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  • Holiday Lets

    BTL vs Holiday Let

    Hi Tribe,

    I'm thinking of investing in 1 property to provide a source of income when I retire.

    I've contemplated BTL (and received very helpful feedback from you) but the government seems hell bent on raiding landlords using section 24 so I’m wondering whether Holiday Let would be make more sense from a financial and tax efficiency perspective.

    1. With this in mind can you share your thoughts on BTL vs Holiday Let (in Cornwall)?
    2. Pros and cons of each?
    3. Do's and don'ts with Holiday Let?
    4. Profit comparison (BTL vs Hol Let)?
    5. Is it necessary to open a limited company for my 1 holiday let to be more tax efficient?

    Some background info:

    Funds available & goal:

    • I have a £70k deposit
    • I also have £20k set aside for overhead of buying and a bit of renovation
    • I can get a mortgage for up to £200k.
    • Therefore aiming to buy for no more than £270k
    • Mortgage repayment would be £1030 pm

    Employment:

    • I’m a higher rate tax payer
    • Employed full time and enjoy my job so aim to do that sort of work until I retire (age 65).
    • I don’t want to become a full time land lord (no desire to use multiple properties as a source of income)

    Existing property:

    • I own a 4 bed house in Oxford which I live in with 2 lodgers (who pay the mortgage) – I enjoy shared living so intend to continue in this house indefinitely
    • I intend to keep this house which is mortgaged (£167k mortgage, house valued at £400k)

    Pension & retirement:

    • Target retirement age: 65
    • Current age: 40
    • I’m not married have no kids (no plans or desire for either)
    • I have a £110k employee pension fund which I contribute – it’s is doing ok so far 12% YOY growth (avg over 3 years)
    • I have £40k shares spread across the previous 2 companies I worked for
    • I’ve saved £90K which is currently in an offset mortgage savings account (offsets the interest on the £167k loan)
    • I’d like to use this to buy a BTL or a holiday let so that my portfolio is diversified across pension, property, S&S ISA

    Thanks

    M

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    Love the lodger route you are choosing to use most effectively.

    I wonder if the usual LL  haters would castigate you for stealing rental income from lodgers to pay your mortgage even though you may be providing a rather nice home for them! ?

    Surely  what you do with lodger income would be your choice?

    But not for the usual idiot lefties .

    You have remarkable opportunities

    But be on your guard.

    You could out of the blue find yourself captured by a female.

    You have circumstances  that would make you a very good catch

    Never underestimate their capabilities

    They can turn your life upside down without you realising it!!

    So perhaps have a plan to cope with that situation if it ever did occur.

    Only 5% of women ever buy a property in their own name.

    Most become homeowners by moving in!!!

    Other than that you could have a FHL that you could enjoy as well.

    But you would need it to be managed for you.

    I believe you are correct in considering the SW for FHL.

    The staycation will be in a lot of people's minds with the increased costs of going abroad.

    The English  Riviera has an attractive ring to it.

    The rail link is to be upgraded I believe.

    Investing in FHL could give you another interest and you could always move into it if you ever wished leaving your lodgers at your Oxford property.

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    Hi Paul,

    Thanks for your thoughts and suggestions. I had a good belly laugh at your comment warning me about being captured by a female! As the laugh subsided I felt a shiver run down my spine. Being captured is probably one of the biggest financial risks.. I've seen too many divorce casualties to ever contemplate marriage or kids and I make that known upfront before relationships develop. However I fear that even offering your loved one a roof on a temporary basis to help them out is a risk.

    Any ideas on where I can find out what ones rights are if a loved one cohabits on a temporary basis? Any ways of doing this without taking on risk?

    I can't afford the time to manage a FHL myself so is there any hope of pulling owning one and not getting involved in the management? I've heard FHL can be managed by a holiday let company for approx 20% of income. Do you reckon that would tip the scales back to BTL (even considering S24, CGT, and other tax drawbacks)?

    FHL sounds so much more profitable from a tax perspective

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    Not being experienced  in anything to do with FHL I would pay attention to what Vanessa and DL etc state about FHL

    As for finding your assets taken from you by any co-habitee.

    You would ensure that they make no payments whatsoever to anything to do with the relevant  property.

    So they can buy the food and holidays etc

    Of course things could change if children rear their ugly heads!!

    One way to protect is to apply voluntary charges or 2nd interests in favour of trusted parties.

    So in the worse case scenario  she says I'm having the house etc your response would be that the 2nd interest will apply for the property to be sold to satisfy  the charges or interests.

    She just won't know you have technically no equity in the properties

    1st and 2nd charges or interests must be satisfied first before any female could get their clutches on your equity.

    Only costs £50 to  register any amount you wish.

    So look at current equity and stick about another £150000 onto a debt owed for that amount to the trusted 3rd party.

    Of course it involves a lit of trust.

    Parents are usually the vest for this as the BOMAD could have Bern in operation for decades.

    You would just be formalising the debt obligation by giving parents security over your equity.


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    I have done both

    Holiday home I think is much more hands on

    You are  running  Hotel in reality

    I ran the figs with a property in Northumberland which achieved 35 weeks a year on average

    the Figs came out about even

    BTL made the same Profit as Holiday Home

    You have to get Holiday homes right I found It had to be of a very high standard in every area of the business

    It needs to be a slick operation I met some fantastic folk from all over the world

    But I just did not have the time to spend on Holiday Home

    Today you have Trip Advisor so you have to get it right

    best of luck DL


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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Hi DL,

    Thanks for sharing your knowledge. I can't afford the time to manage a FHL myself so is there any hope of pulling owning one and not getting involved in the management? I've heard FHL can be managed by a holiday let company for approx 20% of income. Do you reckon that would tip the scales back to BTL (even considering S24, CGT, and other tax drawbacks)? (Im a higher rate tax payer)

    FHL sounds so much more profitable from a tax perspective but I can't afford the time to manage it at this stage of my life.


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    I would ask that question to Venessa she will be more up date than me

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    Hi DL,

    When you ran the figures did you take into account the fully implemented S24 or was this pre S24?

    Did you also take into account the difference in CGT between FHL & BTL?

    Thanks

    M

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    It was pre s24  which will make a huge difference

    so it may well have gone back to Holiday Home being best

    depends on the investors tax position

    If I had kept my property in the sticks I would have most likely gone back to Holiday home


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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Captured by a female lol ! I love you Paul.

    he ain’t wrong either!

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