Looking for a 2nd property - Any advice?

[Mully]

My partner and I recent bought a pub lease and now live above the pub. As a result we set up a limited company for the pub.
We moved out of our two bed terrace and now rent it out.
The terrace is valued approx. £115K which gives us approx £30K equity.
We have a standard fixed rate mortgage (not BTL). Whilst having the advantage of having the costs of our terrace covered by the rent income we'd like to look at buying a second house. Being fairly new to the property market in terms of investing can anyone provide advice on how I could us my current postion to go about affording a second property?

[Andy Start]

Releasing the equity in your first house by way of a 'further advance' would enable you to finance the purchase of another property. It depends on your lender, but generally you will be able to borrow up 95% of the value of your house giving you a potential 24,250 to use as a deposit and cover costs. You would need to be careful that your rent still covers the increased mortgage repayments.

If you are looking for a second property to rent out, a 15% deposit of say 20,000 could afford you a buy-to-let property of around 133,000. If, however, you are intending to move into the second property the process would be the same as buying your first house. Depending on your income status with the pub there are, as I'm sure you're aware, many residential mortgage packages available. Anything from the Bank of Ireland who offer a 100% mortgage at 5.5% which is pretty good to many decent self certification mortgages requiring 10% deposits if you are now self-employed.

My best advice: A decent mortgage broker.

[Mully]

That's the kind of answer i was looking for. I had a couple of ideas however didn't know which would be best. I'll look into it, thanks!!!

[tani]

My partner and I recent bought a pub lease and now live above the pub. As a result we set up a limited company for the pub.
We moved out of our two bed terrace and now rent it out.
The terrace is valued approx. £115K which gives us approx £30K equity.
We have a standard fixed rate mortgage (not BTL). Whilst having the advantage of having the costs of our terrace covered by the rent income we'd like to look at buying a second house. Being fairly new to the property market in terms of investing can anyone provide advice on how I could us my current postion to go about affording a second property?


If you are interested in property investment , why don't you visit Bulgaria and find out for yourselves what a wonderful place it is and in my opinion - the right one to start business in! if you are not able to go there now, here are some tips for you:
If you are interested in buying a property in Bulgaria, here is the solution. Perla Projects Bulgaria is a building developer company owned and directed by Mr Philip Nunes de Oliveira. Now we are concentrated in free reselling of the luxury apartments of Perla Manor and Perla Bay projects. Perla Projects Bulgaria is positive that the interests in property market in Bulgaria will constantly grow during the next years, with the same strength as in 2005. If you’re convinced to invest in properties, do it now and find out more about Perla Projects Bulgaria their website: http://www.perlaprojectsbulgaria.com/
You can, also, visit Perla Projects Bulgaria at many property exhibitions in London and all over the UK: Homebuyer show, Homes Overseas, A place in the sun live exhibitions, etc., where our company will be presented.

[Gerard]

In the UK at the moment the city that has the most bouyant rental market and showing the largest capital appreciation is Birmingham. Birmingham is undergoing a multi billion pound rejuvenation and is packed full with prodessional young people. They are building 2 new hospitals, law courts, business school, new parks etc etc.

The city as we knew it has completely changed. It is the UK's second city with 6 million working and living in and around the city.

One of the most pretigous developments is Holliday Wharf. Check out www.locatebirmingham.com If you have a serious interest we have secured a deal with the developer and currently have 3, 1 bed apts. in the final phase. These are available at below market price and represent a serious saving of upto 12k. The 3 are the last of 30 originally purchased to secure the deal.

Post a reply or e-mail me and I will send more details.

[Tax Accountant]

Make sure if you an equity release you use the funds release wholly and exclusively for the purpose of buying a rental property. If you do this you should be able to claim the interest on the additional borrowing against the rental income.

There are limits to this and some situations you cannot claim for, from what I vagualy remember, but I would speak to professional about it is you could make substantial savings in tax if you know what allowances you can claim.

Wickerman, Tax relief on interest payments is not as you state.

The value of the house is £115,000 at the time when the house was first let.

Therefore, borrowings upto a total of £115,000 will be eligible for tax relief on interest regardless of how the money is used.

Ramnik

[Tax Accountant]

I think you have me there!

I was thinkiing more along the lines of using an equity release from a personal resi property and using it for investment purposes (eg if equity release is entirely for investment, you can claim the additional borrowing as a tax deduction). In this case I think you are right.

What happens (purely by way of example :) ) if you buy a BTL at (say) 70k, refurb it (say 12k) and it values up at (say) 95k when finished - if, after 2 years the value goes up to (say) 120k would tax deductions on the interest payments be limited to the 95k figure?

The correct way to ascertain the figure for an outright BTL property is to look at the total cost to date, including any improvements which have been capitalised, ie added to the original cost of the property. So long as the total borrowings on this property does not exceed the total cost including improvements, the interest is eligible for deduction. In the example quoted by you, the figure would be £70K + £12K = £82K.

In the case of a property which has been introduced to lettings at a subsequent date to the original purchase, the figure would be the value at the date the property entered the lettings business plus any subsequent capitalised improvements.

In the case of a property which is not let at all but simply used as security to raise capital, the interest would only qualify if the capital raised has been used for a qualifying purpose such as deposit for a BTL.

Does this make sense.

Ramnik

[Tax Accountant]

Yes that makes sense.

To be honest I have been claiming the full interest payments on BTL mortgages after remortgaging them. Most of them will be quite close to the actual capitalised value anyway and all proceeds have gone towards re-investment. It would be very difficult to unravel where the money has gone but I do keep absolutely perfect records (and I mean **absolutely perfect **records!) of all expenditure, be it petrol costs or the cost of 5 screws to re-secure doors.

Ideally, you should prepare a profit & Loss Account and a Balance Sheet each year for your lettings business. In this respect, it helps if you also have a separate bank account for your lettings business.

Basically you need to look at the total eligible cost of all investment properties less the total of all loans and mortgages. If the net result is positive, all interest is eligible for deduction as an expense of your lettings business. To the extent the net result is negative, that is the amount on which the interest is not eligible.

Ramnik