Buy-to-Let - maximising rent-to-mortgage ratio

ShoulderChip

Hi,
I am looking to buy my first property next year.
I am expecting to have roughly 70k for a deposit.
I will hopefully not live there in the first year but will at some point in the future.
I took a look at Daft to get a sense of the market and for example saw a 3 bed apartment in temple bar for 350k. I could get this on a mortgage which would cost 1.3k per month to repay over 30 years.
so that would leave me in this situation

Not living there:
Mortgage -1.3k a month
Rent (3 rooms) 2.3k a month

Living there:
Mortgage -1.3k a month
Rent (2 rooms) +1.5k a month


The above appears to make sense to me, interested in hearing opinions / alternatives etc.

athtrasna

Not living there means tax, PRTB registration fees etc.

Living there means you can get €12k a year tax free under the rent a room scheme. If you sit down and do the maths, it may be in your interest to keep the rent below that threshold if you do move in.

Also bear in mind management fees, can be high for city centre apartments.

ShoulderChip

athtrasna wrote: »

Not living there means tax, PRTB registration fees etc.

Living there means you can get €12k a year tax free under the rent a room scheme. If you sit down and do the maths, it may be in your interest to keep the rent below that threshold if you do move in.

Also bear in mind management fees, can be high for city centre apartments.

Ah very interesting, I was not aware of that scheme, just to clarify by not living there I will be in London, so I presumably should not be too affected as it will be all the income I am declaring and will have full use of tax credits etc.
But yes I need to do some more reading, this is my motivation to get through the year here so will have plenty of time to read up

hfallada

The rates are quite different for BTL mortgages and first time buyers for own use. You can get a First Time buyer for own use pretty cheaper. Where as BTL are harder to get and the rates are about 1% higher than own use

Also if you live at the property. The tenants are leases and can be evicted at short notice. Where as you let to tenants individually, its more difficult to evict, there is taxes, higher insurance, PRTB fees

I cant see you renting the apartment worthwhile unless you live in it.

hfallada

ShoulderChip wrote: »

Ah very interesting, I was not aware of that scheme, just to clarify by not living there I will be in London, so I presumably should not be too affected as it will be all the income I am declaring and will have full use of tax credits etc.
But yes I need to do some more reading, this is my motivation to get through the year here so will have plenty of time to read up

https://www.gov.uk/tax-foreign-income/overview

You will have to pay tax on the income in the UK, since you are a UK tax resident. You only have tax credit here, if you are tax resident.

ShoulderChip

hfallada wrote: »

https://www.gov.uk/tax-foreign-income/overview

You will have to pay tax on the income in the UK, since you are a UK tax resident. You only have tax credit here, if you are tax resident.

Ah okay, cheers for the advice, I will know more next Februay if my contract gets extended here or not, if it does not I will move into a place as a first time buyer and sublet, if not I will probably by the sound of things keep saving for another year and benefit from a better mortgage and double the deposit.

Marcusm

BTL mortgages capped at 50% loan to value would most likely scupper any plan.

Villa05

ShoulderChip wrote:

Not living there: Mortgage -1.3k a month Rent (3 rooms) 2.3k a month

Is that the market rent in Dublin? I'm shocked

Baby01032012

ShoulderChip wrote: »

Hi,
I am looking to buy my first property next year.
I am expecting to have roughly 70k for a deposit.
I will hopefully not live there in the first year but will at some point in the future.
I took a look at Daft to get a sense of the market and for example saw a 3 bed apartment in temple bar for 350k. I could get this on a mortgage which would cost 1.3k per month to repay over 30 years.
so that would leave me in this situation

Not living there:
Mortgage -1.3k a month
Rent (3 rooms) 2.3k a month

Living there:
Mortgage -1.3k a month
Rent (2 rooms) +1.5k a month


The above appears to make sense to me, interested in hearing opinions / alternatives etc.

I hope you have enough sense not to pay 350k for a 3 bed apartment in temple bar. Why temple bar? No one wants to live above the no. 1 stag party location in Europe. I don't see how you could possibly get income of 2.3k. 1.5 or 1.6k is reasonable to expect. As others posters have said as BTL 50% is maximum mortgage you could get. As well as fact that it will be taxed on top of all your other income in the country in which you are resident. So likely to be taxed at highest rate. Not to mention 25% of income will need to be withheld by tenant as you will be a non resident landlord. 8% for agent managing the property as you will not be there to organise plumbers electricians etc. property tax, PRTB reg., water charges if tenant disappears or doesn't register etc.
Buy shares in a property fund or a REIT. Or if intent on owning property with 70k you can buy a 1 or even 2 bed apartment in an ok area with a yield of 8% gross.

ted1

By living there the taxation are reduced. But the msin thing is that tenants will be licencees, which means that if there's any issues or if they miss a payment you can turf them out straight away. If you rent out the whole building you could have a tenant living there for months maybe even a year or two who is not paying rent and also destroying the place in the process

ShoulderChip

Okay, I will definitely not go buy to let, I will either move in in February with a deposit of 70k, or Feb 2017 with a deposit of 140k (dependent on my contract getting renewed)
Perhaps my rent expectations were slightly inflated, but the particular apartment I saw for 350k was of a every very high standard, more so then my previous place in Grand Canal where the rent was 1900 and going up every year. Wherever I pick will be my future apartment for ten years I am guessing so I want it to be nice and to slowly stop leasing out the other rooms.

Eric Cartman

also if you were living there, owner occupied places are normally 25% cheaper as its an unattractive option to many.

ShoulderChip

Eric Cartman wrote: »

also if you were living there, owner occupied places are normally 25% cheaper as its an unattractive option to many.

cheaper in terms of mortgage interest I assume?

The_Morrigan

ShoulderChip wrote: »

cheaper in terms of mortgage interest I assume?

No, cheaper rent for the licencees as they don't have the same rights as someone who rents from a professional landlord.