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i have 75k to invest and have two options, one to build an annex at the side of my house to rent out to lodgers or put down as a deposit on another house
I have 3 btls in SE London which will be transferred to my wife's name as I am a HRT payer
the 4th prop will cost at least 300k and cash flow would be a few hundred pounds whereas the annex could deliver 4-500 and boost the value of my main residence by another 75-100k estimated
Hi. We tried to do this on our main residence and also on a BTL and both times the LA stepped in and informed us that if we did it it would be taken further and this put a stop to it.
Add to your house.
£7,500 pa tax-free Rent a Room Allowance plus you'll still get Lettings Relief of up to £40k each for you and your wife even after the changes in April 2020.
Another consideration - as you know, a troublesome tenant with an AST can be difficult and costly to remove, whereas it's much more straightforward with a lodger in your own home.
A potential planning issue is that the local planning dept would probably refuse permission for an annexe that's self contained unless it is strictly for a family member - and that would have to be agreed in perpetuity. So you'd need to be creative in the way the extension is built.
This all depends on what you want the end result to be.
I went to a HMO's seminar on Mon, where one of the investor said you have 2 choices when investing, Invest i) to bring cashflow or ii) for capital growth. Mainly in London mainly people invest because of capital growth because the yield is smaller.
So you need to choose which one you want. If you want capital growth, do you think the extension will be a capital growth as much as purchasing a separate property one then do this. On the other hand if you want cashflow and the exetension will do this for you then do this.
Do you do HMO's in your other properties if not have you thought about it.
The other thing you mentioned is transfer the 3 properties in your bivi's name, have you thought about possible CGT and other factors in doing this. I am not an expert but I am sure you have talked to one.
I would have thought transferring triggers a sale of some sort. If you haven't then talk to someone before you decide to do this.
Attend the National Investment Show in Olympia on 21st Mar.
There is no CGT for gifting/selling a property to your spouse. When they sell the property, they will pay CGT as if they made the original purchase rather than you.
https://www.gov.uk/capital-gains-tax/gifts for more details.
And gifting the properties to your spouse also probably won't be subject to SDLT as long as there is no mortgage over £40K.
Both options you give are very good, each with their own pro’s and con’s. Which would you rather do? Always do the option that is best for you. Do you want to invest in another house, or do you want to add value to a current one? Which ever option you decide will be rewarding. Hope this helps and I’m looking forward to seeing what you decide to do.