AIBU to wonder if lots of people rent out their properties without a buy-to-let?

[Wildswimming2022]

I know quite a few couples who have bought a new property but are keeping their old one/s to rent out. When I looked into it, as had considered doing similar, the numbers did not stack up at all. The the profit would have been so minimal that it was not worth the risk. A big part of this was the conditions that came with a buy-to-let mortgage and bigger deposit required. Does anyone know if a lot of people are actually renting out while on their residential mortgages rather than switching to buy to let? Online it says this is very risky, but I wonder if a lot of people are doing it anyway...

This. It's highly unlikely you'll profit each month, probably the opposite. You make the money when you sell it (years later)

People renting one property out probably aren’t making enough to pay tax.

If it’s not your main residence you’ll have to pay 50% tax on the house sale.

I had consent to let for 12 years!

We had consent for five years and we finished it, not the bank.

Are you sure thats right, I had a conversation recently with someone about this and I'm sure he said it was about 20% tax on the profit of selling a second home.

If it's 50% he's in for a big shock, he's an accidental landlord but I dont the mortgage details

How do you work that out?

if you have other income, with mortgage interest not always being an allowable expense, that’s very unlikely to be true

This is not true - where on earth did you get 50% from?

I don't think my last landlord had declared it. He lived in the house but didn't like it, so bought a new one and moved into that and rented to us. All of his mortgage correspondence would come to me and he'd collect it every so often.

There are quite complex rules around CGT on houses you aren't living in when you sell.

The amount you have to pay depends on how long you lived there, when you started and finished living there, what has happened to the value of the property since you bought it etc.

Utter uninformed bollocks

I’m not uninformed. It’s not bollocks. If you sell an asset which isn’t your main residence you are liable for high rate tax.

Making the assumption that the LL has other revenue streams is not really important. You can imagine all sorts of situations.

Im saying that based on the income from one property alone, it’s probably under the personal income allowances. Obviously not London, but in some parts of the country where the rents are low if that LL is retired for example.

Most BTL mortgages won't allow you to let to family members.

Interest only mortgages?
Cash purchase?
Set up a LTD company and owned by a company which is better tax wise if you have several properties.

I let my house with a residential mortgage, I had consent to let. It wasn’t an issue as I moved into DH’s house but you’re quite right that lenders don’t like you to have two residential mortgages.

A lot of landlords are cash buyers so no mortgage involved at all

The majority I would guess

I’m not uninformed. It’s not bollocks. If you sell an asset which isn’t your main residence you are liable for high rate tax

Yes, capital gains tax. But you are taxed on the profit/growth only so not 50% of the entire value of the house.

Yes ours was only for 2 years (we moved overseas and rented out our old house).

Yes. When I rented the landlords mortgage statement would arrive in the post.

The envelope had the building society branding on it and was the only thing they hadn't changed the address on so it was fairly obvious.

I didn't care. But then the landlord pulled a real dick move on me...

So I wrote on the next envelope "Return to sender - addressee hasn't lived here for years" and popped it back in the post box...

I had a 10 year fixed rate on residential mortgage, got consent to let. That was 9 years ago.

@DobbyTheHouseElk even as a higher rate tax payer it's only 28% and that was before the accountant got his hands on it. You get 12k each tax free, but if you own the property jointly with a spouse that's 24k to play with per year, add on your deductibles and you can soon start to reduce it.

It depends on the value of the property aswell we've used a variety of finance products over the years from consent to let, BTL, bank loans and a mortgage from a foreign bank.

BTL is the most expensive option however when renting out a property you have the choice of the rental value, so can cover your costs by raising the rent to something that cover its. Student properties are great for this. The rising property value is then your profit. Husband has also now dropped renting through an agency and bought a cheap phone for the tenants to contact us instead, this saves a fortune a month.

Not true

Also capital gains tax is not 50%

using second mortgage to pay off the first, so no mortgage is being paid at all on the rented property

Correct.

Put simply, if you've never lived in the house, it's
(selling price less costs of sale) minus (purchase price plus costs of purchase) minus (annual CGT allowance)
taxed at 20% for the amount of profit to take you up to the higher tax band (this amount is added to your other annual income), then 28% on the profit after that.

Nowhere near the 50% uninformed bollocks that was spouted earlier.