Buying a second manshon for no reason

[RetireJapan]

So will you stick with the 13m bid or try to nudge a little higher to tempt them?

We left it at that, I'm not willing to pay more than 13m, I'm pretty sure they don't want to sell for that little

[jane doe]

Welcome to the land of Wa, Sir. Perhaps someone forgot to tell you, but it's a one-way street, and it is always you who is driving the wrong way and upsetting the Wa. Or, as my neighbour helpfully screamed out of her bedroom window across to my living room balcony 1m away, "THIS IS JAPAN!!!". Checkmate.

[mc_spanner]

It's hard to put a monetary value on having nice neighbours.

Selling investments to buy a place which you will use to host occasional guests seems extravagant. Have you considered buying it and renting it out - Tenants rights are robust, so you're not "in control" to the extent that you would be as a landlord in the UK, but you would be able to choose your neighbours and you would get a passive income. When you move into your wife's family home in the future you could keep the two apartments as rental properties or sell them as a pair with a sitting tenant in the second one. I guess you can find out the probable rental income and work out the price that would give an acceptable yield. I hear that yields are pretty low here.

[jane doe]

I did something similar 10 years ago and have never looked back.
I would second the idea of renting it out, and the depreciation I think is for 10 years, which can then make it very worthwhile. I'm not exactly sure, but I think I heard that some owners buy properties, rent them out for 10 years and then sell them on, and repeat the process with a different flat for this reason.

Just to follow up on my own post, like you Ben, buying a second place was completely unplanned. I was in my mid-50's and suddenly facing imminent potential redundancy when I saw what looked like a very good deal - a completely trashed place just round the corner from where I lived. I decided to go out and saddle myself with a mortgage as I figured this would be my last chance to get one, while I still had the job.
I never got to find out if it was my last chance as in the end, I wasn't made redundant that year, and I haven't tried for a mortgage since. But the new flat turned out to be a good move. I paid only Y50K monthly on a part mortgage over 10 years, paid it off early, and did the place up to how I wanted it. It has been a great place to live, I have sold off the other bigger more expensive place that I used to live, and now that I am out of work, I have rented a cheap UR to live in and will rent this place out. The difference will help pay my living expenses. I will pay capital gains tax if the value appreciates at all after I sell it (minus all the costs to bring it up to spec), but on the other hand will be able to claim depreciation for 10 years of renting.

I guess what I would take away from this is, as long as you manage to buy at a favourable price, you can probably make it work for your circumstances one way or another - I never foresaw that I would rent it out when I bought it, so not everything has to be planned from the start, but it helps if you have a clear idea why you are buying if you want to come away feeling satisfied with the decision.

[RetireJapan]

Where are you getting the idea of 10 year depreciation?
Depreciation depends on building structure and age of the building, it can be anything from 47 to just 4 years.

Or do you mean mortgage deduction? That only applies for own home mortgage not for renting out.

I'm guessing that is depreciating the building as a rental property.

[Wales4rugbyWC23]

Where are you getting the idea of 10 year depreciation?
Depreciation depends on building structure and age of the building, it can be anything from 47 to just 4 years.

Or do you mean mortgage deduction? That only applies for own home mortgage not for renting out.

I'm guessing that is depreciating the building as a rental property.

Don't you claim the depreciation allowance with your first tax return after you have bought the rental place?

[jane doe]

Where are you getting the idea of 10 year depreciation?
Depreciation depends on building structure and age of the building, it can be anything from 47 to just 4 years.

Or do you mean mortgage deduction? That only applies for own home mortgage not for renting out.

I'm guessing that is depreciating the building as a rental property.

Exactly, if you have an investment property ie you are renting it out, (I think this applies only to "second hand" properties, but someone can set me straight if I'm wrong) for each year from when you start to rent it, for either 10 or 11 years, you get a tax allowance for the fact that your investment is depreciating. So this can make quite a difference to the amount of tax you have to pay on your rental income. This depreciation is a fixed amount decided by the tax man.

OTOH, if it's your primary residence, ie you live in it, you don't get depreciation, but if you do live in it for 5 years immediately before selling it, any capital gain pays a lower rate of tax you would if you bought it to rent out and the value went up. Of course a lot of properties here don't appreciate, but if you do luck out and the value goes up a lot, expect to pay a high rate of tax on that profit you make on the sale. So just make sure to keep absolutely all the receipts, and if any building works are necessary immediately after buying e.g. dodgy pipes or an unusable bathroom, or else you need to renovate it to put it on the market, and the gain you made is partly as a result of your doing it up, you can claim that as a necessary expense (no promise that the taxman/woman will agree with you, but you can try if you like). Or any expenses connected with the purchase e.g. if you have to change the locks when you first buy it. And all the costs associated with buying it, and then selling it. All those costs are specific to your particular property, in contrast to depreciation explained above.

Hope that's correct, and if anyone knows better, feel free to set me straight.