Sell up and move or Buy to Let it?

sja360

sja360

sja360

Soldato
Joined
28 Jul 2003
Posts
4,172
Location
Dundee
Bit of a quandary here, personally i think for hassle sake best to sell and move on, currently £131k debt remaining for a property worth £330-£350k. 4 bed semi detached victorian.

Wife suggests we keep it for a cash in for retirement while we move to a similar £350-400k house (more modern however) for better schooling.

I like the idea of buy to let but suspect it will eat into my leave time (i work offshore) and will be subject to income tax from profits i guess? (I expect £1500 pcm rental, mortgage is £670ish)

Other option means pretty much selling and moving and this free's up cash.

Still to speak with a mortgage advisor but would appreciate anyone that had similar thoughts or experience and how it went.

For reference we are in Dundee and are looking to move to Bearsden, Glasgow or similar area for decent schooling.

Cheers,
Stephen
 
Note that the mortgage will have to be paid out of post-tax income. Also note that rents in Scotland are subject to controls.

If you do decide to let it, get an agent.
 
If you go the BTL route, you may want to consider the Ltd company route so you don’t get clobbered by the Scottish 2nd home/BTL additional stamp duty (8% on top of the base rates now I think).

Are you already a LTD company contractor as this may also complicate things tax wise? Otherwise if you are a higher rate tax payer as well the change to dividend tax out of a ltd maybe more attractive, especially with a spouse as equal shareholder and being able use dividend allowances.

Going Ltd has other disadvantage such as when you come to sell it CGT would be due on the full gain with no allowance, though the personal CGT allowance these days isn’t particularly generous. You would need to look at both options and see what works best for you and your wife and considering how long you would be doing it for, though much will be reading tea leaves due to future tax and government policy changes over say a 20 year period.

If you want to wash your hands of the day to day of managing it you can get a letting management company. They’ll likely charge you about 10% of the rent.

Also make sure it’s EPC C or better (or easy to achieve it), it will become illegal to rent it out from 2028 if it doesn’t meet that. You’ll need compliant smoke detection to meet the Scottish regs as well, that and stuff like gas safety certs and electrical safety checks done.

The rent controls have been relaxed somewhat recently. You can increase by more than 3% now to an existing tenant every year, but if they complain it would go to adjudication and you would need to demonstrate what you were asking for was reasonable in the current market I believe.

With the tightening of the rental market in response to government intervention in the last 5 years rates have been going up substantially recently. Not sure what Dundee has been like but most places are seemingly seeing annual rent increases 10+% a year now and can likely continue in the next few years as the EPC changes are likely to have a huge impact on the rental market.
 
dlockers said:
How old are you?
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38
I'm not a ltd company contractor, i have heard briefly of people but unaware of ita advantages / disadvantages.

I was always considering going with a letting agent really as it would be too far away and as already stated i couldn't turn up every x weeks.

When i say offshore i don't mean rigs, typically pipelay construction vessels and most recently jack ups for installing wind farms.

I believe if i applied for listed status for the house it would allow me to be exempt or subject to more relaxed EPC requirements. Currently its probably a D.
 
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john_smith said:
@Jokester Can you transfer your personal house into a Ltd? Won’t Ltd have to pay stamp duty? Also Ltd companies often have higher interest rates on mortgages.
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The Ltd needs to buy the property so yes stamp duty would be payable but with the additional increase in 2nd home LBTT and depending on the property values - ie if you’re moving to a more expensive property there can be a saving in doing so.

You would need to loan the Ltd the deposit so would need cash free to do this and then the sale of the house to the company gives you the cash for the deposit for the new house purchase - it all needs to happen on the same day essentially unless you have cash to finance this completely separately.

As with everything shop around and do the sums to see if the advantages outweigh the disadvantages. Interest is an allowable expense to a Ltd company but not to an individual on a BTL.

When i did this I sat down and worked out the cost of both routes, buying, running the letting business (either as Ltd or personal) and then disposing at the end. Since doing that there’s been significant changes to things like CGT allowances (slashed) and corporation tax - as another business owner I now get hit by the split of the £50k allowance of the 19% rate between both businesses.

Then there’s the whole thing about furnished or unfurnished - I suspect you would just want to do unfurnished as it avoids additional hassle with council tax when it’s unlet.
 
Whilst you could go down the BTL route and it is a good investment diversity route, just selling up and putting the left over money into S&S ISA + pension isn't to be sniffed at either!
 
Jokester said:
Whilst you could go down the BTL route and it is a good investment diversity route, just selling up and putting the left over money into S&S ISA + pension isn't to be sniffed at either!
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Yep that's where I was going with my age question. I don't know Scottish property very well but it sounds like it isn't a peak area so growth will be limited vs. locking it into a s&s ISA.
 
dlockers said:
Yep that's where I was going with my age question. I don't know Scottish property very well but it sounds like it isn't a peak area so growth will be limited vs. locking it into a s&s ISA.
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Yeah, my gut feeling is, especially if you don't have significant investments elsewhere, just an index linked fund in either will outperfom property over a 25+ year time frame. Historically I think that's pretty much always been the case. On the other hand, being over exposed to the stock market can impact your retirement if there's a crash just as you're looking to retire so eggs and baskets is something to consider.
 
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