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farmer andrew

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  1. I thought that you could get a better rate with a repayment? it is difficult to comment on these alternatives without this information. If you were seriously considering these as options, the information should be readily available from your broker. Based on the information provided, it is a choice between 2.74% 5 year fixed interest only and 2.74% 5 year fixed repayment. I would go for the former. Just my preference. Other people will have different ideas Im sure.
  2. Assume that the 2.74% is 5yr interest only fixed. What is the rate on the 5yr fixed repayment? What variable rates have you been offered at 5 yr? What rates have you been offered at 2yr? Also useful if you could add details of product fees and broker fees if these differ between products. What is the net rental yield (in %) before finance costs? Does the council guarantee rent amount change over the 5yr? If so, how?
  3. Spending a bit more time on your goals and what you hope to gain from investing in property might be useful. if you are purely after a good return, given that you are time poor, a hands off investment might be better. If you are a property addict and see your future career in property full time, then maybe something closer, more hands on allowing you to build your skills would be better. Additionally, you are 25. If you think long term, then how much will those houses and houses in general be worth when you are 65? 100%/200%/300%/400%.... the value that they are now? The minor regional variations now are likely to be insignificant when compared with general house price inflation over the long run. There is something to be said for investing in your own patch. You know the area - the good bits and bad bits down to individual street or house level. Yes, you can try to get this information from an estate agent, but it isn't first hand, its their opinion. In your local area you have the ability to exploit your other networks to identify opportunities, rather than just relying on estate agents, sourcing agents etc. If anything does go wrong, you can easily nip round and fix it. HTH
  4. I think it will depend greatly on how the 'investment' is structured and the tax position of the individual. Its probably best to speak with a tax expert.
  5. Overall, if you could structure property transactions as 'gifts' of property in one direction and 'gifts' of money in the opposite direction and not pay taxes, I think everyone would be doing that. Stamp duty: the money that you gift your parents will be 'chargeable consideration', which is subject to SDLT. if you already own a property then i'd imagine that you would have to pay the additional 3% as well: https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property Capital gains tax: the gift of the BTL to you would be treated as a disposal and your parents would need to pay CGT on the gain - subject to allowances etc.: https://www.gov.uk/capital-gains-tax/what-you-pay-it-on Inheritance tax: nothing unless your parents die within 7 years and then the element which is a 'gift' (i.e. property value - consideration returned as gift) is added back to their estate when calculating IHT: https://www.gov.uk/inheritance-tax/gifts I am not a tax expert. DYOR. HTH
  6. I think i would try option 3 first. I don't think their ages will be an issue yet (https://www.money.co.uk/mortgages/mortgages-for-over-65s.htm) and I think the LTV is fine. The issue may be their income (5.2=370/70), I think the standard max is usually around 4, but i think there are lenders who will go up further given that their LTV is relatively low (~52-57% =700 or 650 excluding purchase and bungalow renovation/ redecoration costs /370 ), so the key would be to find and speak with a good mortgage broker. Just try to get a very vanilla (no initial rate period?) interest only product with a low product fee and low or no early repayment charge. Even if you are unable to obtain the full amount needed for the bungalow (including all purchase costs), I would max out the mortgage before using the savings. It would take them close to 10 years to put that capital back into their ISAs, if you bought the bungalow with the money from their ISAs. Additionally, are they close to retirement? How big are their pensions? Could they potentially part retire / take early retirement and use their tax free lump sums to fund the purchase? For this, i think you need to speak with an IFA.
  7. Simon, Your response is leading me to question some other information that I got from the broker. In one of the other threads that i have been posting in, I said that i came across a lender that was unhappy with BTL properties with tenants in situ (incorrectly described as "sitting tenants" in the thread and screenshot above - thanks again Julia for correcting my terminology!). This information came from the same broker. In your 25 years, have you come across or are you aware of any lenders that dont like BTL properties with tenants in situ ? I thought this was strange at the time, but he was quite dismissive attributing it to the eccentric lending criteria of some lenders. I'm just wondering whether i dodged a bullet here...
  8. Hi Flo Are you saying that you have remortgaged your home to get 80k cash or that you have remortgaged your home got some capital and are using that as a deposit for BTL (buying costs and renovation funds) on an 80k property? Do you have any emergency funds to fall back on if things do go a little pear shaped? Hope all goes well.
  9. Thanks, Debbie, I tried to read through this the other day with a cold towel around my head and a caffeine intravenous drip but i didn't get too far. Ill try again!
  10. Correlations under normal conditions, maybe and maybe not. Correlations under stressed conditions, maybe not. For a contingency fund, I think the latter is more important. if you do invest a contingency fund into equities, make sure you have an additional buffer above your contingency requirement.
  11. Does the source of funding for the directors loan to the company need to be clearly linked? For example, do i need to have a mortgage for 100k and a directors loan for 100k transacted at approximately the same time; or, could i have a mortgage of 200k that i have had for a long time, 300k cash and then make a directors loan of 100k from cash to the company but still treat the interest on 100k of the mortgage as qualifying interest?
  12. Yes, thanks, Julia. I was thinking exactly the same thing when i was typing up the post but couldnt remember the terminology. really!
  13. A couple of years ago I was interested in setting up a limited company to purchase some BTL properties. When I was speaking with my mortgage broker at the time, I asked whether the lenders had any criteria with respect to how the SPV was funded – share capital or directors loan. He said that there were some lenders who did not like a large proportion of the funding to be via a directors loan and required it to be via share capital. I didn’t understand this requirement given the likely requirement for a directors guarantee. He also didn’t know the rationale. He may have explained that it was because it was easier for the director to repay the directors loan compared with extracting the share capital, but, if I remember correctly, he effectively dismissed it as another one of those eccentricities in lending criteria. I’ve seen quite a bit of discussion in this forum in relation to directors loans and have extrapolated that in general terms lenders do not now place any restrictions on the funding structure of the SPV, e.g. I could have £1 in share capital and the rest as a directors loan. Does anyone have any restrictions over the funding structure of their SPV imposed by their lenders?
  14. I agree with you on this, but there is quite a lot of lending criteria that i don't fully understand. But this was a couple of years back and just one lender that i was interested in moving to, so maybe things have changed now. Im not too sure because i havent done one recently, and to some degree it will depend on the investor - some investors will buy a property and do the renovation themselves and others will hire someone to do it for them. I think if you present the property as newly renovated and fully furnished price £x with a potential gross yield of Y% (or actual gross yield of Z% if you want to sell with sitting tenants) this is a little bit more coherent and the investors can then make their own decision.
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