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lindlro1

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  1. Hi. We own a flat in Oxford which is tenanted. We have received a letter from the freeholder "Simarc Property Management" asking for payment to renew the subletting agreement with our tenant. They want to charge us £90 for this. Would have been £138 for a new tenant. I seem to remember to dialogue on a Podcast that suggested that the freeholder does not have a legal right to request this anymore. Can anyone else comment on this? Have any of you challenged such a charge which seems to be for absolutely nothing at all.
  2. Hi. I have an opportunity to purchase a 9 bed HMO in Stoke on Trent. Fully tenanted. 5 double bedrooms, all ensuite. Went to see it yesterday. It has a decent kitchen, separate laundry room and a large basement with boilers etc. Numbers look quite good on the face of it. Monthly gross rental income £3,870. Purchase price £335,000 (plus £4,000 to sourcer) so 13.5% gross yield. And tenancies seem pretty stable with few voids. Based on existing costs of operation and using a 75% LTV interest only mortgage at 4.59% and a commercial valuation of £380,000 (if achievable) would represent over 20% RoI on all the money left in the deal including stamp duty, legals etc. The question mark I have is the bricks and mortar valuation. The property was actually purchased for just £95,000 as an office with a smaller HMO above back in late 2015. Planning permission was agreed and the conversion / refurb was done. I have no way of knowing the costs but I can't imagine it could have been more than about £130-150K. Property values in Stoke have not gone up that much in 4 years, maybe 15% and there are no obvious comparables locally for B+M valuation but small terraced houses and flats in the same street still only seem to sell for around £50,000 so I am wondering how the value of the property alone (putting aside the HMO income) could be worth anywhere near £335,000. Therefore if something were to change with the rental market would I be left with an asset that is completely over valued? If you were me would you: a) not worry about bricks and mortar value, look purely at the business numbers and go ahead on that basis b) walk away because the vendor expectations are so far adrift from the net property value c) point out the above to the property sourcer who has presented this to me and make a much lower offer. If so, how much would you offer (I haven't been able to speak to the owner directly yet)?
  3. Hi. with my wife we also own 6 properties in our own names in Oxford and have looked into this extensively. goes without saying that you need to get professional advice but a few things to bear in mind. if you are planning to live on the income from the properties putting into your Ltd Co may not be the right solution. as well as Corp tax on the profits you will then pay tax on money you take out of the company. DIvidend tax free allowance is being reduced to £2000 and if you draw a salary you will have tax (at your marginal rate) and NI contributions to pay. you can pay yourself a pension which offsets some of this. if you are not worried about drawing income then paying Corp tax and reinvesting the profits can make Ltd Co a good solution. there are other potential advantages of Limited Co ownership (beyond the mortgage relief). At the point you transfer the properties in they should be transferred at their current value so if you have already had significant capital gain this can be an advantage (see also below). But your company does not have a tax free CGT allowance like you have as an individual. The latest budget got rid of future indexation relief which was quite a big advantage for Ltd Cos. LTd Cos also may have advantages when it comes to inheritance tax. in terms of transferring there are some good Podcasts on this. as well as CGT you may also face SDLT taxes upon transfer. it may be possible to mitigate the former through Incorporation Relief but you will need to show that you have been operating this as a business and not just a personal investment. There is some case precedent "the Ramsey case" which suggests you may need to show you spend about 20 hours per week working on your property business. There are various accounting companies who have differing views on this and a number that will work with you (for a fee) to manage this and get pre clearance from HMRC. to mitigate SDLT is complex. You may need to transfer first into an LLP or Partnership and hold the properties there through two tax years and then transfer to your Limited Company. Again there are firms that can give advice and help you with this process. watch the fees though... finally think about your mortgage / funding. Will you need to remortgage / put on Commercial Finance? Will you have to pay early redemption charges if you have a fixed rate? Acuity Professional and McIntyre Hudson are both firms that can help you with the evaluation / process. good luck.
  4. I would like to hear a discussion around student property, and specifically opinions around the pros and cons of the student pods being marketed by "Emerging Property" and others with fixed returns of 8-10% but no ongoing costs as an alternative to buy to let.
  5. Excellent Podcast. Just one comment, you said that the new mortgage affordability rules do not apply on fixed rate mortgages of 5 years plus. Slight correction on that, the rules still apply but they will use 125% or 145% of your rental income versus that actual mortgage amount you are paying rather than using the 5.5% interest. This i guess is because this is viewed as long term rate that will allow you time to adjust when interest rates do increase. what interests me is when I come to do the mortgage renewal of 2 of my properties that are currently on a 5 year fixed term and the lender wants to look at my full portfolio, will they still allow me to use the fixed rate of the other properties where the remaining fixed term for the calculation even though there will be less than 5 years remaining on the fixed term?
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