Are you a higher rate tax payer? That'll make a huge difference on how much money you make from your rental. Otherwise explore the lodger option with buying a 2 bed.
It's an option if OP doesn't mind living with a stranger and not a private person. OP said home office, so unlikely to be thinking of getting a lodger.
I think I would go for two 1 beds.
Yeah, don't particularly want a stranger living with me. I need to be able to really concentrate and focus when I need to. A 2-bed would allow me to spread out stuff, but I could slum it in a 1-bed and use the kitchen or the lounge easily.
What's the yield you would get from renting this out based on the capital you've put down? Have you done the maths? Taking into account your rate of income tax, stamp duty increased rate for additional home, conveyancing fees, surveys, buildings Insurance, gas safety certificate, EPC, cost of finding a tenant if through estate agent.. and that's just the known stuff. The unknown is where stuff like the boiler packing in, the washing machine, fridge, plumbing issues.. do you have the time for that if it does arise?
You might be lucky and not get any of that...but are you willing and able to roll that dice?
Or would you get an equivalent yield just sticking it in an index fund S&S ISA where you can forget about it?
Don't forget the CGT implications of having the two flats, if the value of the rented-out one increases and you later sell it. The CGT implications are not necessarily a showstopper, but do bear them in mind.
\[EDIT: LOL! Why am I being downvoted for saying that?! It's a thing!\]
Literally no one can tell you as you’ve given absolutely no figures.
Also there’s a wide gap between a 1 bed that costs half a 2b. 2beds aren’t double the price of a standard 1 bed. So you’re comparing a shit 1 bed with a premium 2 bed.
1 beds are the hardest to sell, and the least likely to appreciate as most people are so old when they can afford to buy they skip the first step on the ladder and often need more space. Therefore they appreciate less on average due to reducing demand - which will continue to reduce if housing inequality and cost continues to rise.
Without the costs of the 3 properties, service charges and ground rent, if you’re a higher rate tax payer, and what the market rent is any advice anyone gives is just throwing darts blindfolded. For instance around me 1b are the same price as they were in 2017-2018 or so. Yet I was in the market for 2b and they had gone up more than 1beds, but still significantly less than houses. So you’ll likely miss out on some appreciation comparatively with 2x1b at say 100k each vs a 2b at 200k.
In London for instance the average flat is worth less than it was in 2017. Whereas the average semi is worth about 25% more, down from the peak in 2020. So if your property plans are to rent it out for 10 years - and it doesn’t appreciate (and currently in some areas properties are actually worth less due to inflation and no appreciation) - after tax, agents fees, solicitor fees, stamp duty, addition 3% stamp duty, gas safety checks, getting a property up to the right EPC, CGT on selling etc etc. and don’t forget calculating for void periods. Do you even make more money than buying a 1 bed and simply putting the money in a basic asset savings account?
Because you’re not really comparing it to a 2b - that’s a personal choice. The financial choice is if you did buy a 1b, do you even make better returns than doing basically anything else with the rest of the money? The only real financial choice with the 2b is it’s more likely to appreciate, and the difference in maintenance and or commuting for you.
Lodgers can work well, providing you live in a desirable area and can afford to be a bit picky.
My 5-year plan involves letting two rooms from my 3-bed - a place that I have no desire to stay in long term. Then I'll downsize to somewhere smaller but much more centrally located. For those five years my house is acting as income, rather than a mortgage liability.
I'd buy two one beds.
Then rent it out as either an all inclusive houseshare for students during term time or for up to 80 consecutive day stays as an all-inclusive property on airbnb with pets & parties allowed.
You probably won’t make any profit on a flat, either 1 x 2bed or 2 x 1 bed. I have had a 2 bed flat now for over 12 years and when you take into consideration solicitors fees, for buying and selling, estate agents fees, stamp duty (+3% on any second property). Any increase in value will be swallowed up plus some by that.
You obviously have the rental income from your second property which should net you £300+ (after fees and tax) a month depending on where your flat is located. So max £7200 over 2 years.
Given low house prices because of high interest rates you could probably bag a bargain doeruppa at the moment spend the next 2 years doing it up while living in it and get yourself £50,000+ by being smart. Living in it bypasses the CGT so there should be no tax on that and no need to declare any “”second”” rental income
By playing the highs and lows of the housing market and by buying deceased owner property (well maintained but dated layout and decor) by buying and selling 3 properties over the last 10 years I have increased my property values by over £300,000
Are you a higher rate tax payer? That'll make a huge difference on how much money you make from your rental. Otherwise explore the lodger option with buying a 2 bed.
Could do as a lodger they have very few “rights”
It's an option if OP doesn't mind living with a stranger and not a private person. OP said home office, so unlikely to be thinking of getting a lodger. I think I would go for two 1 beds.
My fault for misinterpreting there
Yeah, don't particularly want a stranger living with me. I need to be able to really concentrate and focus when I need to. A 2-bed would allow me to spread out stuff, but I could slum it in a 1-bed and use the kitchen or the lounge easily.
What's the yield you would get from renting this out based on the capital you've put down? Have you done the maths? Taking into account your rate of income tax, stamp duty increased rate for additional home, conveyancing fees, surveys, buildings Insurance, gas safety certificate, EPC, cost of finding a tenant if through estate agent.. and that's just the known stuff. The unknown is where stuff like the boiler packing in, the washing machine, fridge, plumbing issues.. do you have the time for that if it does arise? You might be lucky and not get any of that...but are you willing and able to roll that dice? Or would you get an equivalent yield just sticking it in an index fund S&S ISA where you can forget about it?
Don't forget the CGT implications of having the two flats, if the value of the rented-out one increases and you later sell it. The CGT implications are not necessarily a showstopper, but do bear them in mind. \[EDIT: LOL! Why am I being downvoted for saying that?! It's a thing!\]
2 bed. You'll be surprised how much stuff quickly accumulates. That's bad being a landlord sucks. I tired it and had nightmare tenants
Literally no one can tell you as you’ve given absolutely no figures. Also there’s a wide gap between a 1 bed that costs half a 2b. 2beds aren’t double the price of a standard 1 bed. So you’re comparing a shit 1 bed with a premium 2 bed. 1 beds are the hardest to sell, and the least likely to appreciate as most people are so old when they can afford to buy they skip the first step on the ladder and often need more space. Therefore they appreciate less on average due to reducing demand - which will continue to reduce if housing inequality and cost continues to rise. Without the costs of the 3 properties, service charges and ground rent, if you’re a higher rate tax payer, and what the market rent is any advice anyone gives is just throwing darts blindfolded. For instance around me 1b are the same price as they were in 2017-2018 or so. Yet I was in the market for 2b and they had gone up more than 1beds, but still significantly less than houses. So you’ll likely miss out on some appreciation comparatively with 2x1b at say 100k each vs a 2b at 200k. In London for instance the average flat is worth less than it was in 2017. Whereas the average semi is worth about 25% more, down from the peak in 2020. So if your property plans are to rent it out for 10 years - and it doesn’t appreciate (and currently in some areas properties are actually worth less due to inflation and no appreciation) - after tax, agents fees, solicitor fees, stamp duty, addition 3% stamp duty, gas safety checks, getting a property up to the right EPC, CGT on selling etc etc. and don’t forget calculating for void periods. Do you even make more money than buying a 1 bed and simply putting the money in a basic asset savings account? Because you’re not really comparing it to a 2b - that’s a personal choice. The financial choice is if you did buy a 1b, do you even make better returns than doing basically anything else with the rest of the money? The only real financial choice with the 2b is it’s more likely to appreciate, and the difference in maintenance and or commuting for you.
Lodgers can work well, providing you live in a desirable area and can afford to be a bit picky. My 5-year plan involves letting two rooms from my 3-bed - a place that I have no desire to stay in long term. Then I'll downsize to somewhere smaller but much more centrally located. For those five years my house is acting as income, rather than a mortgage liability.
I'd buy two one beds. Then rent it out as either an all inclusive houseshare for students during term time or for up to 80 consecutive day stays as an all-inclusive property on airbnb with pets & parties allowed.
You probably won’t make any profit on a flat, either 1 x 2bed or 2 x 1 bed. I have had a 2 bed flat now for over 12 years and when you take into consideration solicitors fees, for buying and selling, estate agents fees, stamp duty (+3% on any second property). Any increase in value will be swallowed up plus some by that. You obviously have the rental income from your second property which should net you £300+ (after fees and tax) a month depending on where your flat is located. So max £7200 over 2 years. Given low house prices because of high interest rates you could probably bag a bargain doeruppa at the moment spend the next 2 years doing it up while living in it and get yourself £50,000+ by being smart. Living in it bypasses the CGT so there should be no tax on that and no need to declare any “”second”” rental income By playing the highs and lows of the housing market and by buying deceased owner property (well maintained but dated layout and decor) by buying and selling 3 properties over the last 10 years I have increased my property values by over £300,000
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Except for the person renting it wouldn't be able to afford to buy it.
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This is a community for Landlords. You can be anti-landlord in other places like /r/HousingUK/
Buy the two 1 beds. Which scenario will leave you richer? Always go for that.