Unless you are eating into your savings).
For retirees - their income is usually a pension or pensions - plus whatever their investments give them such as rental income from property and interest and dividends from financial savings and investments.
To get back to your original question, I would suggest that you would NEVER have a hope in hell of claiming the rental property ever had been your Main Residence.
However, if you are a non UK tax resident - there might be some other Capital Gains Exemptions. But better move fast as some of these exemptions are going to be closed very soon (announced last week).
However, if you are a non UK tax resident - there might be some other Capital Gains Exemptions. But better move fast as some of these exemptions are going to be closed very soon (announced last week).
Personal experience is property is a pain in the arse.
I've got a couple and have never had a problem finding tenants. However, thats not the only thing to consider. Some are more picky than others. Need to budget for ongoing maintainence such as boilers and other costs.
When a tenant leaves you got the hassle of checking the property, fixing stuff, releasing the bond, advertising the place, getting another tenant in, checking the property, dealing with all their first-month fussy enquiries. You loose a months rent as there is inevitably a gap. Then there is the tax forms and tax bills on any rental income.
Thats the negs. The positive is that if you get a good tenant, its relatively hassle free aside from the expense. But investments that don't require 'customers' is by far a happier path in my opinion - unless you've found a property thats just too good to miss.
For our two, one is returning a profit, the other one a loss. Neither will sell for good money as the market is still s
te, despite what the news keeps telling us about rising prices. Plus, once you've got a property, leaving it empty to sell it then becomes a further financial drain as you are paying out / loosing income (depending if you have a mortgage or not) so its better to just keep on renting the place.
It's costly to get into it, costly to get out of it, and a gamble in the middle. I think where rentals become viable is when you have loads of properties. A few quid on each one amounts to a big annual income and makes the effort:reward ratio more worthwhile. But if that isn't the goal, I wouldn't bother.
Don't bother with flats either - the maintainence charges are usually dead-money and hugely over priced on new builds.
Just my 2p.
I've got a couple and have never had a problem finding tenants. However, thats not the only thing to consider. Some are more picky than others. Need to budget for ongoing maintainence such as boilers and other costs.
When a tenant leaves you got the hassle of checking the property, fixing stuff, releasing the bond, advertising the place, getting another tenant in, checking the property, dealing with all their first-month fussy enquiries. You loose a months rent as there is inevitably a gap. Then there is the tax forms and tax bills on any rental income.
Thats the negs. The positive is that if you get a good tenant, its relatively hassle free aside from the expense. But investments that don't require 'customers' is by far a happier path in my opinion - unless you've found a property thats just too good to miss.
For our two, one is returning a profit, the other one a loss. Neither will sell for good money as the market is still s
te, despite what the news keeps telling us about rising prices. Plus, once you've got a property, leaving it empty to sell it then becomes a further financial drain as you are paying out / loosing income (depending if you have a mortgage or not) so its better to just keep on renting the place.It's costly to get into it, costly to get out of it, and a gamble in the middle. I think where rentals become viable is when you have loads of properties. A few quid on each one amounts to a big annual income and makes the effort:reward ratio more worthwhile. But if that isn't the goal, I wouldn't bother.
Don't bother with flats either - the maintainence charges are usually dead-money and hugely over priced on new builds.
Just my 2p.
Edited by Paul O on Thursday 12th December 17:20
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