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Hi Everyone

I am a newbie , British expat living in Qatar. Thanks Property Hub , an excellent resource I found recently.

I will appreciate some guidance from experienced fellow here. I own a 3 bed semi in Luton. I have saving of around 80K and now have option to either extend my house  and rent the extended part around GBP 1000 pcm or have BTL and aim for capital growth. Any advice will be much appreciated.

Regards

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Hi Adam

Welcome! 

I assume this is a house which used to be your main residence and you will end up living there again? Something you may not have considered, noting I am not a tax advisor, but your primary residence is free of capital gains tax (currently) when you sell. Renting part of your primary residence out in some instances I believe could change the tax treatment of your home when you sell, so something you should definitely seek advice on as the last thing you want is to inadvertently trigger a CGT liability where there was none. 

Having said that, you don't say how much the extension will cost and how much value it may add to your house. Note also that borrowing against your home will usually be a lot cheaper than a BTL (particularly compared to borrowing through a company for a BTL). Plus, even assuming an £80k capital cost, £1k per month rent on that expenditure is a 15% gross yield!! You'll struggle to get that anywhere else... In the absence of further information, I can't really provide any further advice, but hope these pointers give you some food for thought. 

Cheers

Sam 

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On 4/12/2021 at 1:50 PM, Mark Rocks said:

Welcome to the forum @adamq!

What would your dream scenario be from your next investment? Do you want to gain more money quickly or are you happy to wait a while?

Also have you had planning approval for the extension?

Thanks Mark. I am happy to wait . I am told  that planning permission won't be problem as neighbours have done similar extensions.  Due to uncertainty of market I thought rather than sitting on 80k I should get an extension which will start giving me back straightaway in form of rent. 

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On 4/12/2021 at 11:03 PM, sam_f3 said:

Hi Adam

Welcome! 

I assume this is a house which used to be your main residence and you will end up living there again? Something you may not have considered, noting I am not a tax advisor, but your primary residence is free of capital gains tax (currently) when you sell. Renting part of your primary residence out in some instances I believe could change the tax treatment of your home when you sell, so something you should definitely seek advice on as the last thing you want is to inadvertently trigger a CGT liability where there was none. 

Having said that, you don't say how much the extension will cost and how much value it may add to your house. Note also that borrowing against your home will usually be a lot cheaper than a BTL (particularly compared to borrowing through a company for a BTL). Plus, even assuming an £80k capital cost, £1k per month rent on that expenditure is a 15% gross yield!! You'll struggle to get that anywhere else... In the absence of further information, I can't really provide any further advice, but hope these pointers give you some food for thought. 

Cheers

Sam 

Thanks Sam . Replying late as recovering from corona but much better now.

Very useful points raised. The extension will cost from 80-90k and value added will be around 120-125k. 

You are right that from ROI point of you I won't get the same on a new house. 

Regarding CGT if a part of primary residence has been used in past for renting,  do I still have to pay it even if there are no tennents at the time of sale ?

 

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On 4/16/2021 at 12:46 PM, adamq said:

Thanks Sam . Replying late as recovering from corona but much better now.

Very useful points raised. The extension will cost from 80-90k and value added will be around 120-125k. 

You are right that from ROI point of you I won't get the same on a new house. 

Regarding CGT if a part of primary residence has been used in past for renting,  do I still have to pay it even if there are no tennents at the time of sale ?

 

Glad to hear you're on the mend from corona! 

Sounds like a cracking deal, that's what I would be inclined to do.

I believe the CGT impact would be regardless of whether tenanted at the time, rather it would depend on how long it was rented for as a proportion of your period of ownership (or if/how long you declared the income to HMRC - not that I am advocating not doing so!!). Worth noting that a lodger should be fine, it's just where an exclusive part of your home was rented out [under an AST] - well worth confirming though. 

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