A Change Is As Good As A Rest: Uprooting, Relocating Or Staying Put

Let-to-buyers are canny investors who hold on to their homes while buying bigger and better ones.

Ask David and Maggie Constance. When Maggie had a little boy, the Hereford-based couple realised they needed more living space. After scouring the area, they found a four- bedroom detached house only two miles from their current address. But instead of calling in the estate agents or going online to sell their home, the couple contacted a local valuer. And his verdict was an exciting one. The home that they’d bought from the council for £36,000 was now worth £96,000.

They decided to remortgage their old home and raise enough cash to pay the deposit and moving costs on a new one, plus they needed to move their possessions only a few roads away and did not have to endure that agonising wait for a new buyer; it ’s always easier to find and install a tenant than wait for a buyer to bite and then complete. Further, they saved agent ’s fees of over £2,000. So, in their new roles as let-to-buy landlords, the Constance’s have let out their old home and make a healthy profit into the bargain.

The interest on the remortgage (the cheapest way to borrow money known to man) is deductible against rental income for tax assessment purposes, so effectively the tenants pay the mortgage off on their new property, courtesy of the government (bless ‘em).

They’re delighted with concept. Who wouldn’t be? They’re now using their original house as an extra source of income as well as a capital asset. It ’s an excellent way to move forward. And you don’t have to stop at one property; you can just keep on going up the ladder, renting out a series of ever-larger homes until you find the right one that you want to stay and live in. Theoretically, later in life, when all mortgages have been paid off and kids have grown and flown, you can move back down the ladder, passing through the properties again and sell them off one by one, over a series of years, taking advantage of the government ’s (bless ‘em) principle private residence relief, and pay no tax whatsoever on the capital gains!

Letting should not be taken lightly, however. Not everyone cherishes late-night calls about faulty boilers or having to remind tenants about the rent, and you will need to vet them closely to make sure they are the paying guests you want. If you have any lingering doubts, contact a lettings agency to do it all for you. It will cost you a small set-up fee, about 10% of your annual rental income for finding and signing up tenants and about 12-15% for running the show, or you do this yourself; just do it properly.

The important thing to remember is that your old property(ies) is/are no longer your home. It is an investment, which means you can’t just swan in and out at your leisure. And you can’t be precious about them anymore. You must give your tenants at least 24 hours’ written notice whenever you go there and follow all the other usual rules when letting.

Nice idea, though, isn’t it? We all dream of living a tax-free existence. Well, this may be one way to achieve just that.