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View Full Version : Moving out and renting out....help!



Danstable
08-04-2006, 20:16 PM
Please bear with me....

I'm just about to be launched into the Landlord world and could do with some help. I've had a look around but can't find anything that relates directly to my situation. Also, my question covers a few topics so I thought it best to post it here.

I currently live in my own property with one tennant who pays less than the minimum 'non declarable' amount in rent. I plan to move out of the area (and rent with a friend), and want to rent out two more rooms which will bring the total annual income to £9,900. All tennants will be good friends of mine and they will be on a combined agreement.

At present I have a personal mortgage with 10 months until the end of the fixed rate period and penalties to pay if I change before then. I have normal building and contents insurance, nothing more.

I need to know what to do!

1 - Do I nave to inform my mortgage provider if I no longer live at the address and rent it out? Or do I wait until renewal time and then switch to a buy to let?

2 - What about insurance, I guess I'll have to take out a different type, any advice?

3 - Tax! What do I declare and how do I declare it? Any tax benefits??!

4 - What about these new pension allowances that relate to investment in property, could these be of help to me?

Finally, I did always intend to switch this property to a 'buy to let' mortgage in 10 months. With the intention of getting a personal mortgage on another property. A shock job offer has meant this all has to happen asap (except for having to buy another property).

Thanks in advance for any advice you can offer.....and hello to you all :)

Dan

Danstable
11-04-2006, 00:13 AM
No advice anyone?

I think I have the answer to number 1, stick with the mortgage I have and then just switch when it's up for renewal next february. Will I be breaking any rules?

Number 2 - I think I can work out the best deal for myself.

Still stuck with 3 and 4 though :confused:

Poppy
11-04-2006, 09:21 AM
3 - Tax! What do I declare and how do I declare it? Any tax benefits??!
You must complete the HM Revenue & Customs Self-Assessment form and include the Land and Property section.

4 - What about these new pension allowances that relate to investment in property, could these be of help to me?
If you mean the mooted residential property pension allowances - the government changed its mind because it would have been a bonanza for property investors and not for ordinary people wanting to build up their pension fund.

Recommend that you sign an assured shorthold tenancy (AST) with your soon-to-be tenants for six months. Landlords who rent to friends and family have a tendency to let them get away with murder, then wonder how to evict them. The board is full of such queries. I hope you have been reading up.

Don't become one of those statistics. Be professional.

Danstable
11-04-2006, 12:56 PM
Thanks for the response Poppy.

Do I fill out the self assessment form now, when I start letting the property out, or at some other time....i.e. when I've actually received some rent?

Also, as I am paying off a mortgage on the property, I assume I can deduct the interest I'm paying from the income and then pay tax on the remainder?

Cheers,

Dan

Esther Wallace
11-04-2006, 21:29 PM
Hi,

We went through organising this a year ago. I can only advise you on what we did. Which in some cases maybe different as we are out of the country so don't pay tax on our property.

1 - We are still using our normal mortgage and don't have to change to a buy to let mortgage until ours expires. However we did let our mortgage advisor know. He is an independant advisor though, not sure what they'd say if you speak directly to the lender.

2 - You must insure the property. However in less your letting it as a furnished property, it would be the tenants responsibility to cover the contents insurance part.

3 - You are only taxed, for any profit made above your mortgage payments.

Sorry have no idea about the pension stuff, but I think this has already been asnwered. Make sure you get everything done properly with a Tenancy agreement, even the nicest people can become difficult when money is involved. Cover yourself and do everything by the book.

Good luck

Energise
11-04-2006, 21:50 PM
All tennants will be good friends of mine.

I would suggest you totally erase that point from your considerations.

Danstable
11-04-2006, 23:14 PM
Great answers, thanks.

Yes, I agree about the friends bit, I do intend to get a Tenancy Agreement in place.

Another tax related question....I am replacing the kitchen in order to let the property out, I am funding this with a loan, I assume I can attribute those monthly payments to the cost of the house and therefore not pay tax on it?

Keep the advice coming, it's much appreciated.