UK Landlord Forum / Life

Hello there,

Long story short, I own my flat in Bristol with two mortgages and now I am expecting to buy a house together with my partner but still keep the flat as a private landlord.

I am trying to figure out if the numbers look okay financially for me. But I've been scratching my head around and still haven't worked it out. I am hoping if you could share some wisdom as a more experienced landlord.

1. The flat would be valued somewhere between £220,000-£230,000. Current mortgage balance is £160,000, but I will need to borrow £25,000 from my current lender to cover the stamp duty, legal, and move-in related cost of the new house.

2. House - buy with partner is £350,000. The ownership of the house may look like Partner owns 65%, and I own 35%.

I will pay the whole stamp duty, which is roughly £15,500. So far, it's all okay. But when it comes to renting my flat out after the purchase, this is where I am confused.

The potential rent I'll be charging is £1200 pcm. Service charge will be borne by me which stands at £176 a month. Flat is in a good location, so don't expect it to be an empty room for more than a month annually.

The three mortgages (Two existing ones + additional borrowing) for the flat will come to £979 a month. I am currently employed earning just on the edge of 40% tax bracket, so this new rental income will be taxed at 40%.

I want to minimise the tax on this rental income to 20%, but I am not sure how to achieve this. Also, I'm doing salary sacrifice with my employer and my net pay is actually less than before sacrificing.

If I can manage to only pay 20% on the rental, I'll only need to possibly pay somewhere between £300-£400 after the tax and expenses. Bear in mind, I'll also have one more mortgage to pay on the new house, which will be around 660.

Thank you so much for reading it this far. Really sorry for such a long story. I am wondering all of the above, does it look okay to you? Am I missing anything? I've never been a landlord and would appreciate some feedback etc.

Thank you.

You will need to approach your mortgage company and ask permission to let the flat.

They will either say:

1. No (this is unlikely)
2. Yes, no problem, go ahead
3. Yes, but your interest rate is now increased by 1% (a fairly common amount)
4. Yes, but you will need to remortgage with our BTL mortgage.

Please don't be tempted to let it and not tell them. It can end badly for you.

SDLT is £15500 on your new purchase as its a second home.
Does partner have a second home?

If you sold the flat at £230,000 and purchased at 350k SDLT would be £5000.

If you then bought a different 230k flat (house would be better with no service charge) that SDLT would be £6900. A SDLT saving of £2600.

By your calculations your monthly cost is £979 + £176. £1155? With income of £1200? And over hanging tax charges, not to mention other costs?

You can buy sub 230k houses that have a better gross profit than £45 a month.

Why are you desperate to keep it?

Looks like choppy housing market on the horizon and your remortgage costs are high given the timing of it.

Sell up, sit on the cash, buy in the market dip.

Missed the "its on a ressy mortgage" you wont get a further advance and then consent to let the next day at an 80% LTV, I'm pretty certain of that.

Quote from: Riptide on January 27, 2023, 03:09:30 PM
SDLT is £15500 on your new purchase as its a second home.
Does partner have a second home?

If you sold the flat at £230,000 and purchased at 350k SDLT would be £5000.

If you then bought a different 230k flat (house would be better with no service charge) that SDLT would be £6900. A SDLT saving of £2600.

By your calculations your monthly cost is £979 + £176. £1155? With income of £1200? And over hanging tax charges, not to mention other costs?

You can buy sub 230k houses that have a better gross profit than £45 a month.

Why are you desperate to keep it?

Looks like choppy housing market on the horizon and your remortgage costs are high given the timing of it.

Sell up, sit on the cash, buy in the market dip.

Yeah it is SDLT for second property which is what I am buying atm. Partner doesn't have a second home. He's a first time buyer and we've come to the conclusion that I am going to pay for all SDLT.

The reason I want to keep this flat is because I see huge potential in it. The new flat around me is being sold for 280K. Mine is a little out-dated but in the centre and I want to keep it for my retirement in the future.

I understand £45 a month profit doesn't make any financial sense to keep it as a landlord. But at the moment, I am keen to keep this flat and trying to keep the tax at 20% on this rental but I am unsure how to do that.

Quote from: HandyMan on January 27, 2023, 03:08:54 PM
You will need to approach your mortgage company and ask permission to let the flat.

They will either say:

1. No (this is unlikely)
2. Yes, no problem, go ahead
3. Yes, but your interest rate is now increased by 1% (a fairly common amount)
4. Yes, but you will need to remortgage with our BTL mortgage.

Please don't be tempted to let it and not tell them. It can end badly for you.

Ah I have approached them. I am not going to do it illegally. They will add 1% onto my 2 exisiting mortgages.

A venture like this would scare the bejesus out of me. I am very risk-averse.This is like a house of cards,one small knock and it comes tumbling down. Is it not possible for your partner to move in with you,and share expenses? If that is already the case,why rock the boat? Do you have to buy another house between you? If you feel you must,I think you need to let go of the attachment to your flat and sell it.
Being a landlord can be a thankless task,it's only the money one makes (and that is getting harder) that  makes it worthwhile.You are already paying two mortgages. The location of the place might make it easy to let,but repairs and possible problem tenants can cost you dear. 

Quote from: heavykarma on January 27, 2023, 06:43:35 PM
This is like a house of cards, one small knock and it comes tumbling down.

Potentially, although we don't know about saikou999's level of job security (if there is such a thing now) and salary.

Might make sense it they are pretty sure about the future increase in the flat's value.

Quotebut repairs and possible problem tenants can cost you dear.

Agreed. It only takes one tenant to go rogue and it may cost you plenty.