All you BuyToLet / mortgage experts...
 

Want to buy a flat in Sussex, rent it for 3 yrs, sell and take the profit (I don't pay CGT). Have seen a few. I am aware of 15% deposit and 125% rent/repayment limitations.

I'd like to get a BTL but don't think the rent will be 125% of the interest (we can just scrape the 15% deposit).

What's the feasibility of buying as a only UK residence (I have no others)? If I don't rent it, then I'll "lose" 3-4k per year from the rent I don't get, which negates any capital profit. At minimum will I have insurance problems if I rent it with a "home" mortgage; or is this permissible for, say, 6 mths? Then how easy will it be to convert to a BTL mortgage (if conversion fees cost a few grand it again negates any benefit)?

(I'm thinking this is a slightly dumb question as I still don't know how I'll get the 125% rent, but all thoughts greatly appreciated...)

sorry to butt in..
 

but, how are you avoiding CGT as I have a 2nd property that I wish to sell but I am fooked if the tax man is getting another 20k from me...

If you have enough income buy it as a private residence and then convert to a BTL - I know that Alliance & Leicester charge you £125.00 for authority to let a private property. They also help with lease contracts :D and let you stay in the residential mortgage deals.

hail hail - How much is the property worth? Sell 59k worth of the house to a member of the family (avoiding stamp duty) and then sell the whole thing in the next tax year - you effectively get 3 CGT allowances :D

Thanks fastbloke, the flat is currently worth 90K approx, if i understand correctly.....

1. Sell 59K worth of the flat to the wife, before the end of the tax year.
Question: how do I do this?
Question: why 59k, does CGT not apply below this value?

2. Next tax year sell the property to Joe bloggs
Question: How does this avoid CGT, I own 31k value in house, wife owns 59k value i house, do we not pay CGT on these values?

thanks again.

Thanks FB - does the Alliance and Leicester thing mean that you carry on with the same mortgage terms but just with a one-off payment? That would be cool. Or does it have to meet the usual BTL criteria / or is it only for a limited period, say max 12 mths, which would not be enough for me? Any idea if this is common with many banks or if I'm stuck with A&L?

BTW, are you allowed a limited gain before CGT? 5, 10 grand? (I'm out of the country, so normally exempt).

hail hail - how much did you buy it for? - You only have to pay CGT on the profit and you have an allowance of £7900.00 for this year, plus you can probably get taper relief - (talk to an accountant for this bit) - If you sell more than 60k worth of the house to the wife she would have to pay stamp duty.

Brendan - I this most lenders will do it, but I know A&L charge £125.00 cos I did this for a client yesterday. Basically you get the residential mortgage and then say you are leaving the country for a year and would like to rent it out... will that be OK nice Mr Lender - They say gives us a few quid (125.00) and that will be fine. After a year say you are planning on staying for another year - 2 years whatever -another £125.00 and the consent to let continues.

As above, you have an allowance on CGT of £7900.00 for this year. I think it is £8200.00 next year. If you don't pay UK tax then there are other ways to increase this, as the capital gain over and above the allowance is added to your narmal income to work out the rate you pay

Can you not just move into the house for a bit before you sell it to avoid CGT? Primary residence and all that?

you can do that as long as you don't have another house that you want to be your primary residence and you don't live in a different country - I imagine commuting might be tricky for Brendan :D

Just one thing to consider before buying the property, I am a lettings agent and at the moment the market is dead. Do a bit of homework first to make sure that the property is lettable I ie can you let it a it is or does it need work done on it) and that agents have people on their books looking for that type of property. Im just outside London on the borders of surrey and normally dont have problems at all but we currently have 2 properties that have been vacant since October. If an agent tells you that the property will let for a certain price dont accept it as gospel. Rental prices have come down considerably. If the property is big enough think about letting out rooms. The MD decided to do that when he couldn't let his 3 bedroom place in ALdershot. All the rooms went within the week. If you want any info on letting let me know, i'd be happy to help

Has the Stamp duty threshold not been changed too £120,000?

Darren