Let to buy....most efficent route please?

Question

I own a property with a small outstanding mortgage, I now would like to

rent this property out to a Housing Assiotiation on a long term basis.

Should I let this property out without raising capital through a re-mortgage to finance my next family home,because I was hoping to clear this property of debt to ensure that there will always be a family residence no matter what transpires( with 100% of the rental income going towards our next mortgage)

OR

Should I draw down upon the first home for to ensure as little tax liability as possible, but thereby removing the option of the forever family home.

Which is more tax friendly?

My employment is worth 35k p.a, however my wife is a fulltime mum, are there any hints or tricks that I could employ, to limit my exposure to Gordons grabbing picker and stealers

Regards

GIMPY

Miss L. Toe · Accepted Answer

The potential tax killer is the CGT on the rental property, you will never want to sell it when you know you have to give 40% of the profit away :-(

What you are actually doing here is borrowing to invest. Is that sensible ?

What I would do is:

1) Sell the proprety that you no longer want to live in (I assume you are already living there and have no CGT liability 2) Buy my next home using the proceeds of the sale as deposit and with the minimum mortgage

This is just what most people do.

Use the savings on the interest to save/invest sensibly. There are many ways of investing in property other than directly owning some.

DSt · Answer

Care to elaborate? I'm in a similar position, and want to understand how best to invest using the property. TIA, DSt.

Miss L. Toe · Answer

I was primarily thinking of shares in property companies,and the soon to be announced REITS.

Also shares in building companies are often thought to have some relationship to property prices (they usually have good size land stocks with planning permission).

One can also use these vehicles to invest in property outside the UK (and thus take advantage of future falls in the value of the pound etc.

There was an article in yesterday Sunday times about a soon to be launched fund from Assetz that will invest in Student Halls of residence.

formatting link

seem to have many routes to the market - I have not researched them at all and havn't looked beyond the first page of their site so am not recommending them, just giving an example of the sorts of things that are around to invest in property. Usual caveats apply.

Bedders · Answer

x-no-archive: yes Is CGT only payable, if the money raised from a sale is not re-invested..?

Miss L. Toe · Answer

Normally, CGT liablity arises at the time of the sale. What you do with the money afterwards is totally separate.

BUT - CGT can be a complex are especially where things like a family business is concerned.

So I think you need either to properly tell us all the circumstances (and then check what we might say) or find an accountant.

Ronald Raygun · Answer

No.  What you do with the money doesn't affect CGT liability.

Let to buy....most efficent route please?

Join the Discussion

Didn't find your answer?