Renting out a second property - do you have expertise in this?(12 Posts)
In short, we are thinking of renting out our second property. We are just weighing up the pros and cons and potential financial benefit (or not).
In particular, we are trying to find out more about tax considerations, and any exposure we could have to capital gains tax.
Can anyone tell me more, or forward me to a good website which explains this well.
Many thanks for any help.
Yes you will hve capital gains exposure, but if it is not your primary residence you will have CGT exposure anyway.
Yes you will have to pay tax on the income (minus wear an tear allowance). There are a lot of details on the HMRC website. If you have a mortgage you will be able to put the interest part of the mortgage againist tax.
I am also interested in this. My daughters currently live in our second property (flat), the reason we bought it. Would we be better off renting it out?
Make sure you declare everything and offset outgoings and you should be ok. Greyvix: you may well be better off renting but there will be costs associated with this, not to mention risk.
Thank you for the advice. We are pretty naive, and haven't looked at the best deal financially.
I cannot advise you on Tax but as a letting and property manager I can assure you if you do your research, keep a fund for repairs and faults you will create a long term asset.
depending on the number of bedrooms and where it is it may be better than other investments.
the main point I would make is as long as you plan, research local prices agents etc you can create an asset that pays month after month and with enough of them I know landlords who don't have to work because they are essentially financially free.
also when doing research into your prices etc it is far better to look into cashflow of the property than yield - most agents use that term and to an extent its a good measure of the property but cashflow will be best.
also a lot of people hate agents - but to make an investment property into a real asset you'll not want to be managing it yourself so
some questions to ask:
who will be managing my property and will you tell me who is replacing them should they leave? - knowing the person is the best way to know how they work
ask them if they have passed the NFOPP Residential Lettings qualification (at least level 3)
ask them about their sales technique - I would recommend anyone who says they are a matchmaker with the sales mostly in how they describe the property on their marketing. just because they will focus on finding someone who matches and will be willing to pay the correct price rather than someone who will go ' that'll do' and try to reduce the cost.
you need to have an EPC, gas safety certificate and I would recommend getting insurance for your property and furnishings.
I'd love to help should you decide to move towards building an asset for yourselves however if you are outside of London I can recommend a few good agents I know if you would like?
get 3 agent's opinions too on value of rent and how long they will take to get it tenanted.
hope this helps
Deaglan Furey - HomeXperts Director
I have to disagree with the agent. They can be good for marketing but managing the rental yourself is far from complicated once you build up a team of tradesmen. Go as a guest (free) to local networking groups such as BNI and save yourself the fees each month.
I get a text from a tenant, I text my relevant tradesman immediately and it gets sorted. Agents do it when it suits them then add 10% + VAT for the "service."
I am currently buying a second home to let, and have heard that it is far better to manage the maintenance yourself if you can.
We have decided to do this as I have dh and 2 ds who are very handy and can do anything except electrics and boiler.
Agents have a list of people they use and quite often they come in at much higher cost than other local tradespeople.
You can off set any repairs and related goods against tax, so for considerable time not have to pay much on a small cheap property.
I agree with Waiting for me
Is the property near where you live? if so, you do not need a managing agent taking 15%!
look on Zoopla for rental yields for similar properties to see the rental value. Then send emails to local schools, police station, fire-stations, hospitals to see if they have staff needing accommodation. You will get a tenant who is employed, crb checked, and you can get a standard rental agreement form WH Smith etc. Declare all your income and expenditure to HMRC on your tax return.
You do not need an agent!
The only time (in 20 years of renting) that we had a problem tenant waa one we got thru an agency and they were utterly useless. Going direct we have had good tenants and no problems.
We are in the process of buying a buy-to-let. The owner was about to re-let it out if he did not get a sale. However, we have agreed to buy at a good price. It is near a mainline station to London (50mins) and about 200m away from the city's main hospital. The owner has offered to put us in touch with the tenant he had lined up (a bloke he's played football with for 8years, so not exactly a friend but someone he has known for a while). This will save us trying to find our own tenant, but it is completely up to us if we want to rent the house to him and that has been made clear.
We are meeting would-be tenant tomorrow. What sort of things should we ask? We will not have completed on the property for another 6-8 weeks so we don't have to think about tenancy agreements until then. It's more 'do we like him' are we happy to have him as our tenant!
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Just a small note of caution for anyone considering jumping into this, it is just my opinion but I think given all the noise being made about mansion taxes and second home owners/buy to let, that pretty soon, the Government (whatever administration) is likely to clamp down pretty hard in this area, tax wise.
That could mean removing the tax relief on mortgage interest for example- ie you will no longer be able to deduct the interest from your income from the property before calculating tax due but would pay tax on income less other expenses only (such as agents fees and maintenance). This would make a pretty huge difference to most landlords' actual income and you should maybe consider it as a risk/possibility and where it would leave you financially if it were to happen.
Re tenant Breward, I think your instinct is most helpful, as is the personal recommendation, however you should get a reference from a previous landlord/employer and get deposit and proper tenancy agreement with deposit as you can never really tell! I would ask normal chatty stuff, why he is moving, get a sense of how long he may be there, living alone, whether he has any pets, (smoker)? So that you know what you are getting...
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