new here, want to buy the barn next door

If you are planning to buy a rental home, or you're thinking about what to do with one you have just acquired, this is the place for any questions about starting out in the rentals business.
ricflairandy
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Joined: Sat Aug 27, 2016 9:41 am

new here, want to buy the barn next door

Post by ricflairandy »

hi all,

our house originaly was a house and a converted barn on the same property adjoined. It was split and then sold as 2 properties before we bought the main house and the adjoining door was blocked off.

we live in a popular area, and would liek to try and by the barn and join it back to our property, and then rent it out for holiday lets. I beleive this is what the previous owners did back before they split it off.

The questions i have is, would the fact that we are joining it back to our house have any complications with our current mortgages, or would it even allow us to get around the holiday let only mortgages, which seem to be few and far between. Its a popular area and as long as icould cover the mortgage and costs id be happy. Not bothered about making a profit really.
Giraffe
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Post by Giraffe »

Welcome ricflairandy,

I'm no expert on property status nor mortgages. But some initial thoughts come to mind.

First: you need to establish whether you would end up with 1 whole or 2 adjoining properties. You don't say where in the world you are. In England my understanding is that if a self contained residential part of a property has a separate entrance, then it is classified as a separate dwelling, and would be subject to separate council tax. Do you want holiday makers to have their own entrance or have them walking through your home? All depends on the layout of the building. Suggest you consult your local council for advice. But beware, the fact that the building is currently 2 properties may initially put you at a disadvantage.

Second: you need to talk to your current mortgage provider as to the terms of your mortgages. If you end up with one dwelling, would you have permission to sublet part of it for holidays? If you end up with 2 dwellings, then you may or may not need a different mortgage. A good broker should help you here.

Also you will need different insurance cover for holiday letting.
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AndrewH
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Re: new here, want to buy the barn next door

Post by AndrewH »

ricflairandy wrote:The questions i have is, would the fact that we are joining it back to our house have any complications with our current mortgages ...
Welcome ricflairandy. I am presuming you are in the UK. The short answer to that question is probably "no".

I have to make some assumptions here, but I am going to say that before ownership of the two properties was split there was just one set of title deeds for both, or in the case of registered land a single Land or Charge Certificate (a Charge Certificate is the same as a Land Certificate, except it shows there is a legal mortgage attaching to the property).

When the barn was sold off separately from the house, a new set of deeds would be created for the barn on its own in the form (I suspect) of a new Land Certificate. If you were to buy the barn it would be no different from buying any other property, like down the road or in another village. If you needed a loan you would not have to use the same mortgage company, although there might be advantages in applying to the same one.

You do need the services of a solicitor to check out everything carefully. In the small print of your existing mortgage(s) on your home there might be (but most unlikely) some prohibition on doing what you are planning to do. Planning consent would have been required originally when the house plus barn was turned into two dwellings, but (well not to my knowledge) is planning permission required to turn two properties back into one, and into the same ownership.

PS. If the situation is that the original owner retained the barn but sold the house to you, or someone before you, it makes no difference to the end result should you be buying the converted barn from the original owner.
ricflairandy
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Post by ricflairandy »

sorry yes uk. Ive been onto a mortgage advisor today who has said i would need a holiday let mortgage and the properties would have to stay seperate. Thats fine, im ok with that.

What kind of expenses do you have overall, anyone have any lists or ballpark idea of percentages.
All i want to do is cover the mortgage, i have no really desire for it to make me money, its more an investment for the future than anything.

Thanks again for the help

Andy
Giraffe
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Post by Giraffe »

Here's an initial list off the top of my head:

INITIAL
. Costs of purchase of property
. Any initial building work required, external/internal
. Any landscaping required
. Works required for health/safety and fire regulations
. Initial fixtures and fittings
. Furniture, soft furnishings, bedding, kitchen contents, garden furniture...
The style and quality of the refurbishment will effect how much you can charge, and numbers of bookings

ONGOING
. Mortgage
. House and contents insurance. You will also need public liability
insurance
. Council tax, or business tax depending how your business goes
. Cleaning/changeovers
. Check in of visitors
. Linen/towels cleaning
. Window cleaning
. Annual fire check
. Gardening/grounds maintenance
. Water/sewerage costs
. Gas/Electric
. Telephone/Internet
. TV licence
. Advertising/marketing costs (or agent)
. Wear and tear replacement budget
. Redecorating budget (higher than normal home usage)
. Building maintenance
. Deep spring clean (or more often)
. Your own time

You will find lots of threads and postings on LMH covering the above.

As an offsite owner I pay a housekeeper and subcontractors for some of the above and for handling emergencies. As an onsite owner you can of course save on these costs but at a cost of your own time.

Also will you be doing your own marketing and handling of bookings, or will you use an agent? Again, a balance of costs vs own time.

One overall comment I would make - don't underestimate the amount of time required to run a quality holiday let to high standards. In terms of returns, we are all different. It will depend on your own business strategy and how much time you are prepared to put into it.
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Gordo
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Post by Gordo »

ricflairandy, I may have missed something but I can't see any real business logic in amalgamating the properties. Would it not be feasible to buy the barn and keep them as separate units rather than have all your eggs in the one basket?

From an investment perspective, splitting titles (making 2 where there was 1) is a popular strategy for all sorts of reasons, however you've already missed that boat as it's benefits would have gone to the original owner.

Is your reasoning linked purely to preserving/extending existing borrowing capacity?
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ricflairandy
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Post by ricflairandy »

No the reasoning was just to bring them back as they where, but as i can see its far better to keep them split.

the original owner only split them to sell them quicker, but the barn still hasnt sold and its been up for sale for 2 years now, hence us looking at it as a holiday let.

Im just trying to work out if it would basically pay for itself. AS i ve said, i dont really want to make a profit out of it, jus tmake sure it covers the mortgage and associated costs, anything extra would go off the mortgage as extra.
Ecosse
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Post by Ecosse »

One thing you have to seriously about is whether you want to run a holiday let. Many people think it'll be an easy way of maintaining a property somewhere (be it next door or, like many here in the Alps, in a holiday destination abroad) but soon get disillusioned. While there are plenty of nice things about running a holiday let, you have to enjoy dealing with guests, be prepared to give up a significant number of evenings marketing and dealing with enquiries (I think there must be a secret webcam link to our phone which shows the best time to phone/arrive is just as we're sitting down for dinner!) and be prepared, if you're successful, to give up every Saturday in high season at least to cleaning and meet and greet duties. So, that's no weekends away, meals out with friends, family days out, holidays etc. without at least the hassle of organising someone reliable to do the changeover.

Personally I couldn't put that amount of effort in for no recompense. Perhaps for you, it wouldn't be an issue but do think carefully about it - not just for the next 2 years when everything is new and fun, but more whether you will feel the same still giving up your time in 5 or 10 years time.
Giraffe
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Post by Giraffe »

Gitemontjoly puts it much better than me. Do you want to spend this amount of time in holiday letting your long term investment? Another option is longer term letting with a buy to let mortgage.

As an investment, whenever you come to sell you will need to factor in UK Capital Gains tax, currently

2nd home. 40% of gains
Buy to let. 40% of gains
Holiday let, non-business. 40% of gains
Holiday let, run as a business 10% of gains
after a small annual allowance for CG. LMHers, please correct me if I have the figures wrong.

If you need to think about Inheritance Tax (which at my age I have to!) then you may need a Financial Advisor depending on your circumstances.
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Casscat
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Post by Casscat »

CGT on an investment property is 28%. However there are moves afoot to make capital gains on BTL properties subject to income tax and not CGT.
Giraffe
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Post by Giraffe »

Thanks Casscat
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Giraffe
Posts: 410
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Location: Cornwall, England

Post by Giraffe »

Gitemontjoly puts it much better than me. Do you want to spend this amount of time in holiday letting your long term investment? Another option is longer term letting with a buy to let mortgage.

As an investment, whenever you come to sell you will need to factor in UK Capital Gains tax, currently

2nd home. 40% of gains
Buy to let. 40% of gains
Holiday let, non-business. 40% of gains
Holiday let, run as a business 10% of gains
after a small annual allowance for CG. LMHers, please correct me if I have the figures wrong.

If you need to think about Inheritance Tax (which at my age I have to!) then you may need a Financial Advisor depending on your circumstances.
The best things in life are free
ricflairandy
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Joined: Sat Aug 27, 2016 9:41 am

Post by ricflairandy »

Cheers guys,

We know there would be alot of work involved, as my partner has worked with another owner who has owned 4 looking after those.

With the property literally being adjoined, my long term plan would as i said be to make the letting pay for the mortgage, anything else is a bonus but as long as it covered that and expenses id be happy. Long term eventually merge the properties/land back together. Not sure how you would do this or if its even possible.

Its definitly not an invest and sell for a profit scenario. More that our dream is to have both properties and land back as one bigger estate. Letting seems to be the way to pay for us to get it.

It may not even be possible yet, going to have a chat with a mortgage broker this week.
Fleur
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Post by Fleur »

If nothing else by buying the barn you are protecting you own house / property.
We bought a barn adjoining our Fr house and now have peace of mind that we won't have anyone setting up a chicken farm, small industrial unit or anything else undesirable next door.
However I appreciate ours was a different scenario and no mortgage involved.
Yes, it's cost us money but no regrets.
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charles cawley
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Post by charles cawley »

Really useful stuff in these replies. Thanks to all. Although I am a booking agent, it can be terrifying how quickly you can go out of date.
No web-site for now.
Advice about holiday letting
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