A hopeful landlord's outstanding questions!

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    A hopeful landlord's outstanding questions!

    Hi guys! I'm very much new to the landlord game, so my apologies in advance if these truly are rookie questions. At any rate, I've searched extensively for answers to them without much or any luck, and was hoping you guys could help me out!

    My position is that I'm looking to purchase a 3 bed property in London in the next few months with a view to moving in and renting out my 2 spare rooms to lodgers. Having done all my homework (I think!) I still have the following outstanding questions:

    1) Assuming I opt into the government's Rent a Room scheme (I'm aware there are situations when I may not) are student loan repayments due on the portion of rental income that falls within the tax-free allowance? In other words, rental income up to the £4250 annual allowance is obviously tax-free, but am I also exempt from student loan repayments up to this £4250 amount?

    2) I understand that I will be liable to pay capital gains tax (less Private Residence Relief, less Letting Relief, less capital gains personal tax allowance) if I eventually sell my property for a profit, given that I will have rented out part of it. My question is, since the relief amounts are calculated on what % of my property I have rented out, how do I calculate this? Is it done on square meters? Number of rooms? And do communal areas such as kitchens and bathrooms count?

    3) I'm trying to get my head around whether my property would be classed as an HMO, given that my girlfriend would move in with me and contribute to my mortgage payments monthly - would she be classed as a lodger, therefore meaning that I have 3 tenants in the house?

    Again, my apologies if the answers to any of the above really are readily available, but I can't seem to find straight answers or clarification on them anywhere!

    Thanks in advance,

    Ben

    #2
    3) It will be a HMO, there will be four people (from the sound of it) in three households. Depending on the local authority, it may not need to be licensed, but most HMO regulations apply regardless of the license status.

    I think the answer to 2) is square meters and you include the shared bits in the residential area, but I'm only about 60% sure of that. I'd ask an accountant while asking about 1)!
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      As a resident Landlord with only two single Lodgers, I believe the property would be exempt from HMO status / regs. I presume your girlfriend would not be a Lodger, rather, as your partner, would be part of the 'resident Landlord' single household? If either of the other households ever increase to anything more than single persons, then you would lose the exemption.

      However, no matter what the number of people or tenure, it will always fall under the general health and safety considerations of the Housing Act 2004 and Housing Health and Safety Rating System (HHSRS). I advise you to google the HHSRS Operating Guidance V.2, and file it.

      You are also required to install smoke / CO alarms, under the new Oct 2015 regs, easily googled.

      For any other advice, please ask.

      Cheers, Ghost.

      Comment


        #4
        Hi jpkeates/Ghost,

        Thank you so much for your responses - that's really helpful. Regarding the HMO status, taken from the gov website:

        "Your property is an HMO if both of the following apply:

        - at least 3 tenants live there, forming more than one household
        - toilet, bathroom or kitchen facilities are shared"

        I guess the key here is whether my girlfriend would be considered a 'tenant'. My guess is surely not - she's living with me as my partner, I certainly wouldn't consider her a 'tenant' socially speaking. I'm assuming this is something I could run by my local authority for clarification and to stay within the law.

        Regarding the calculation around what % of my house I'd let out to lodgers, if this were to include communal areas, then considering a typical 3 bed property (let's say 3 bedrooms, kitchen, living area, bathroom, hallway) surely I'd be considered to be letting out 80-90% of my home (everything except my own room, essentially). This is really going to bite when it comes to capital gains tax, and I would be surprised if everyone was calculating it in this way! Can anyone add any advances/personal experience here?

        I'll be sure to look into HHSRS and the new Oct 2015 regs - thanks Ghost.

        Ben

        Comment


          #5
          Originally posted by BCJ View Post
          I guess the key here is whether my girlfriend would be considered a 'tenant'. My guess is surely not - she's living with me as my partner, I certainly wouldn't consider her a 'tenant' socially speaking. I'm assuming this is something I could run by my local authority for clarification and to stay within the law.
          As you originally described it, I took your girlfriend as a third lodger.

          If you are a cohabiting couple, the addition of two single lodgers doesn't make it an HMO.
          If one of the lodgers acquires a resident partner, it would become an HMO.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

          Comment


            #6
            However, be aware that any time you are banished to the settee, your property becomes an HMO.
            To save them chiming in, JPKeates, Theartfullodger, Boletus, Mindthegap, Macromia, Holy Cow & Ted.E.Bear think the opposite of me on almost every subject.

            Comment


              #7
              jpkeates - thanks for clarifying!

              JK0 - hell, or indeed any local authority, hath no fury like my girlfriend scorned. If I were banished to the sofa a license would be the least of my worries

              Cheers chaps!

              Comment


                #8
                Originally posted by JK0 View Post
                However, be aware that any time you are banished to the settee, your property becomes an HMO.
                Be also aware that if banished from the house or indeed if you start living elsewhere for any reason (holidays, hospital is fine..) the the lodgers become AST tenants, regardless of what the paperwork says...

                Is g/f viewing???

                Cheers!
                I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

                Comment

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