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BTL in my wife's name
BTLNewbie
Posted: 01 October 2017 20:12:16(UTC)
#1

Joined: 01/10/2017(UTC)
Posts: 1

Hi all.

A friend of ours has encouraged us to look into BTL up north in his city. He has 12 properties and is doing very well. I'm considering it, but just need to get a few things straight in my head first.

- We have £45k available to invest and are thinking of getting 2 x £60k properties.
- We would need a mortgage to cover the remainder on both
- Our primary family home is in my name only
- I earn approx. £50k year and my wife around £11k a year

Is it possible for the rental income on both to be put in my wife's name to make it more tax efficient?

Thanks for any help you can provide.
Jim S
Posted: 16 October 2017 11:26:53(UTC)
#2

Joined: 08/12/2016(UTC)
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Personally I don't think now is the best time to invest in BTL, to put it mildly
- mortgage rules are tougher nowadays in terms of being able to cover potential mortgage increases from rent
- extra stamp duty when you purchase
- loss of wear and tear allowance
- no longer taxed only on profits if you're a higher rate taxpayer

But if that's your intention, do your homework before you start, there are some good books out there. I think you are looking in the right area since prices in most areas of the north of England haven't increased much in the last 10 years. My gut feel is there are better growth prospects & yields there than in the home counties.

I'd suggest buying one at a time, and have your wife take on both mortgages in her name only. Possibly it might help if you were guarantor, but I would avoid joint mortgage because of the tax implications for you.

Generally speaking, I would try and avoid putting in more of your own family money than you need to to get a good mortgage rate. Assuming the mortgage rate is good, borrow as much as you can. Probably to get a good rate it will make sense to put in at least 20% deposit, but hopefully not much more than that.

Also I would suggest getting a mortgage with a 'whole of market' broker familiar with BTLs. I have used London and Country and been happy with them, there are other good brokers out there.

Also I would suggest a 5 year fix, not just because rates are low at the moment, also to avoid some of the extra affordability hurdles (which factor in what happens if rates increase), and to reduce remortgage hassles (eg. new rules mean I think you need to declare all BTL income if you remortgage one of them)

Also make sure you have some money set aside for emergencies - void periods, bad tenants etc.

You are planning a big financial step, so research thoroughly before you start. Good luck!
Tim D
Posted: 16 October 2017 13:26:43(UTC)
#3

Joined: 07/06/2017(UTC)
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Wasn't so long ago there was a fair bit of news about BTL landlords putting their properties into companies, or at least thinking about it (examples here, here or here; there were many more at the time). I've no idea at what point (in terms of number & value of properties) that it becomes worth the hassle though. For established landlords a big obstacle was triggering a CGT event, but for someone just getting started in the game there might be attractions to just doing it that way from the start, maybe.

Mr Helpful
Posted: 16 October 2017 15:50:58(UTC)
#4

Joined: 04/11/2016(UTC)
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BTLNewbie;51621 wrote:

1. A friend of ours has encouraged us to look into BTL up north in his city.
2. We have £45k available to invest and are thinking of getting 2 x £60k properties. We would need a mortgage to cover the remainder on both
3. Our primary family home is in my name only
4. Is it possible for the rental income on both to be put in my wife's name to make it more tax efficient?


1. Presumably the friend has offered to manage the properties?
RE management at long distance can have major pitfalls.
Will the friend always be there on hand, fit and able to help, years down the track?
2. Concur with earlier poster, consider buy one and see how things go.
Remember RE illiquid, cannot be sold quickly with the click of a mouse.
Might cash need to be realised urgently at some stage for other Investment Classes or needs?
And housing is not exactly 'on sale' at present.
3. Noted. Remember CGT free.
4. Cannot immediately see a problem, but any capital gains tax liabilities (should you be so lucky), could not then be minimised/avoided by splitting the gain(s) between the two of you.
5. Presumably serious rapid capital gains are not expected from today's purchase price?
More a question of yield?
Has a yield figure been mentioned?

Good advice above in earlier posts.

Good Luck
jeffian
Posted: 16 October 2017 16:56:34(UTC)
#5

Joined: 09/03/2011(UTC)
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BTLNewbie,

You specify that your principal residence is in your sole name, but then talk about "we" buying/mortgaging investment property and ask if "the rental income" can be put in your wife's name. Surely the answer is for your wife to buy the investment properties in her sole name and receive the income from them? I appreciate that on £11k income she might not pass affordability tests on her own, but you can support her as any gifts between husband and wife are not taxable. If you jointly buy the investment properties, then not only will you be hit by the 3% Stamp Duty surcharge on them, but you will also have to pay 3% surcharge on your Principal Residence if you ever want to move house!


Edit: By the way, I appreciate that the London property market is very different from other parts of the country but you may be interested in my recent experience trying to help my son buy his first flat. He came back from early viewings asking why so many of the flats he saw were empty and stripped bare and it dawned on me that there is a flood of BTL's coming onto the market as landlords face up to harsher re-mortgaging, restrictions on mortgage interest relief etc and asking prices are definitely falling here. Sign of the times?
Tug Boat
Posted: 16 October 2017 18:43:40(UTC)
#6

Joined: 16/12/2014(UTC)
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Buy RGL, no maintenance costs, no stamp duty, it has potential for growth and pays 7%.

It takes two minutes to sell it not two months.

2 users thanked Tug Boat for this post.
Captain Slugwash on 16/10/2017(UTC), Mr Helpful on 17/10/2017(UTC)
Captain Slugwash
Posted: 16 October 2017 21:40:24(UTC)
#7

Joined: 19/07/2017(UTC)
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Tug Boat;52041 wrote:
Buy RGL, no maintenance costs, no stamp duty, it has potential for growth and pays 7%.

It takes two minutes to sell it not two months.


Exactly this, or one of any of a dozen other REIT's, or even IUKP, which is an ETF of all of them.

I used to rent out flats I had outgrown. Never again.


2 users thanked Captain Slugwash for this post.
Mr Helpful on 17/10/2017(UTC), Guest on 17/10/2017(UTC)
Mr Helpful
Posted: 17 October 2017 10:02:48(UTC)
#8

Joined: 04/11/2016(UTC)
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Captain Slugwash;52049 wrote:
Tug Boat;52041 wrote:
Buy RGL, no maintenance costs, no stamp duty, it has potential for growth and pays 7%.
It takes two minutes to sell it not two months.

Exactly this, or one of any of a dozen other REIT's, or even IUKP, which is an ETF of all of them.
I used to rent out flats I had outgrown. Never again.


Have noticed a tendency for people (noted in our own family) to be scared of Stocks and Stock selection, as they see prices rise and fall. On the other hand quite content to load up on BTL where the prices are not published daily. And then many do like to see their investment in the flesh, so to speak; suspect they are an expert on housing, but not so much an expert with Stocks.

With REITs it is perhaps more difficult to get exposure specifically to the residential sector?
So for those comfortable with Stocks, but also sufficiently organised to advance plan and administer BTL, perhaps some of each might be considered?

Would add that current house prices and resultant yields do not attract this investor presently.
But then same could be said of other Asset Classes.
1 user thanked Mr Helpful for this post.
Guest on 17/10/2017(UTC)
Tim D
Posted: 17 October 2017 10:18:36(UTC)
#9

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Mr Helpful;52061 wrote:
With REITs it is perhaps more difficult to get exposure specifically to the residential sector?


This is something I've been quite interested in. Some comments on various options in a thread here. (I do have a rental property amongst my assets, but it's an occasional source of unwanted hassle and I'd sell it and reinvest elsewhere - ideally while maintaining exposure to the same asset class - if it wasn't for the 28% CGT on some significant gains since the mid-90s)
1 user thanked Tim D for this post.
Mr Helpful on 17/10/2017(UTC)
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