Accidental Landlord Twice – needs experienced help please

Accidental Landlord Twice – needs experienced help please

11:22 AM, 26th January 2014, About 10 years ago 16

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Hello everyone, I need advice as a Buy To Let novice

I am what might be called an accidental landlord. I was living in a flat I had purchased and then I bought another flat in another town as I was due to be moving there with my job. I did not move there in the end and subsequently I let that property out.

The property I was living in I have also let out as I ended up moving somewhere else (again work).

This is all good and well but the problem I have is that the two properties are not making money for the following reasons:
The first one I was a complete novice and let the property to a friend for well below the market rate (this will be sorted later this year when they are due to move and I can adjust the rent). I must add that I am breaking even on this one.
The second property (my old home) is not what I would call a great rental property because I bought it to live in and had no plan to let it. I am just glad that I am not losing money on it and am also breaking even on this one.

I now want to build a portfolio of properties but I need to know what I must do next. I am slowly building up a cash reserve as suggested by Mark Alexander and others.

1. Should I go see an accountant now and set up a business? If so, what type would be best for a landlord and is there anything I should be wary of?
2. Should I try and reduce the mortgage on the second property to get it to the point where it is generating cash flow or just let it keep ticking over? I don’t want to sell it just yet because the value has not gone up yet but it is a new build and there are very big plans for the entire area.

Any advice would be greatly appreciated

Davidaccidental


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Comments

Fed Up Landlord

16:34 PM, 26th January 2014, About 10 years ago

It is off settable Jeremy but only against future rental profits and not your other income. HMRC in their wisdom do not class being a landlord as a "business" Which it obviously is but we all know how the taxman works!

David Sables

16:55 PM, 26th January 2014, About 10 years ago

Neil and Gary,

Thanks again for more good advice.

I will look into getting the mortgages sorted out, hopefully it wont present too much of a problem. The one apartment was a repossession and I managed to get it at a decent price, also putting down a 20% deposit. When it comes round to re-mortgaging, is it a good idea to get it revalued as I have made substantial improvements to the property. Is there a chance that the value of the property is now more than I paid, if so, the LTV shouldn't be an issue on this one?

The other flat has a higher LTV, so am I right in saying that it is a good idea to increase my equity here to reduce the LTV? And sooner rather than later as I would prefer not to sell unless there is no alternative.

Jeremy, thank you for those points you have brought up, I think I should be able to reduce my expenditures by focusing on some of the things brought up earlier.

From what I have read here today I think that my focus should be something like this:

1. Reduce expenses as much as possible and keep on top of it. Get the properties paying.

2. Continue building a cash reserve so that I have enough for emergencies and also, as Neil mentioned, to cover the LTV issue for when the banks do withdraw their permission to let.

3. Get an accountant so that I can take advantage of the available allowances etc.

Does this seem like a good way to progress or have I missed anything important?

All this together should help get me on a firm footing and I will certainly be revisiting this site regularly for advice and guidance, and hopefully in time to offer advice.

Thanks again for your time everyone, no doubt I will be picking your brains in the future and I only hope I will be able to reciprocate.

David

Jeremy Smith

17:28 PM, 26th January 2014, About 10 years ago

Reply to the comment left by "Gary Nock" at "26/01/2014 - 16:34":

Yes Gary, my error, you are quite right, I don't know what I was thinking in saying that !!

On a thought,
if you were to make a loss, and never get into making a profit before you sold the property, then not had any rental properties would the loss be able to be claimed against anything, perhaps the capital gain from selling it, or would it just lost !

an example comes to mind:
I have bought a property recently which requires quite a bit of 'renovation'/decoration.
If I got in a tenant/lodger, then did it up whilst they were there, or after a few months they moved out then I did it up and subsequently sold it, would the 'loss'/costs of doing it up be claimable against the capital gain profit I would have made from the sale ?

Neil Patterson

17:35 PM, 26th January 2014, About 10 years ago

Reply to the comment left by "David King" at "26/01/2014 - 16:55":

Hi David,

I think we have got a good start for you to consider.

If you do save to reduce LTV for a later BTL remortgage I would keep it as cash in the bank account not pay the mortgage down as it will give your more options and it is safer to have cash in hand in case of emergencies.

Fed Up Landlord

20:35 PM, 26th January 2014, About 10 years ago

Hi Jeremy. Generally any initial costs prior to first let are classed as part of the capital expenditure along with mortgage fees and solicitors. If however someone moved in and redecoration took place during the tenancy then an accountant may allow it against rental income which is more advantageous if you intend to keep the property and help to reduce tax liability. If it takes place before the let it comes off the capital gain when you sell. It all depends how you want to play it.

Some One

9:35 AM, 27th January 2014, About 10 years ago

Is there are reason you don't want to sell the existing ones?

If you want to make a proper go of being a landlord and your first two don't provide enough yield, why not get rid and start again purchasing deliberately rather than accidentally for the lettings market.

Again, you'll need to check the tax position, but since you've lived in both you'd have some chance of reducing (possibly completely) any potential CGT liability.

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