ASK493: Should I sell to avoid a big stamp duty bill? PLUS: Am I made to buy 4 HMOs?

0:01Hi, I'm Rob. And I'm Rob. And this is Ask Rob and Rob. Welcome to Ask Rob and Rob, the show where we enhance your knowledge of property, all thanks to some brilliant questions sent in by our listeners. We've got another two great ones coming up today, as we do every week. And it all works because you send in your questions and you do it like this. Yeah, you head over to propertyhub.net forward slash ask. There you'll be presented with a wonderful buffet of options. You can ring up and leave us an answer for a message, or you can leave a message on your computer. And if that was enough, you even have the option to try and get your question in the Sunday times by writing in.

0:41Whatever you prefer, it is all in that link, propertyhub.net forward slash ask. Let's listen to our first question in from Toph. Hi, Rob and Rob. My name is Toph and I love the podcast. I've been listening to it for a number of years. I was wondering if I could lend your expertise on this property situation. I'm a high rate taxpayer with a single buy-to-let in my personal name. It's performing well. I achieve around a 4.6 % post-tax return on investment and 20 % capital growth in the last three years since I've owned it. Now I'm looking to buy a personal primary residence, which is going to be around£300 ,000 if not more.

1:15But because I already own the buy-to-let, I'd face higher stamp duty, which would cost me at least an extra£10 ,000 or so. My options seem to be number one, keep the buy-to-lap and pay the extra stamp duty, which would be annoying, but it is something I can afford. Number two, to sell the buy-to-lap, lose the income stream and a good investment, but avoid higher stamp duty rates now and also in the future. And then number three, to transfer it to a limited company, but then I would face upfront costs of capital gains, early remortgaging and stamp duty fees for moving it into a company structure as well.

1:47There's also additional administrative and management burdens of operating the company. My question is, is there a smarter way to structure this? Or should I just accept the extra stamp duty as a cost of doing things cleanly? Are there any creative solutions I might be missing? Thanks for all you do. I really appreciate your insights. Darf, thank you for your question. Painful, right? And the pain is going to continue because what you've outlined is correct. To my knowledge and to Rob's knowledge, there is no creative work around. the HMRC are very good at cracking down on loopholes so if someone is offering you a loophole be careful because it may come back to bite you at a later date but I don't even know of any loopholes at this point in time so I can't even tell you what the gray areas are that you could approach something worth knowing you may know this already but for the benefit of everyone listening at least is that as this is your first residential property yes you're gonna take a hit on that stamp duty.

2:45But in time, if you were to get a more expensive residential property, and I don't know how old you are, so maybe that's not on the cards, but if you are early on in your life journey and you're likely to buy a more expensive property in the future, next time around, if you sell this property, this resi, you will be subject to the extra rate you have to pay for second homes. That will be classed as your residential the next time around. So it's a one-time thing. It's not going to be every time you do this but for this resi yeah you're going to have to take the hit but when you sell this one and buy another resi in the future that one won't be at the additional rate for second homes i appreciate that doesn't really ease the pain now but it's some positive news for the future i wish you luck sorry couldn't give you anything more creative than that but it is the truth is the reality and sometimes we just have to pay tax okay let's see our next question This one is from Jane.

3:41Hi, Rob and Rob. This is Jane calling from Hong Kong. I've been listening to the show since 2020 and it was reading your book that encouraged me to buy my first bite of let and then later a five-bedroom HMO. My husband, also called Rob, good strong name, and I will be returning to the UK after 15 years as expats and I'd like to run an idea past you. We have a pot of cash for about 300 ,000 and we would like to use this money to buy property for cash flow only so we can both work part-time. Now I know you guys are big into capital growth but for me right now capital growth is just a cherry on the cake.

4:19Our current student HMO was purchased for£160 ,000 and rents for£1 ,500 a month. I actually like renting to students because they have a set move out date and I enjoy the interaction with them. With mortgage rates being what they are, single units just don't produce enough cash flow and I'm not interested in the unpredictability of serviced accommodation. So the question is, with this£300 ,000, do you think it's a good idea to get four student houses or am I just not seeing the wood for the trees? I'm estimating that with deposits, stamp duty, legals and a refurb, each house is going to cost around£70 ,000.

4:56I'm running this idea past you first as it's a large amount of money that I may only ever have once and I don't want to mess it up. I also really respect your opinion. keep up the good work fellas and I look forward to your next podcast. Jane thank you for your question so if pure rental income is your goal then you're probably looking at going about it the right way HMOs are likely the way to go I would normally put in lots of warnings about how much hard work it is and the expenses you might not have planned for and things like that but the reason I won't do that now and I'm not going to say that this is outright something that you are underestimating is that you've done it before you know what running a student HMO entails and you know the real numbers that come out at the end not just the headline exciting sounding gross yield numbers that you see when you're being marketed this kind of thing.

5:41So if it's something that you've done before and it works for you and you like it then why not do more of it. But I'd say that there's no strong why not but there are a couple of things to keep in mind. The first is of course rental reform. So this is affecting everyone but it's going to affect the student sector in particular because you've said one of the things you like is that they have a set move out date. That's not going to be quite so straightforward once these reforms happen. We don't know what the final version of this is going to look like. There's been all kinds of suggestions and amendments about how it's going to affect the student market.

6:12I think the eventual answer will be that you should be able to get your property back in time for the next September, whatever happens, but it's not going to be guaranteed in the same way as it is now. So not a major concern, I would say, but it is something to think about. The other thing to think about is just concentration risk. You haven't said where you're planning to buy these. logically it would make sense for you to buy them close to the one that you've already got because you understand the market you know how things work there however you would then have five student HMOs in the same place which does introduce an element of risk having five regular buy-to-lets in the same city wouldn't worry me in the same way but in the student market we have seen trends in the past where a certain area of town that was appealing to students just isn't anymore a big part of that has been the rise of purpose-built student accommodation also just trends in the student market have changed and people want to live more in city centres now than they did before so there's a risk that you've got all these properties in the same area which brings lots of efficiencies but then it does bring that risk of well what happens if something affects that entire market so it's not me saying don't do it it's just me saying these are things to think about and you're saying like should i buy four student houses well it doesn't necessarily have to be as all or nothing as that why don't just start with one start with another one see how it goes it might be that you've just got lucky with your current one the next one throws up all kinds of problems you weren't aware of and you think my goodness i don't want another few of these or it might be just as great as you think and then you can move on to buy the next few from there but while i completely see the appeal of coming back getting stuck into something putting that money to work getting the income coming in you don't necessarily need to or want to do it all at once so jane thank you for your question and good luck and we hope it's helped you as well and we want to help you even further because on Thursday we'll be back with the main event, the Property Podcast.

7:57And of course, we'll be back on Sunday, the Sunday Times, answering more of your questions there. So until all those momentous events take place, take care, have fun. Bye-bye. Bye-bye.