Can I buy another house to rent out which will pay the mortgage?

[Overseasmom100]

So I dont have a mortgage on my house (prob worth around £230,000)

I'd like to buy another house to rent (prob put my niece in it) as investment for my DS (currently 15) in the future.

Can I do this? Would I get a mortgage loan as Im 52 and DH is 59. The rent would make the repayments over time and then in time when DS is working etc, he could take on the remainder.

You need to check out the tax rules as mortgage interest is being phased out as an allowable expense so can you afford the tax?

Also do you have the deposit, usually more on a buy to let

Stamp duty is also higher on second homes

not sure, the way the wind is blowing it might not work out as you want.

Firstly, as a LL myself, there are lots of costs and responsibilities with owning a rental property. I would say about 30-40% of rental income goes on maintenance, costs (new boiler and that kind of fun), gas safe certificates, electrical faults, leakages (if the neighbour upstairs leaves the bath to run).

TBH, it's a not a goldmine and be careful that the rental income exceeds the mortgage costs (so you can weather all the maintenanc issues).

Also, if the price of the property goes up and you decide to sell down the line, there is a whopping 40% of tax on the added value since you bought it.

Also, if/when Labour come to power they may simply requisition it for their own needs, or allowing any tenant to force a sell to them (below market value). At which point you'd pay the above mentioned tax.

Also, everyone on MN will hate you

For me, I am trapped as selling it means massive tax bill. And keeping it means all kinds of shit when Labour come to power. So a carefree income scheme it is not

I think yo need to do your homework. You cannot claim mortgage costs against tax ( soon to be implemented) If you have a buy to let motgage you cannot rent to family members. We have rental properties. At the moment they are a poor investment as the values have not increased in 5 yras although the expenses have. The govt seem hell bent on getting rid of the small landlord. They dont make much profit and are a lot of work. repayment mortgage would wipe out your profit and interest only would remain a big debt. Doesnt sound the greatest plan to me. I am longing to sell ours but there is little equity

Yes it was just a dream really. I think it will be more use putting money away each month ready for a deposit for DS.

You could phone a few mortgage brokers for a chat. With many buy to let mortgages you have restrictions on who you can let to, family members are often listed (I guess because they are more of a risk for non payment of rent)

There is some misinformation on this thread

1. Capital gains tax on sale is not 40%

1. Mortgage interest as an expense is already capped and is being reduced annually

The govt seem hell bent on getting rid of the small landlord.

Yes, indeed. Personally, I say 'about bloody time, too' ; but it's something you'd need to carefully consider.

if this is England you need to think very hard. As well as extra tax on buying second home, rules on BTL mortgages, you need a solid buffer against non-payers (who are VERY difficult to evict and will become even more so when section 21 is abolished). You need insurance for buildings, your contents, malicious damage, rent guarantee and legal expenses. You need money for fixes, maintenance - up to and including a full rework if you get one of the deal/steal/trash brigade. There aren't many of them but they are out there.

you need enough money to cover all the agent fees, referencing and so on - tenants can't be charged for that now so unless you can charge enough rent to compensate, forget it. Also deposits are now capped at 5 weeks so you can't charge extra if people have pets. It's a risky game despite what the MN sillybitch contingent will say about 'rich greedy landlords'. And it is being made deliberately more so to drive out small landlords and leave the market for the housing associations. Being a tenant will really be horrible then.

Renting to family members is insane.

obviously with inflation running at least double what you can get on savings and stock market high but unstable you are limited on options. Perhaps start a pension for your son?

point proven about MN in the post above mine...

Mencken One person's 'silly bitch' (are you usually so eloquent in every day life? ) is another person's social justice campaigner.

The point has been made that 'Everyone on MN will hate you', so at least it is acknowledged that the majority recognise second home ownership, the using of (unearned) profit on your own home to snap up someone else's first time buyer home (thus affording them life's little luxuries, like having more than 60 days' security of tenure; being able to settle in communities, in schools; a right to a private life free of a pimply 19 year old coming around every 3 months to comment on your housekeeping- those little fripperies) - is immoral.

And before you play the 'jealousy card', I own a £500,000 home outright and have £400,000 in savings.

But I'm not going to condemn anyone to paying my mortgage for me, because, due to nothing more than my luck, I could do so.

regarding the sheep-like landlord hater, I'm usually a lot ruder. Will try harder.

Miljah, Nobody has to rent my flat. Renting is not inferior to buying.

It makes sense for all sorts of people to rent, am currently letting to doctors who move every couple of years to a new hospital/city, and for them it makes no sense to buy and sell a house every couple of years.

Personally I have rented for many years myself prior to buying, in many different places, without feeling a sense of unfairness. I used to like the flexibility of renting, the lack of responsibility (leaky roof? Boiler down? Not my problem to fix).

Tenants need better rights, I agree with that. In my home country you cannot evict tenants if they keep paying the rent. Some people rent for life.

The laws about renting need to change. That's up to parliament.

Does not make LL's evil though

Can I ask how you have invested your 400k? Looking for inspiration

Your struggle to find a property with sufficient yield to cover costs, tax and mortgage repayments unless you are putting in a large deposits. Ultimately it would be a better investment to buy stocks - they are easier to dispose of, you can spread risk, they don’t cost you anything to hold on to, you pay less tax, yield will most likely be higher etc.

@Miljah we rent. We’re extremely grateful to our land lord. We get a nice house with no financial risk, no costs for repairs, no being chained to the property (which is important to us), low housing costs and no debt. We work for ourselves instead of work for the bank paying off extortionate interest.

Good rental properties are important and help people. I'd much rather rent a nice property from a professional landlord than have a crappy starter home hanging around my neck.

Miljah - living in a rental property is not depriving first time buyers of a home. It’s renting a home, either because it suits better to rent or because the tenants cannot afford to buy. You also have no idea how individuals have saved the deposit for their rental property.

I used to rent out my property in one area of the country while renting a property in another. It suited me to rent when I was younger as I was moving around a lot. I was living in my own (rented) home not “someone else’s first time buyer home”. What a weird thing to say

Also in Scotland, private tenancies are unlimited in time and tenants can’t just be evicted without a good reason. Considering that right to buy is gone and councils don’t maintain their housing stock well, this can mean private renting can be a better idea than social housing.

Miljah
The govt seem hell bent on getting rid of the small landlord.

Yes, indeed. Personally, I say 'about bloody time, too' grin; but it's something you'd need to carefully consider.

Absolutely because everyone can afford to buy can't they? Oh except for those who can't and need to rent. Never mind, as long as there are no more small landlords I'm sure the renters will be happy being homeless.

Solitude. Are you aware that if you rent a property, you are actually paying someone else's mortgage? That's how it works. If you rent, you end up with nothing. If you buy to let, you end up with a (second) house. It is 'inferior' if you could afford the mortgage repayments which can easily be less than rent, but can't buy because either you don't have equity to stump up as a deposit, in another property that has sky rocketed in price, or mummy and daddy couldn't stump up the deposit, or your need to pay rent prevents you from saving.

Where is my cash? Stocks and shares.

Silvery (is it you who has gone silent on the Brexit board, btw? 😉).

Has it occurred to you that quite a few people 'can't afford to buy' because others have used the unearned equity in houses bought no more cleverly than 'at an auspicious time' to snap up that erstwhile first time buyer's potential property?

I’m with @Miljah on this. If your rental income is higher than your mortgage the tenant could technically afford to buy it. How many young people are locked into renting as housing is unaffordable to them.

Boggles guess you've never had the 60 days notice letter hit your doormat, have you?...... because that's as much security as you have.

I actually gave far less of an issue with 'professional' landlords with several properties and a reputation to maintain.

It's yer ' 'Ave A Go' one buy to let who are the issue here.

If they don't really know what they're doing, they end up with trashed houses, or (lucky, lucky) tenants with no heating or hot water for days. Etc.

If young people can't afford to buy then they can stay at home with their parents.
Why should someone not buy a second home as a buy to let, just because someone else can't afford to buy?!
That poor person will not be able to buy either way, stupid argument put forward by a PP.
No one buys a house for let and says to poor young people live here for free !! ... Their parents can do that.

Also, OP ask your mortgage advisor!!

To return to the original question: yes you could buy another property.
Do the sums first. It is possible to make money and pay off a second mortgage, depending where you are in the country and how much you can afford to pay. Speak to estate agents and financial advisers. Our BTL flat was partly funded from savings so the mortgage isn't too high, anf is on a 10-year payback. For the first few years we lost money, but that was expected. Choose your tenants carefully, very carefully, and insure against everything

Most BTL mortgages won't let you rent to rellies anyway for at least 2yrs