Just to say hello

[morgana]

Hello to all members of the forum.

I have joined with 2 friends of mine and we started our own property rental business.

I use the word "business" in the loose sense as at the moment we are just 3 individuals who have bought 6 properties between us.

We have not been going a year yet, but my question would be for future tax purposes would we be better submitting tax returns as a partnership or as individuals?

We are splitting everything 3 ways, which inculeds taxes and profits and other expenses.

So far we have paid cash for the properties, but now we are starting to remortgage as and when we can, as we wish to make further investments.

We have the choice of repayment or interest only, and we are hoping to always have 6 properties fully paid for.

We will achieve this by remortgaging the paid for properties, and buying the newer one in cash, untill all 6 original houses have been remortgaged with new paid for houses in their place.

I dont know if we are going the right way about it, as I have said we are very new to this game, and we happened to have some capital,from various sourses, divorce etc.

As the interest rates of cash in the bank are so bad, we took a gamble, and it seems to have paid off.

we have been paying between 50 and 60k for the houses, 3 houses with 3 beds with rent being 525 per month and 3 two bed houses being 495 per month.

They are in the Liverpool area, and the rental yeild seem quite good for what I have seen compared to other districts.

Anyway, thank you for reading my first post, and I wish you all well for next year.

US3

[Richlist]

HMRC views income from property as investment income. So, unless you have formed a limited liability company then, the income from that property should be declared by the person or persons who own it.

Presumably you will mortgage each property in 3 names and own one third each so, each person should complete an individual self assessment form showing one third of the income and expenditure.

[morgana]

HMRC views income from property as investment income. So, unless you have formed a limited liability company then, the income from that property should be declared by the person or persons who own it.

Presumably you will mortgage each property in 3 names and own one third each so, each person should complete an individual self assessment form showing one third of the income and expenditure.

Thanks for the reply Richlist.

We had no rental income before April 2011, our first tenant did not move in until June, although we did have expenses on the renovations before April.

What would you advise we do to take advantage of any tax breaks that may be available to us?

About the mortgage, as we have not quite got to that stage yet, we have not given it much thought.

We dont know if it would be best to have the mortgages in one of our names only so that we pay for 2 houses each, as it will all come out of the "pot",or mortgage in 3 names.

As all the properties are all about the same value we dont see a problem, we are in this for the long term, and with us all having "grown up"children would like to leave them something.

Would the mortgages in 3 names be the best way forward, or dividing the houses out?

As you can guess with adult children we are of a certain age (notspring chickens any more, more like ond hens), and if the inevitable happened sooner rather than later............the neater the better for all concerned.

We certainly have a lot to think about, we may have been a bit lax, busy gettig the houses ready. We really need to get our act together.

Thanks again.

[Richlist]

You could probably benefit by employing an accountant. You might also benefit from running your plans past a solicitor (one who deals wth property), the costs would definitely be worthwhile as your situation is very unusual. Normally jointly owned property is between married/ unmarried couples which tend to carry some safeguards in law. With friends it can be more complicaed and what seems OK now may not be if situations change over time ......so get professional advice and don't just rely on a internet forum.

We had no rental income before April 2011, our first tenant did not move in until June, although we did have expenses on the renovations before April.

What would you advise we do to take advantage of any tax breaks that may be available to us?

You cannot normally claim expenses in preparing a property before its available to let, against income tax. Presumably you bought the properties to let and have not been living there yourselves ? Basically you either buy a property that needs no work before you let OR you buy one cheaper and spend money preparing it for letting. The tax treatment of both kinds of expenditure is entirely the same i.e. its capital expense and can only be offset against future capital gains when the properties are sold.

Would the mortgages in 3 names be the best way forward, or dividing the houses out?

You need professional legal advice as to the pro's & con's before making that decision. Talk to a solicitor.