# Dilema to Sell home and buy 2 rentals



## Hardial (May 12, 2015)

Hi All,

This is my first post on here. This is great forum full of useful info. 

I have a dilemma. I'm ex forces and have a pension, a rental property in UK and my present home. 
The question is: Should I sell my present 5 bed home and buy 2 more rental properties in UK to generate a higher income?
or 
Do I use the capital from the sale and buy outright in Spain from the outset? 

My preferred solution would be to use income from 3 properties for a long term rental in Spain for a number of years and try to find somewhere to settle which ticks all our boxes. 

I'm expecting to clear a 2000/m in euros.

Any thoughts from expats much appreciated.

Thanks in advance. Hardial


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## PicklesDP (Jul 17, 2015)

Buying and selling in Spain is very expensive. Some properties are on the market for years unsold. So from personal (terrible) exerience, I would strongly recommend renting first. 

Unless you have a lot of money to burn, to me it feels like you have one chance to buy a property in Spain. So you really have to get it right. If you get it wrong like me you can be trapped with a property that you cannot sell.


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## mrypg9 (Apr 26, 2008)

I think that is a very personal decision which you alone can make. Yu are the best judge of which of your options you should choose.
We left the UK ten years ago and sold our house rental properties and business premises. Since then we have rented. 
Everyone said we were mad to throw money away to landlords. We have for the past seven years rented a very nice house with a good landlord in a nice area and invested the money from our property sales.
That option suited us. It may not be the best for others.


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## snikpoh (Nov 19, 2007)

If I had my time again and didn't have children of school age, then I would certainly buy-to-rent in UK and rent a property in Spain.

If that's your situation, then that's what I would advise.

However, as @mrypg9 says, this is a personal decision that only you can make. For some, buying in Spain is the best option.


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## Gazeebo (Jan 23, 2015)

I agree with all the above, especially as it is a personal thing.
If you buy in Spain, I think you need to be 110% as the property market still seems to be slow and we see properties that have been on the market for a couple of years. Maybe the cities are better places to buy in Spain.
Different people give different opinions all according to their circumstances. A lady who has lived here for 34 years told me last week she has always bought in Spain, but is so fed up with the government taxing highly for buying and selling, when she sells her present property which she is reforming, she is going to rent in future. She said this also gives her more freedom and choice.
We are trying for 6 months and will decide at the end, but it is a possibility that we will purchase a couple of properties in the UK, rent them out and rent in Spain. I will let you know in 6 months' time.
All I can now say is do your research, keep an eye on the markets and try before you buy.


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## Hardial (May 12, 2015)

Thanks for all the inputs so far. I appreciate that it is a personal choice but advice and suggestions go a long way when making informed decisions. I have been crunching numbers and getting myself into a bit of a state. It is a big move/change in life styles and am trying to cover various bases. Many questions need answering. As it's been mentioned we have to be sure of the location if we are to buy and I think this can only happen after some time in the country.


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## Chopera (Apr 22, 2013)

Hardial said:


> Hi All,
> 
> This is my first post on here. This is great forum full of useful info.
> 
> ...


Short answer: buy to let in the UK

Long answer: things like getting access to buy-to-let mortgages* (which don't exist in Spain), tenancy laws (which favour the landlord a lot more in the UK), the availability of regulated letting agents in the UK, inheritance law complications, inheritance tax, and generally not burning your bridges usually make the UK a safer bet.

(*To expand on the above a bit, it is often advisable to take out a mortgage on any rental property to offset income tax, and you could also use the equity released to buy a property in Spain as well as rental property in the UK. It depends on the sums of course)

You still need to declare your UK income in Spain, and you'll need to declare them as assets as well, as well as declaring the income in the UK, but the dual taxation agreement means you won't pay the same tax twice.


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## peedee (Aug 30, 2015)

Chopera said:


> Short answer: buy to let in the UK
> 
> 
> (*To expand on the above a bit, it is often advisable to take out a mortgage on any rental property to offset income tax, and you could also use the equity released to buy a property in Spain as well as rental property in the UK. It depends on the sums of course)


With changes to tax from next April stopping tax relief on mortgage interest on buy to let there is a big question on that. The changes can bump you into a higher tax rate and potentially not making any profit on you BtL ‘Buy-to-let tax will cut our income by 25pc.' How much will YOU lose? - Telegraph


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## Chopera (Apr 22, 2013)

peedee said:


> With changes to tax from next April stopping tax relief on mortgage interest on buy to let there is a big question on that. The changes can bump you into a higher tax rate and potentially not making any profit on you BtL â€˜Buy-to-let tax will cut our income by 25pc.' How much will YOU lose? - Telegraph


The new tax is only for income in the higher tax bracket. Yes having a mortgage won't make much difference if other income already pushes you above that threshold (£31,865) but if you are retired then, unless you've got a fantastic pension, that's unlikely. And even so, it's not a bad idea holding some mortgage debt even without any tax breaks, because it's a hedge against inflation.


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## Leper (May 12, 2010)

My Advice:- Do whatever you think best in your UK property, but rent in Spain for quite some time before you even think of buying in Spain. Military people know that it is always best to leave room for retreat.


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## Hardial (May 12, 2015)

Buy-to Let is an option I've not explored. I was planning on being debt free in UK properties and only have rental/living costs in Spain. I'm in my mid 50's and OH is approaching 1/2 century. We're not looking to work in Spain but OH doesn't mind part time as a teacher.
I will defo not fall into the high tax bracket. The reason of letting in Uk is that I will be invested in bricks and mortar and have something to leave our 3 kids when we finally leave this world. Am I thinking too far ahead?


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## mrypg9 (Apr 26, 2008)

Hardial said:


> Buy-to Let is an option I've not explored. I was planning on being debt free in UK properties and only have rental/living costs in Spain. I'm in my mid 50's and OH is approaching 1/2 century. We're not looking to work in Spain but OH doesn't mind part time as a teacher.
> I will defo not fall into the high tax bracket. The reason of letting in Uk is that I will be invested in bricks and mortar and have something to leave our 3 kids when we finally leave this world. Am I thinking too far ahead?


At one point when in the UK we had rental properties there and in Canada. I have to say it's not just a matter of buying the properties, getting the tenants and collecting the money. It can be awful lot of hassle. There is tax to pay on the income, repairs to plan for, difficult tenants, agency fees....and then when the properties are eventually sold if they are not your main residence there's tax to pay. We sold and invested the proceeds in the end as we got fed up with it all. You have to work out what % interest/profit you are getting on your investment before you decide if it's all worthwhile. 
You have also to bear in mind that the Government has imposed caps on the amount of Housing Benefit an eligible tenant can claim to offset rent. This will have a downward pressure on rental income in some areas.
Then there's the possibility that a Labour Government could be elected in 2020. Unlikely, indeed....but who knows? If this happens, rent controls will be introduced.
When we left the UK we rented our house for a few months pending sale. I was happy when it sold almost immediately....
I'm also perhaps unusual in not intending to leave my son and his family anything. They have enough already. No-one left me anything apart from the most precious legacy of all....a good upbringing and encouragement to get the best education possible. Anything we leave goes to Dogs Trust and our books to the Estepona Municipal Library.
But I understand that most people don't think like that.


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## Chopera (Apr 22, 2013)

Hardial said:


> Buy-to Let is an option I've not explored. I was planning on being debt free in UK properties and only have rental/living costs in Spain. I'm in my mid 50's and OH is approaching 1/2 century. We're not looking to work in Spain but OH doesn't mind part time as a teacher.
> I will defo not fall into the high tax bracket. The reason of letting in Uk is that I will be invested in bricks and mortar and have something to leave our 3 kids when we finally leave this world. Am I thinking too far ahead?


You're not thinking too far ahead. I'm slightly confused because you said you had a UK rental property as well as your main 5-bed residence, and were considering selling that to buy two more properties to rent out, so you were considering but-to-let. If you took out but-to-let mortgages (which is what I think you were referring to) at say 50% loan-to-value you could buy twice as many UK rental properties, or stick to 3 UK rental properties and invest the equity released elsewhere. Elsewhere might be a property in Spain or some other type of investment. Generally you'd be better speaking to a specialist on this matter.

I've been living in Spain for over 10 years while renting out 3 flats in the UK. Provided the property is in reasonable condition and you are prepared to pay a letting agent a decent cut for full property management, it's not a problem.


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## Hardial (May 12, 2015)

Hi Chopera - Thanks for your input. My original thought is to have 3 fully paid properties in UK and let out to supplement the forces pension. But one of the responses mentioned that it's possible to use buy-to-let @ 50%LTV and have some money left over to spend in Spain if needed.


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## Horlics (Sep 27, 2011)

Unless you're very good at obtaining property at the right price and in the right place, BTL can be hard to make money on, and as mry said, being a landlord can be a right royal pain in the arse, as I am well aware. For the yield to be good you have to choose something that attracts a nice rent but also is in an area where there is high demand, meaning you won't find it left empty for long periods between tenants. 

The people I know who dabble in BTL are making next to nothing and only stay in it for the gain in property value they think is going to happen. I do know a couple of people who make good money from it, but they do homes of multiple occupation, which is more hands-on than straightforward letting.

Owning outright is good money, of course.

I'd ignore going for BTL mortgages and stick with renting out fully owned properties. If you find yourself in Spain and enjoying all aspects of it, and if you then see a property you want to own, you can take a mortgage to buy it, and that type of mortgage will be cheaper than a BTL one.


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## Chopera (Apr 22, 2013)

Horlics said:


> Unless you're very good at obtaining property at the right price and in the right place, BTL can be hard to make money on, and as mry said, being a landlord can be a right royal pain in the arse, as I am well aware. For the yield to be good you have to choose something that attracts a nice rent but also is in an area where there is high demand, meaning you won't find it left empty for long periods between tenants.
> 
> The people I know who dabble in BTL are making next to nothing and only stay in it for the gain in property value they think is going to happen. I do know a couple of people who make good money from it, but they do homes of multiple occupation, which is more hands-on than straightforward letting.
> 
> ...


I agree that BTL in general might not be particularly attractive as an investment at the moment, however I had the impression the OP was also interested in leaving some bricks behind for his children. Also I imagine the gains from being able to offset income tax against BTL mortgage interest payments (unless they are in the higher tax bracket of course) probably outweigh any additional cost compared to a Spanish residential mortgage. And that assumes the OP can obtain a Spanish residential mortgage in the first place.


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## Horlics (Sep 27, 2011)

Hi Chopera,

Yes, he's interested in leaving bricks, but he'll be doing that whether buying outright or taking a mortgage, so it's a question of the cost difference between the two. You're right though, the tax offset might swing the BTL mortgage to be cheaper. Although, if resident in Spain, would the tax paid on the rental income be taxed in Spain, and if so, is the tax relief on the interest available? I'm not sure.


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## Isobella (Oct 16, 2014)

Chopera said:


> I agree that BTL in general might not be particularly attractive as an investment at the moment, however I had the impression the OP was also interested in leaving some bricks behind for his children. Also I imagine the gains from being able to offset income tax against BTL mortgage interest payments (unless they are in the higher tax bracket of course) probably outweigh any additional cost compared to a Spanish residential mortgage. And that assumes the OP can obtain a Spanish residential mortgage in the first place.


Agree, buying in the UK is a no brainer. I drew up some spreadsheets for my neighbour. She has 11 properties, 3 in London. The cheaper ones are leased to housing associations with no voids. All owned by a trust although I have no idea what her tax implications are. On the other hand a friend bought to let on the costa with a tenant who stayed 3 months and never paid after the first month, never managed to rent except in August. Demand outstrips supply in the UK.


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## peedee (Aug 30, 2015)

Chopera said:


> Also I imagine the gains from being able to offset income tax against BTL mortgage interest payments (unless they are in the higher tax bracket of course)


This seems to suggest that you won't be able to offset mortgage interest against income unless you're a higher rate tax payer.
My understanding is that this is not the case but that you cannot offset mortgage interest against income regardless of your tax bracket.
Only way I can see to get around this is to own the property as a company as they can still offset.


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