With the real estate market expected to experience an annual growth rate of 2.57%, there’s no better time to add property to your investment portfolio. With this being said, a common question arises: can I live in my investment property?
This is a great question, especially if you’re new to the property market or are reevaluating your living arrangements. Though the questions sound like a straightforward “yes” or no” response, it’s not.
In fact, it involves a variety of factors including legal, financial, and practical implications that you’ll need to be aware of. So, if you’re looking to purchase property in the UK and would like to find out if it’s possible to reside in your investment property, keep on reading.
An investment property is real estate purchased primarily to earn income, either through renting it out or reselling it at a higher price to gain a profit. Unlike personal residences, these properties are seen as assets in your financial portfolio.
Typically, investment properties include residential homes, apartments, commercial real estate, or even vacation rentals. When getting involved in property investing, the goal is to benefit from rental yields, capital appreciation, or both.
Technically, yes, you can live in your investment property alone, but this decision heavily depends on the type of mortgage, the terms set by your lender, or if you’ve bought it outright.
Most investment properties are bought with a buy-to-let mortgage, which usually has specific clauses that do not allow the owner to occupy the property. However, if you purchase the property outright or with a residential mortgage (and can meet the financial requirements to do so), you may live in it as your primary residence.
Living in a property intended as an investment might breach mortgage terms or impact your tax benefits. For example, buy-to-let mortgages require the property to be let to tenants, not occupied by the owner.
Breaching this can lead to penalties from the lender, potentially calling in the loan or imposing fines. Not only that but your tax relief on mortgage interest and other allowable expenses might be compromised which can affect the profitability of your investment.
Simply put, no. Generally, moving into a property financed by a buy-to-let mortgage is not permissible. This is because these mortgages are designed for rental properties and insurers and lenders have specific requirements and exclusions regarding owner-occupation.
If your circumstances change and you wish to move into your investment property, you might need to refinance to a residential mortgage. This involves assessing your financial status and potentially different interest rates. So, while living in your investment property with a buy-to-let mortgage isn’t possible, there are ways to make living in the property possiblea
Living in your investment property with someone else, such as a friend or a non-paying partner, can also be complex. If you’re planning to receive rental payments from the co-occupant, you must declare this income and it may affect the tenancy status of the property.
Another point to note is that the presence of an owner-occupier, such as yourself, alongside tenants can create a different legal standing concerning landlord and tenant laws. This could cause complications if an eviction is ever necessary.
If your family members, including dependents, wish to move into the investment property, similar rules to renting to unrelated tenants apply. This could still contravene the terms of a buy-to-let mortgage unless specific permissions are legally given by your lender.
Additionally, familial tenants should be formally documented through tenancy agreements to ensure all legal housing standards and tax obligations are met.
If you’ve purchased a property with the intent of it being an investment but later decide to move in, the timing can vary. If the property was bought with a residential mortgage and not as a buy-to-let, you can move in whenever you choose.
However, with a buy-to-let mortgage, you would need to convert your mortgage type or obtain explicit permission from your lender. These processes can take time and potentially incur costs so it’s best to be aware of these if you ever wish to live in a property that you’ve purchased with a buy-to-let-mortgage.
Living in your investment property can be a smart move, offering both personal and financial benefits. Whether you choose to live in it full-time, part-time, or simply keep it as a rental, understanding the rules and legalities is key to staying compliant.
At Peninsular Property, we’ve spent over 30 years helping people make the most of their real estate investments, including navigating the complexities of living in an investment property.
If you’re considering this option or exploring other ways to optimise your property portfolio, our expert team is here to help. Reach out to us today for tailored advice and support on your investment journey.
Joe is the founder of Peninsular Property and has worked in the industry since 2005. Joe has negotiated on over 9 million pounds worth of property purchases and managed over 1000 properties for clients all over the world. Joe is a landlord himself with a varied property portfolio so is ideally placed to advise clients on their property purchases and investments.
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