# Buying my third property



## lotusm (17 Oct 2006)

Hi 

This is the Situation at the moment. I owe my home valued €220K and e a took out a mortgage of €82.5k nearly 4 years ago, I rent out 2 rooms and I am getting €100 a week rent a room. I have a fixed mortgage of 4.25% which expires in December 2005.
I bought a second property last year, however because the builder had problems with the site, it will not be built until the autumn 2007. This property had a sale value of €175k when I bought it. It is now valued @ €210K. I have paid a balance of €17.5K on the second property from saving. I plan to move into the second property and rent out my 1st property.
I’m thinking off putting a deposit on a 1 bed apartment in the same development which I can get for €145K. I think I can get €500-550 monthly rent. 

I have SSIA Maturing in April 2006 of hopefully around €25K
I also have some shares maturing... €4k in May
My Salary is €45K and I am single

My questions.

1. I have to gather a deposit of €15K for the 3rd party, what is the best way to do this?.
2. Should I increase my mortgage on my existing property
3. What is the most tax efficient way of doing all this?
4. what is the best mortgage available to be now on my existing mortgage?

If there anything else I should be think into account I would be grateful for any suggestions.

Thanks.


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## Kevin Brod (17 Oct 2006)

*Re: Buying my third party*

Ummm…

you could turn your PDH into RIP and refinance it to release equity to help pay for the other 2.


Do something like the BOS rip product

75% mortgage on the potential RIP worth 145k

=> on 145k get 75% mortgage of 108k

(Rental income would have to be at least 560pm to do this)

stamp would be 4350k

Total equity required: 40,600k



New PDH

=> on 175k get 90% mortgage of 157.5k (already paid your deposit and equity here)

Turn old PDH into RIP and raise equity on it.

Assuming you owe approx 74k now and you need the further ~40k above + say 20k for legals and furniture etc.

A remortgage to 134k on a value of 220k is a 60% ltv.

You would require a minimum rental income of  ~665pm to do this.


You could play around with all the figures.  Basic idea release equity on PDH and fund the purchase of the other 2 properties.

Keep you LTV's as low as you can to get the best rates.

What age are you?  Do you have a preference over fixed or tracker rates?


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## lotusm (18 Oct 2006)

*Re: Buying my third party*

Hello Kevin,

Thanks for your advice, I am not so sure of some of the terms you have you DPH,RIP,ITV,LTV, If you would not mind explaining them, I would be most gtateful.

I am 33 and openminded regarding either fixed or tracker

Joe


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## Kevin Brod (18 Oct 2006)

*Re: Buying my third party*

Sorry for the technical jargon.

PDH - Private dwelling house - your main residence where you live

RIP - Residential Investment property - a property you rent out fully.

LTV - loan to value - difference between the mortgage outstanding and the value of the house (as a percentage) - lower the LTV the better the rate you can get.

Basically I would suggest borrowing 60%/75% on the 2 properties you are going to rent and borrowing 90% on the one you're going to live in.

60% LTV on the 2 RIPS will allow you to get better rate options depending on which Lender you approach.


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## ClubMan (18 Oct 2006)

*Re: Buying my third party*



This seems to be fundamentally a _Property Investment_ query so has been moved.


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## NorfBank (18 Oct 2006)

Should you be putting all your eggs in the property basket? If you've done the research and made your mind up then go ahead but you might want to read through some postings on diversifying your investments and having a broad portfolio of cash/equities/bonds/property etc.


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## asdfg (18 Oct 2006)

Just looking at this from a tax point of view. 
Did you pay stamp duty at the appropriate investors rate when you bought the property?


> Clawback
> A clawback arises if rent is obtained from the letting of the house or apartment for a period of 5 years from the date of the conveyance or transfer, other than under the rent-a-room scheme. The clawback amounts to the difference between the higher stamp duty rates and the duty paid and it becomes payable on the date that rent is first received from the property. A clawback will not arise where the property is sold to an unrelated third party during the 5-year period.


Did you declare the profit from rental income to revenue. As the mortgage is fairly small you have a tax liability of approx 3,000 pa. See Guide to Rental Income especially "Example Rent account", "What Expenses can be claimed" and "How is the tax due on rental income collected"


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## gearoidmm (18 Oct 2006)

asdfg said:


> Just looking at this from a tax point of view.
> Did you pay stamp duty at the appropriate investors rate when you bought the property?



From the original post, it suggests that he is living in the property so this does not apply yet


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## asdfg (18 Oct 2006)

> From the original post, it suggests that he is living in the property so this does not apply yet


 
From my post 

A clawback arises if rent is obtained from the letting of the house or apartment for a period of 5 years 

so it does not matter if the owner resides in the house or not he is earning an income of 10K from rental income


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## techman (20 Oct 2006)

He is allowed to earn a rental income tax free while living in his PPR.

I forget the limit exactly - around €7k per annum.


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## bacchus (20 Oct 2006)

techman said:


> He is allowed to earn a rental income tax free while living in his PPR.
> 
> I forget the limit exactly - around €7k per annum.


 
yes, if no more than €635 incl all bills is collected per month (€7620 per year)
Now €100 per week per room for 2 rooms is above that threshold. So, "Rent a room" scheme is not applicable and income is therefore subject to tax.
It makes more sense not to go above the threshold by small amount (€2780 in this case).. Better stick below or way above it...


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## ANTOM (20 Oct 2006)

I would agree with not putting all your eggs in the one basket especially with rates on the rise


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## fester (19 Dec 2006)

If Kevin Brod is about perhaps he or another poster could clarify something for me, I am in a similar position the original poster in this thread.

Just to confirm re the maximum Buy to Let advance against rental income (if my calcs are correct) you seem to be suggesting a multiple of 16 x times annual rental income? (Subject to 75% LTV).

Is this still valid and if so with which lender(s)? Heard a lot about BOS but they seem to have toned down the Buy to Let aspect of things on their website since the Halifax re-branding.

My personal circumstances are PPR with very low LTV mortgage (120K v 800K), investment prop 1 with 220K mortgage v 360K value, and new investment prop 2 coming soon at 295K.  Would like to leave the PPR out of the equation if at all possible (not use it at all for new investment prop) and ring-fence the 2 x investment properties with 1 lender. Rental income will be 1500 p.m. on Prop 1 and 1200 p.m. on Prop 2.   Thanks in advance.


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## NorfBank (19 Dec 2006)

Fester, that rental income is strong enough to allow you 75% LTV against each RIP thus:

v RIP1: 270k
v RIP2: 221,250

With Bank of Scots.


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## fester (19 Dec 2006)

Thanks very much NorfBank, note your earlier comments about diversifying investments etc, wise words, my SSIA and Mrs Festers SSIA are due shortly so will certainly look at some other vehicles (not the 4-wheeled kind) when we have that few bob to hand ...


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