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  • Property-a-holics

    Dilemma - change current residence to BTL?

    Thank you, everyone, for your replies!  I see a number of downsides if I chose to keep my semi and know deep inside I must sell as it is the sensible thing to do. I perhaps just wanted some reassurance. I love the house and been wanting to buy a BTL for a long time now but think have missed the boat at least in Wokingham area. 

    The issue here is I can see the downsides of keeping my semi. These are

    • I do have good equity in it but equally keeping the semi will get me less than 4%. At that rate, it will take me 5 years to recover the 3% stamp duty premium I will have to pay today for my proposed main residential buy. 
    • All it then takes for the interest rates to rise by 1% and I go from under 4% return to 0% return. 
    • Then I add in the fact that I will not get the best deal on my proposed buy if I keep hold of my semi. Taking this into account as 'opportunity cost' of holding onto my semi wipes out my return as of day 1.
    • Prices in Wokingham are silly money now. Compared to what I saw an HMO in Nottingham, an area I am familiar with from student days, for around £300k. This turns out £28k per year as of today and has a good track record. (for some strange reason lots of HMO type student/professional houses are now on sale everywhere. Is this S24 effect?)
    • Finally, keeping my semi means the chancellor will get his grubby mitts on some of my capital gains however this will not be an issue if I sell now.

    I am quite liking the idea of selling my semi, buying a bigger main residential property here with an LTV which allows some money to be deposit for a multi bed property up North. Nottingham with the HS2 plans seems ideal.  This would mean I could get a second residential as well ( my broker indicated the only limiting factor in 2 residential mortgages is my wages) given Nottingham is cheaper to buy in. Then it is Paul's lodger strategy - no hassle with returns/tenant eviction or tax. Just plain old cash for my trouble of having to ride up to the midlands once a month.


    I'm quite jealous of what you have worked out following all the opinions expressed over your original post.

    You are clearly a very sensible person who has listened and probably received confirmation of your background thoughts.

    You have worked through the logic and have dispensed with the emotional attachments.

    You are considering things in a totally hard nosed and objective way.

    Not many can take that leap of faith.

    I reckon you have things totally sussed.

    As for your query regarding why so many student properties etc are coming to market I would suggest things like S24; Mandatory HMO licensing for all 5 occupiers or more, increased student institutional investment, ICTB, PRA.

    I am surprised like you to see several 6 bed properties up for sale in my area.

    There is no reduced demand and yet LL are selling.

    It could be they are selling to reduce leverage on their properties to become more resilient by being lower geared.

    But if I was you I wouldn't buy into the HMO market.

    Keep as a normal house with no more than 4 occupiers with you sofa surfing when you live at your Nottingham property 1 day a month!!!!!

    Or if a 5 bed you have the spare room.

    Nottingham Council will never find out that 1 day a month there are 5 occupiers.

    But I reckon you have worked out a most effective strategy that will beat Govt hands down.

    Silly old Govt  doesn't realise the billions it will lose in tax as LL think way outside the box to defeat S24!!