Buying property away from south east
Discussion
Apologies if this should be in Finance, I'll report this myself and ask for a review.
Is it worthwhile buying a property outside the south east at a lower actual value:salary ratio and trying to run it as self-generating equity vehicle to fund a future purchase within the south east, and rent whilst I'm doing that?
Inspired by the "property as investment" thread in this forum.
Is it worthwhile buying a property outside the south east at a lower actual value:salary ratio and trying to run it as self-generating equity vehicle to fund a future purchase within the south east, and rent whilst I'm doing that?
Inspired by the "property as investment" thread in this forum.
MotorcyclesFish said:
Apologies if this should be in Finance, I'll report this myself and ask for a review.
Is it worthwhile buying a property outside the south east at a lower actual value:salary ratio and trying to run it as self-generating equity vehicle to fund a future purchase within the south east, and rent whilst I'm doing that?
Inspired by the "property as investment" thread in this forum.
If property is falling in price then how will it become a self generating equity vehicle?Is it worthwhile buying a property outside the south east at a lower actual value:salary ratio and trying to run it as self-generating equity vehicle to fund a future purchase within the south east, and rent whilst I'm doing that?
Inspired by the "property as investment" thread in this forum.
jonny70 said:
MotorcyclesFish said:
Apologies if this should be in Finance, I'll report this myself and ask for a review.
Is it worthwhile buying a property outside the south east at a lower actual value:salary ratio and trying to run it as self-generating equity vehicle to fund a future purchase within the south east, and rent whilst I'm doing that?
Inspired by the "property as investment" thread in this forum.
If property is falling in price then how will it become a self generating equity vehicle?Is it worthwhile buying a property outside the south east at a lower actual value:salary ratio and trying to run it as self-generating equity vehicle to fund a future purchase within the south east, and rent whilst I'm doing that?
Inspired by the "property as investment" thread in this forum.
98elise said:
Profit on property 1 will be taxed, before you pay the rent on property 2.
You would probably be better just buying the place you want to live in.
Stupid question here, if I took a mortgage such that no excess was generated, I.e. rent covered mortgage and broke even, would I need worry about tax? Obviously there are far more variables here, but simplistically...?You would probably be better just buying the place you want to live in.
MotorcyclesFish said:
Stupid question here, if I took a mortgage such that no excess was generated, I.e. rent covered mortgage and broke even, would I need worry about tax? Obviously there are far more variables here, but simplistically...?
You won't get a mortgage where your only breaking even on the rent.....MotorcyclesFish said:
Stupid question here, if I took a mortgage such that no excess was generated, I.e. rent covered mortgage and broke even, would I need worry about tax? Obviously there are far more variables here, but simplistically...?
You can only claim the interest payments against tax not any repayment. So yes it would be possible to cover the interest payments with the rental cost and therefore pay no tax (although with rates low at the moment this would be unlikely) but you still need to repay the capital at the moment and if values aren't rising....Sarnie said:
You won't get a mortgage where your only breaking even on the rent.....
He might have a large deposit? Surely if his LTV is low and the rent covers replayments, this is less an issue (interested from own POV). Obviously this opens open up tax consequences on the principal repayment element i.e. it's taxable.Interested in this, thinking of something similar for our daughter's university fees in 16 yrs time(i.e. I put in 50% deposit and let tennent pay repayement mortgage, release equity at later date). Viable?
stongle said:
He might have a large deposit? Surely if his LTV is low and the rent covers replayments, this is less an issue (interested from own POV). Obviously this opens open up tax consequences on the principal repayment element i.e. it's taxable.
Interested in this, thinking of something similar for our daughter's university fees in 16 yrs time(i.e. I put in 50% deposit and let tennent pay repayement mortgage, release equity at later date). Viable?
It doesn't matter how big the deposit is, if the rent is equal or less than the monthly mortgage payment, it won't fit with any lender.Interested in this, thinking of something similar for our daughter's university fees in 16 yrs time(i.e. I put in 50% deposit and let tennent pay repayement mortgage, release equity at later date). Viable?
The rent will need to be at least 125% or more of the mortgage payment. So a £400 mortgage payment requires a minimum rental of £500........
stongle said:
He might have a large deposit? Surely if his LTV is low and the rent covers replayments, this is less an issue (interested from own POV). Obviously this opens open up tax consequences on the principal repayment element i.e. it's taxable.
Interested in this, thinking of something similar for our daughter's university fees in 16 yrs time(i.e. I put in 50% deposit and let tennent pay repayement mortgage, release equity at later date). Viable?
It doesn't matter how big the deposit is, if the rent is equal or less than the monthly mortgage payment, it won't fit with any lender.Interested in this, thinking of something similar for our daughter's university fees in 16 yrs time(i.e. I put in 50% deposit and let tennent pay repayement mortgage, release equity at later date). Viable?
The rent will need to be at least 125% or more of the mortgage payment. So a £400 mortgage payment requires a minimum rental of £500........
Sarnie said:
It doesn't matter how big the deposit is, if the rent is equal or less than the monthly mortgage payment, it won't fit with any lender.
The rent will need to be at least 125% or more of the mortgage payment. So a £400 mortgage payment requires a minimum rental of £500........
Yes I understand that. So the only relevent criteria is 125% of the Mortgage payment. So if I had a property worth 200k, with 100k BTL Mortgage (so circa £500p.m.), 100k own capital; I'm essentially fine as long as rental is >£650p.m. Gifting to daughter would then probably require a more complex tax vehicle; but to confirm the main lender requirement (aside from credit risk) is rental yield...The rent will need to be at least 125% or more of the mortgage payment. So a £400 mortgage payment requires a minimum rental of £500........
stongle said:
Yes I understand that. So the only relevent criteria is 125% of the Mortgage payment. So if I had a property worth 200k, with 100k BTL Mortgage (so circa £500p.m.), 100k own capital; I'm essentially fine as long as rental is >£650p.m. Gifting to daughter would then probably require a more complex tax vehicle; but to confirm the main lender requirement (aside from credit risk) is rental yield...
Most lenders will also assess your income in the same way if it was a residential mortgage. The majority of lenders require a minimum salary of £20k upwards, some want £35k......You may run into problems if you are looking at a BTL that your daughter is going to live in as lenders don't like family members residing in the property.
If you gift her the deposit to do it her name she might fall foul of the income criteria if she's a student....
There are lenders who will ignore the above, but you will pay for it via the interest rates available from them and the fee's payable.
Sarnie said:
It doesn't matter how big the deposit is, if the rent is equal or less than the monthly mortgage payment, it won't fit with any lender.
The rent will need to be at least 125% or more of the mortgage payment. So a £400 mortgage payment requires a minimum rental of £500........
Actually its 125% of the interest portion of the monthly payement that they look to cover.The rent will need to be at least 125% or more of the mortgage payment. So a £400 mortgage payment requires a minimum rental of £500........
Edited by Burrow01 on Tuesday 23 October 18:09
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