my girlfriend is to move in with me, and we cant work out whether to sell or rent her house. is she exempt from cgt if she sells (she's lived there for over three years)? is the tax on renting punitive (she's higher rate)?
2007-03-10 01:24:35 · 15 answers · asked by rob b 1 in Business & Finance ➔ Renting & Real Estate
You should look at the market for renting where you live. We have property in Oxford and in Stratford and we are finding it harder to let these days because people are buying now to let, there is a very different market than a few years ago, when it was much easier to let. If you let you have to get rid of a lot of your furniture because they have to be approved of by the fire safety certificate, so if you have old sofas it may not be fire proof, also you have to have a gas certificate, you may have to have a lot done to your place for insurance purposes, if you are letting. We are in a bad situation because of capital gains taxes, so it is hard for us to sell without losing a lot of money, but I would love not to have to let. You have to constantly up grade the property, for an example we have to put a new boiler in one property and that came to over £2,000, so is it worth letting? Find out about the demand, for letting property in your area. I don't think that houses are going to go up in value any more. You must find out whether this is a good time to buy and a good time to sell. I know that a property we have was worth about £45,000 about 17 years ago and now it is worth between £225,000 - £240,000, so you must ask is the value of property likely to go up in the foreseeable future, I would think not much as it is getting to the state that no one can afford property, if property goes up any more in cost, no one will be able to buy. Go and see a finical adviser normally the interdiction session is free, it only costs once they are doing things for you. Go to an estate agency they should give you some advice on what is better to do, sell or let in your area.
I see at least you don't have the problem of capital gains tax, so you will get the full value of the property. Whereas for us we will either have to put property into trusts or sell at a loss. If the house you are letting is unfurnished then you don't have to pay rates if there is no one living there, but if it is furnished I think you have to pay part rates. It is always best to let through an agent, because if you have trouble with the tenants they will get rid of them or do the liaising, they do take a percentage of the rent but there is no worries about the property if they look after it.
2007-03-10 03:31:48 · answer #1 · answered by mellouckili 3 · 0⤊ 0⤋
Your girlfriend is exempt from CGT if she sells now. If she rents the house out, she is potentially liable to CGT on any future sale, but the period in which she lived in it would be exempt and there are other exemptions as well.
She would pay tax only on the profit made from the renting, ie rents received less all expenses to do with the house.
She should remember that no one will look after the house and love it the way she has done, so be prepared to do some repairs when the letting ends. She is unlikely to get 100% occupancy.
My advice:
1. never do anything purely for tax reasons
2. if you can't decide what to do, don't do anything.
2007-03-10 09:45:24 · answer #2 · answered by fengirl2 7 · 1⤊ 0⤋
I would rent out the property, find a reputable agent that has low fees (most offer these to compete with other agents). Its also a lot safer to rent through an agent as they are always on hand when things go wrong. There are so many people making a mint out of renting their second property.
Its also a good idea for your girlfriend to keep the property 'just in case' sorry to put a damper on things but so many relationships fail once a couple has moved in together & the person who has sold up, loses out on a hell of a lot of dosh.
Having a bit extra coming in each month is always good, and in future you can sell the house once the price has risen & put that money towards your future together!
At the end of the day, give renting a go & if its not for you both...sell the house!
You really need to sit down & research the pros & cons of both renting & selling up....find out which would benefit you now aswell as in the future and what will suit your circumstances!
2007-03-10 09:40:00 · answer #3 · answered by Becci 4 · 0⤊ 0⤋
The rental market is booming at the minute. I would advise renting it.
Be aware though, there are certain rules she need to adhere to as a landlord, and I`d also advise being careful to ensure good references from tenants.
The most secure way is through an agent - they will ensure the tenants are credit checked etc etc and also carry out regular inspections so that the property doesnt fall into disrepair.
It can be a lucrative income, most mortgages border on 450-500 and a nice 2 bed house can fetch 570 on the rental market, if its 3 bed you`re looking at upwards of 600. (obviously dependant on the area.)
2007-03-10 09:42:38 · answer #4 · answered by mrssandii1982 4 · 0⤊ 0⤋
Compare interest you might receive from investing any equity left in the property against rental income after tax. Then look at the rules and regulations appertaining to rented property and tenants rights. You would probably earn slightly more from rent but would it be worth the aggravation you might receive trying to cope with your responsibilities regarding your tenants.If you have a mortgage on the prperty at the moment you will need the lenders permission to let and they will almost certainly increase their interest rate this will eat into any profit you anticipate. You would be forgiven for thinking that I would be very much against renting your house out. Tread carefully!!!!!!
2007-03-11 09:09:17 · answer #5 · answered by DEREK M 3 · 0⤊ 0⤋
Definitely keep it - the rent will pay for the mortgage and what is left over keep in a bank account for any repairs or decorating of the property - you will reap the rewards in the future. Also without putting a dampener on your relationship the house will still be there should things not work out - (just being realistic)
2007-03-10 09:34:05 · answer #6 · answered by Anonymous · 1⤊ 0⤋
My advice would be to rent the property out - the tax would be negligible so its worth holding onto this asset.
get an agent in your local area to discuss tax with you so you can make an informed decision.
The rent you get can be safeguarded with a protection warranty for a few pounds a month - you can have the agent maintain / manage the property etc
2007-03-10 09:31:45 · answer #7 · answered by bevflower 3 · 0⤊ 0⤋
Rent for now and wait a few years for the real estate market prices to rebound a bit. Although it sounds like you may not live in the US as I am not sure of what CGT is...
2007-03-10 09:28:26 · answer #8 · answered by Gman 4 · 0⤊ 1⤋
The problem with renting is you have to maintain the property and deal with tenants. Is that soumething you wouldnt mind doing? Also what if you get a tenant that doesnt pay their rent? Will she be able to afford that? My suggestion would be to sell so she doesnt have to worry about it.
2007-03-10 09:28:46 · answer #9 · answered by Amanda 1 · 2⤊ 0⤋
It depends on your personal circumstances only you know that but remember if you rent you have to declare to the revenue and it is unearned income and taxed at 40%.
2007-03-10 10:11:44 · answer #10 · answered by FRANK W 2 · 0⤊ 0⤋