1st Time Buyer - Buying to Let but continue renting current residence

B

buckfast

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Hi All,

My wife and I currently rent and have been saving a deposit with a view to purchasing locally (Dublin commuter area).

We are now considering buying a holiday home in the West with a view to rent it out on short term holiday rentals. We would purchase using our own savings, with no mortgage.

We would then continue to save hard until such a time that we have the option again to buy locally for our own residence, or else up and move altogether to our house in the West, with our savings, pending suitable employment opportunities.

I wonder what would the implications be in terms of tax and would there be any other hurdles associated with this or any risks or financial implications we should consider before taking the next steps?

Thanks in advance.
 
Forget about buying a house other than your home to live in.

From time to time, first time buyers get advantages - lower stamp duty, grants, higher mortgage amounts. So if you already own a property, you will not qualify for any such advantage which might be there.

So buy a home where you want to live. It will probably be a lot cheaper than renting. If you have a fair amount of cash, then the mortgage rate will be lower. If you have spent all your cash on a holiday home, you might not be able to get a mortgage or if you do, you will pay a much higher interest rate.

Owning your home has huge tax advantages - no CGT on the increase in value and it is ignored for means tested social welfare benefits. Make that your priority.

Brendan
 
Thanks, appreciate the reply. How would your advice change if we knew for sure that we were wished to one of the two :
a) Buy a house in the West, continue to rent in Dublin area but never buy, and then after a few years move to the house in the West? I assume that in this case we would have to pay tax on any income from renting out the house in the West?
b) Do as above, but in case we change our mind and do not want to move to the West, then just sell the property in the West and buy in Dublin. I assume here we would be subject to CGT?
 
To be honest, that is very hypothetical. In practice, we can't really determine what course our life is going to take. So the key is to remain flexible. Keep your cash. Don't buy an investment property. Only buy a home if you know you are going to live in it for a few years.

a) Yes you would pay income tax on the rent received. When you sell the house eventually, you would pay CGT on some part of the increase in value. The only way you should do this is it met the following criteria:
1) You definitely knew you were going to move to the West.
2) This was the house of your dreams and would not be available when you wanted to move to the West.

b) You would pay income tax and CGT. And when you buy in Dublin, you would lose any advantages available to First Time Buyers.

You might not be able to sell the property. By then, there probably will be legislation barring landlords from selling property. I am exaggerating, but the legislation is gradually killing off the rental market.

Brendan
 
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