Buy to Let [ sort of ]

[smalldog]

dont disagree if you dont intend to build. Ive got 8 and didnt want all that cash transiting my personal accounts, partly why its now a business. Also want to be able to leverage all the equity as collateral (if I dont lose it all now with the property slide!!!!! ) to get corp finance for actual property development rather than BTL. Tax wise its better to have it in the business, CGT is higher than Corp tax BUT if you want to get your paws on any cash rather than reinvest profits there is a case to keep it personal....

All mine were bought with personal BTL mortgages, but Ive now legally written them into trust so any profits are no longer mine and are liable for CGT. Otherwise if I sold them then Hector could come knocking for his 40%, regardless of the fact the money went straight into my business account for reinvestment elsewhere. The trust gets round that little issue and its pretty much the only way to build it initially as you wont be able to get a commercial mortgage for a good few years until you have been operating a while and can show accounts..

arguments for both sides really, ya makes ya choices...

[Ardesco]

4 - you dont pay tax if you dont make a profit. If your mortgage is the same or more than your rent you dont pay a bean as there is no gain

Not 100% accurate. You can write off the interest part of your mortgage, but not the capital repayment part of your mortgage. If you are on BTL only get an interest only mortgage as it makes the accounts easier. If you have a repayment mortgage you need to work out the interest portion each month and deduct that from the incoming the repayment portion counts towards your profit as you are increasing the amount of the property you own, it's all rather convoluted working out your liability and really not worth the hassle.

PS - Re landlords insurance you don't need it most of the time. Tenants are responsible for their own contents insurance. If you own a leasehold property then the service chg includes building insurance which will cover the cost of rebuilding the fabric of the propertry including things like kitchens/bathrooms etc. If its freehold then its a different story and you need Landlords buildings insurance as a minimum, upto you if you then want to topup with things like malicious damage etc...

Disagree, always rent the flat as furnished and get contents cover, get the agency you rent through to tell you the minimum requirements to classify it as furnished. If you rent the flat out as furnished you can take a percentage of the rental income tax free for maintenance (I believe it is 15%, but that's off the top of my head, I would check the exact percentage).

This means you take the money you get from rental, take off 15%, pay the agents fees, pay the interest portion of your mortgage, and then look at what is left when working out how much tax you pay.

Top tip is use the profit from the BTL to make overpayments on the mortgage on your main home and not the BTL. Keep the amount owed on the BTL high so that you can write off the income as tax free, and reduce the mortgage on your main home to make the saving on mortgage payments. When you have paid off the mortgage on your main home look at paying off the mortgage on the BTL, but not before.

[smalldog]

Not 100% accurate. You can write off the interest part of your mortgage, but not the capital repayment part of your mortgage. If you are on BTL only get an interest only mortgage as it makes the accounts easier. If you have a repayment mortgage you need to work out the interest portion each month and deduct that from the incoming the repayment portion counts towards your profit as you are increasing the amount of the property you own, it's all rather convoluted working out your liability and really not worth the hassle.



Disagree, always rent the flat as furnished and get contents cover, get the agency you rent through to tell you the minimum requirements to classify it as furnished. If you rent the flat out as furnished you can take a percentage of the rental income tax free for maintenance (I believe it is 15%, but that's off the top of my head, I would check the exact percentage).

This means you take the money you get from rental, take off 15%, pay the agents fees, pay the interest portion of your mortgage, and then look at what is left when working out how much tax you pay.

Top tip is use the profit from the BTL to make overpayments on the mortgage on your main home and not the BTL. Keep the amount owed on the BTL high so that you can write off the income as tax free, and reduce the mortgage on your main home to make the saving on mortgage payments. When you have paid off the mortgage on your main home look at paying off the mortgage on the BTL, but not before.

Some good points Ardesco, but I avoid furnishing them like the plague. The amount of money Ive spent on furniture in the past that has either had to be given away or put into expensive storage is a pain, and that doesnt include the hassle factor of moving stuff around in your own time and hiring vans and the like....and that doesnt incldue the cost of policies which aint cheap! Not for me, each to their own though and if you only intend to have one then maybe, when youve got 8 it turns into a nightmare!

I can tell you white goods, a sofa and a bed are minimum reqs...its actually the council tax classification you should work too. Oh and PS - if its ever empty/void and furnished you pay 90% council tax, be warned!

PS - yes you are right I was working on the basis of interest only.

PPS - you can use the BTL profits to pay off your home BUT if you are making a profit its taxable....Hector will know you are renting it as agents are obliged to inform the local tax office so be careful!!!!!!!

[Ardesco]

Some good points Ardesco, but I avoid furnishing them like the plague. The amount of money Ive spent on furniture in the past that has either had to be given away or put into expensive storage is a pain, and that doesnt include the hassle factor of moving stuff around in your own time and hiring vans and the like....and that doesnt incldue the cost of policies which aint cheap! Not for me, each to their own though and if you only intend to have one then maybe, when youve got 8 it turns into a nightmare!

Assuming you get good professional tenants that have 1 year contracts you are potentially looking at 8 trips a year to replace broken furniture which is paid from the tenants deposit (You can add in your time and travel costs as well). Assuming that each property is going for a rental of £700/month (I'm guessing that's the absolute minimum) you are looking at just over £10,000 a year tax free by furnishing the properties. That's about £1,250 per weekend for moving stuff around, not a bad rate in my eyes...

I can tell you white goods, a sofa and a bed are minimum reqs...its actually the council tax classification you should work too. Oh and PS - if its ever empty/void and furnished you pay 90% council tax, be warned!

Quick trip to Ikea and you can cover all this for under £500. Contents insurance on 4 items with a total value of just under £500 should not be too much at all. The other positive with contents insurance is they cover the carpets and may well cover damage to the walls/ceilings/electrics in the case of a burst pipe.

PS - yes you are right I was working on the basis of interest only.

PPS - you can use the BTL profits to pay off your home BUT if you are making a profit its taxable....Hector will know you are renting it as agents are obliged to inform the local tax office so be careful!!!!!!!

Yes the profit is taxable, but by using it to pay off the mortgage on your own home and not the BTL you are keeping the profits down. As you pay off more money on the BTL the interest portion of your mortgage reduces which increases your level of profits which increases the tax payable. In general 15% of the rental and the interest component of the mortgage should mean that there is very little profit left to pay tax on anyway, the point that I was making was do not pay of the mortgage on your BTL before you pay off the mortgage on your home. It is not a tax efficient way of doing things.

[Ardesco]

Oh and PS - if its ever empty/void and furnished you pay 90% council tax, be warned!

Forgot to add my response to this point. You can always unfurnish it when the tenants move out to save on council tax, and after 6 months you pay full council tax on it anyway furnished or not.

[ASB]

the point that I was making was do not pay of the mortgage on your BTL before you pay off the mortgage on your home. It is not a tax efficient way of doing things.

One other point on this. You can increase the mortgage on the BTL and use that to pay off all (or some of) your residential mortgage. The thing to be careful of is that the mortgage on the BTL should not exceed it's original purchase price. Obviously it depends on circumstances whether this can help or not.

[KentPhilip]

Are you all enjoying making your capital losses at the moment, as the housing market crashes into the ground...?

[smalldog]

sure, each to their own but I cant be assed...had my fill of ikea trips and flat pack fun....I dont pay any tax on it anyway as I dont take profits so dont pay CT, it all gets reinvested....Will probably pay a bit of CT this year as will take a small div.

My worst ever weekend was hiring a van on a friday night, driving to Brum IKEA. leaving there at 11PM, driving to sheffield and getting there at 1:30AM. Getting up at 7AM, painting the interior of the house, driving to Manchester for a party, driving back to sheffield sunday AM, finish painting then furnish three bedrooms with flatpack bed, chest, wardrobe etc....then drive back to London for midnight Sunday....

Oh and a lot of my trips coincided with New year, xmas, clashed with weddings etc....No TA!

[Ardesco]

Are you all enjoying making your capital losses at the moment, as the housing market crashes into the ground...?

No capital loss yet, and capital loss is meaningless anyway unless you need to sell. If my properties are not worth substantially more than I paid for them in 30 years time I will be extremely surprised and then you will be able to laugh at my misfortune.

Conversely I will quite happily laugh all the way to the bank in 30 years time when i have a nice income for doing very little, a nice property portfolio and the ability to cash in my properties for a substantial chunk of money while you are still renting your place while waiting for property prices to hit "rock bottom" before you buy...

[smalldog]

kentphilip, thats why people like you should never dable in something you dont understand. Keep your cash in a bank account nice and safe....

Just try and understand this tiny but crucial tip for any investment product, property, shares, unit trusts, investment trusts, classic cars, gold, silver...get the picture?....

DONT SELL WHEN THE MARKET IS AT OR NEAR THE BOTTOM...AND DONT INVEST MONEY YOU MIGHT NEED TO GET AT IN A HURRY OTHERWISE YOU MIGHT LOSE....

tell me someone, is that too hard to grasp? DOH!!!