father_jack

Thinking of keeping one of our flats to rent when we get our new house and just getting a bigger mortgage. What are the hidden costs I've forgotten about?

I know you need stuff like fire proofed sofas to stop spliffed up students setting fire to themselves

I know I'm gonna have to pay 40% tax on presumably all the earnings

I know there's capital gains if I rent it for over 2 years then sell. How much is CGT anyway?

Anything else I should be thinking of.

Cheers

FJ

DavidBrown

1. The letting market is saturated, so it may be difficult finding tenants (and rents will be lower as a result)

2. Make sure you get an excellent letting agency if you're not going to handle it yourself. I can't be arsed dealing with tenants, so use an agent. I've had diabolical agents, and amazing agents. It makes all the difference.

MarkO

If you've lived in the flat for more than 2 years before you rented it, CGT can be avoided.

Also, rather than pay tax on the property, max out your mortgage on it (to clear what's owed on other properties). Why? Well, any rental earnings which are used to pay back the mortgage are tax-free.

But I'll agree with the earlier comments - buy-to-let is pretty saturated, so before you embark on this, make sure there's actually a market for the flat to be rented.

imlach

father jack - we've just done this one one of our flats.

Remortgaged highly on the flat to avoid tax on any earnings - tax is offset against the INTEREST on the mortgage (note, not the full repayment - just the interest!). This meant we could lower the mortgage on our new home.....

Therefore in simple terms :

rental income - interest on mortgage = amount liable for tax at 40%

If the above is > £0, then you can also offset expenses against it (repairs, upkeep expenses etc).

ie, you can probably avoid paying ANY tax on rental income.


Remember to tell your mortgage lender you are letting, as well as insurance ppl!

uncle buck

Remember that once they're in it can be very difficult to get them out again. They will probably trash the place if they are students or graduates

Be careful who you rent to....

father_jack

Cheers guys - I thought that you had two years to decide which was your primary residence and you had to pay CGT if you sold after that period.
Was about to clear the mortgage on the rental flat, but think I will max it out as suggested and use that cash to decrease the mortgage on the new place.

I don't think renting it will be a problem, It's right opposite Edinburgh University, lots of rich ****** students about. Got some agencies coming round this week to give us a price.

Thanks

FJ

imlach

FJ - why not rent it out in August for £400/week to festival people!!!

father_jack

I think I'll rent out my flat for the festival (it's the girlfriends that we're keeping to rent). Mine goes up on the ESPC for sale tomorrow and should sell pretty quickly, so I don't give a t0ss if a troupe of travelling acrobats trash the place

Where would you advertise for festival rents? ed-fringe has sort of a posting area - anywhere else?

Thanks for the info the rest of you - still need a definate on the capital gains - thats the only one thats worrying me.
Oh and how much is reasonable for an agent to want for a managed service.

imlach

Most letting agencies charge 15%.
My sister used Rydens once and wouldn't again!
They didn't really do much for their 15%....
ie, non payment of rent was NOT their problem!!! You'd think it would be....

Paul78

Jeezuz, for 15% I would expect them to do the full works !
In London, fairly standard rates are 10% for let only, ie: find tennants, vet them, move them in, set up standing order.
If you want your rent collected its another 2% and full management is 16%, where they will look after everything.
Saying this though they will charge for everything in between like tennancy agreements etc !

imlach

For the 15%, they collected the rent - it was just that when it was not paid, they were not willing to chase it!!! That was one of the reasons for using an agency!!!

Consequently, I am doing it myself this time......bit more work, but worth saving 15%!

Paul78

Indeed, and if you need a good contract or any help then I will be more than happy to help .. Drop me an e - mail !

For my sins I worked for Hamptons in London then Oxford for a couple of years !

Rgds,

Paul

salsa-king

i've rented out my flat i hav in Nottm...renting is not a problem!

you pay tax on the un earned income! (i pay 23%ish)

get a short hold tenency aggrement (pre printed out etc) from Oyez (say like 'Oh yay')
these are about £10 for 5

dead easy..short hold tenancy agreement for a let of a furnished dwellinghouse etc...pre done all you do is put your address and names in!

keep to know longer than a 6month let!

Phil

father_jack

imlach - did you get 2 mortgages or 1 big one? Can you recommend any mortgage advisors?

Cheers

like the website btw

imlach

FJ - hehe - you found the website then!! The house is a dump eh!

2 mortgages.....email me.

father_jack

You have mail