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  • FIRST POST
    • mstr
    • By mstr 10th Oct 16, 5:27 PM
    • 10Posts
    • 5Thanks
    mstr
    Renting at a loss (future gains in mind)
    • #1
    • 10th Oct 16, 5:27 PM
    Renting at a loss (future gains in mind) 10th Oct 16 at 5:27 PM
    Hi,

    I looking at moving after buying my house for the wrong reasons, I have the deposit and funds to buy another house so don't need to sell this house for that.

    I was looking at renting it out quite a while back ( I guess like many people think about ) but the rental ( I'm looking at the council as they are quite keen and offer a 3 year contract ) is going to be about 50 - 70 quid lower than the mortgage ( not final figures but close ).

    I really want to be hands off as possible and they offered a tempting idea.

    The shortfall is a problem and my thinking is as they pay the bulk of the mortgage i should not be to long before it equalizes. Also they are effectively the landlord as they explained they have all the insurances so I save a little on that. I would still be liable for boiler or shower breakdown etc ( if by the tenants they would do the repair).

    Is this a crazy idea, has anyone rented on a loss for a couple of years with hope that it worked out ? I called the mortgage company and just need to fill out a consent form for renting but I cant applies for a fixed rate mortgage if they give consent just tracker so if rates sharply increase in the next 3 years.......

    Crazy as a fox?

    Thanks :-)
Page 2
    • Crashy Time
    • By Crashy Time 11th Oct 16, 5:29 PM
    • 2,951 Posts
    • 1,688 Thanks
    Crashy Time
    Why one way and not the other? Where's your evidence?

    Most renters I know are exactly the same with their house rent as they are with their energy supplier or media package - not bothered and happy to let it keep rolling over.
    Originally posted by Grenage

    How many renters do you know?
    • Crashy Time
    • By Crashy Time 11th Oct 16, 5:36 PM
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    Crashy Time
    There can be more reason to stick with a landlord then with an energy supplier, too. There's costs and hassle involved in moving for the tenant, people may like neighbours, community etc, and the insecurity of renting privately means many may stick with a landlord they know to be decent (or at least not bad) rather than move. People will be drawn more to cheaper places, but it's not the most fluid market...
    Originally posted by bitsandpieces

    In Scotland landlords are heavily regulated now, if they are "bad" they won`t be a landlord long. IME it is just that many private landlords offer cheaper rent to get long term working tenants while letting agencies encourage kite flying prices in the hope of netting over-seas types, travellers/students etc. who don`t know the local market. The problem of course for the landlord is that they get voids and high turn-over, but the agent doesn`t really care about this. As for insecurity, my last rental lasted for 7 years, and I was actually getting itchy feet to move on Good long term tenants will only be found by pricing rent at sensible levels IMO.
    • Kynthia
    • By Kynthia 11th Oct 16, 6:14 PM
    • 4,702 Posts
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    Kynthia
    Moving costs a lot of money in paying for new credit checks and removals, is very disruptive, and you need to have cash available to fund a new deposit before your last is returned. People like stability and won't move unless their landlord is bad, the property is bad, or they can find somewhere a lot cheaper that it makes up for the additional costs and hassle. Unless they are overpaying for their property or downsize it's unlikely a new property would be significantly cheaper. If the property is okay people don't move, even more so if they have children in school and don't want them disrupted, moving too far from the school, or changing districts or catchment areas.

    OP I've heard horror stories from letting to the council in regards to the condition of the property after the 3 years. Plus your mortgage company need to give you permission to let and may not allow a commercial tenancy. So do your research. If you don't want the hassle then sell as it's a lot simpler.
    Don't listen to me, I'm no expert!
    • mstr
    • By mstr 11th Oct 16, 6:47 PM
    • 10 Posts
    • 5 Thanks
    mstr
    Hi , Thanks all.

    The property is a 3 bed semi with good size gardens in new of some TLC but I'm currently looking at fitting new kitchen and lick of paint and what not. The main school for the area 5 minutes walk. Its on a bus route and access to the main duel carriage ways is easy.

    So I think location is good, condition is average ( at the moment ) but a smaller house with nicer inside just around the corner seemed to be up for let for quite awhile before a tenant ( 2 months easy ).

    The property will be put back as it was and as they want it just magg and white with no flooring ( which is good as the carpets are very old and they need to be renewed if letting) .

    The possibility of bad neighbours could be a concern and got a meeting to discuss with mortgage company so will ask the questions raised.

    They also offer another service where I choose the tenants and have full control and is basically the same as a letting agent without any fees ( but a chance of void times ).

    But yes selling is an option and looking into that to.

    Council letting doesn't seem to be getting much love :-)

    Thanks all
    • ThePants999
    • By ThePants999 11th Oct 16, 6:48 PM
    • 320 Posts
    • 319 Thanks
    ThePants999
    The shortfall is a problem and my thinking is as they pay the bulk of the mortgage i should not be to long before it equalizes.
    Originally posted by mstr
    I don't understand this. Your mortgage payment does not go down over time. And your rental income will not go up while locked into this 3 year contract. So how exactly are they going to equalise?

    I have a sneaking suspicion you've misunderstood how repayment mortgages work.
    • Crashy Time
    • By Crashy Time 11th Oct 16, 6:49 PM
    • 2,951 Posts
    • 1,688 Thanks
    Crashy Time
    Moving costs a lot of money in paying for new credit checks and removals, is very disruptive, and you need to have cash available to fund a new deposit before your last is returned. People like stability and won't move unless their landlord is bad, the property is bad, or they can find somewhere a lot cheaper that it makes up for the additional costs and hassle. Unless they are overpaying for their property or downsize it's unlikely a new property would be significantly cheaper. If the property is okay people don't move, even more so if they have children in school and don't want them disrupted, moving too far from the school, or changing districts or catchment areas.

    OP I've heard horror stories from letting to the council in regards to the condition of the property after the 3 years. Plus your mortgage company need to give you permission to let and may not allow a commercial tenancy. So do your research. If you don't want the hassle then sell as it's a lot simpler.
    Originally posted by Kynthia

    Last flat I had didn`t want any deposit, and you don`t hire top end removals you just rent a cheap van for the day, plus who doesn`t have cash on hand to pay out a few hundred quid deposit? Being honest, in the past I have moved flats with a few runs by bus and large hold-all bags with maybe a couple of taxi runs for bigger things, renters get all their white goods, TV`s, furniture etc supplied for them usually, you don`t have to move these things around. The reality is that with the tax changes and Brexit many landlords are going to struggle, if I was the OP I would go with the council deal, or as you say sell up.
    • Crashy Time
    • By Crashy Time 12th Oct 16, 1:41 PM
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    Crashy Time
    I don't understand this. Your mortgage payment does not go down over time. And your rental income will not go up while locked into this 3 year contract. So how exactly are they going to equalise?

    I have a sneaking suspicion you've misunderstood how repayment mortgages work.
    Originally posted by ThePants999

    You maybe over-estimate the chance of rent rises?
    • Pixie5740
    • By Pixie5740 12th Oct 16, 1:47 PM
    • 8,872 Posts
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    Pixie5740
    In Scotland landlords are heavily regulated now, if they are "bad" they won`t be a landlord long.
    Originally posted by Crashy Time
    BS. I reported a shady landlord who lets out 3 properties in Aberdeen and a glorified shed at the bottom of her drive in Aberdeenshire who is not registered with either council as a landlord. Do you know what's happened to her? SFA. Years after being reported she is still letting out 3 flats and a large shed.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • Crashy Time
    • By Crashy Time 12th Oct 16, 1:50 PM
    • 2,951 Posts
    • 1,688 Thanks
    Crashy Time
    BS. I reported a shady landlord who lets out 3 properties in Aberdeen and a glorified shed at the bottom of her drive in Aberdeenshire who is not registered with either council as a landlord. Do you know what's happened to her? SFA. Years after being reported she is still letting out 3 flats and a large shed.
    Originally posted by Pixie5740

    How is she getting on at raising the rents?
    • Pixie5740
    • By Pixie5740 12th Oct 16, 1:53 PM
    • 8,872 Posts
    • 11,889 Thanks
    Pixie5740
    How is she getting on at raising the rents?
    Originally posted by Crashy Time
    What does that have to do with the fact that even after being reported to the council she continues to commit a criminal offence by renting out properties? Yes landlords must be registered with the council(s) in which they let out properties but I have yet to hear of one rogue landlord being prosecuted.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • mstr
    • By mstr 12th Oct 16, 6:30 PM
    • 10 Posts
    • 5 Thanks
    mstr
    I don't understand this. Your mortgage payment does not go down over time. And your rental income will not go up while locked into this 3 year contract. So how exactly are they going to equalise?

    I have a sneaking suspicion you've misunderstood how repayment mortgages work.
    Originally posted by ThePants999
    Hi,

    Yes I know how they work, all things being equal the more of the mortgage paid off the more equity I will own and that seems to 'unlock' better interest rates so the payment should come down ( to a point ) - now that might be flawed logic and not the understanding of mortgages.

    Yes the rent increases 'inline' with market trends ( and as its under market value it wont go down ).

    I have email some questions and haven't got an answer from them yet so maybe they are busy or the questions are to awkward to answer lol.

    Thanks
    • Voyager2002
    • By Voyager2002 12th Oct 16, 7:07 PM
    • 11,031 Posts
    • 7,384 Thanks
    Voyager2002
    Hi,

    Yes I know how they work, all things being equal the more of the mortgage paid off the more equity I will own and that seems to 'unlock' better interest rates so the payment should come down ( to a point ) - now that might be flawed logic and not the understanding of mortgages.
    Originally posted by mstr
    No.

    If you manage to pay off more of the amount you borrowed (as well as interest) you then become eligible for better deals, but in order to get them you would have to remortgage: this is not something that happens automatically. And the process is likely to take a good deal longer than three years...
    • mstr
    • By mstr 13th Oct 16, 9:50 AM
    • 10 Posts
    • 5 Thanks
    mstr
    No.

    If you manage to pay off more of the amount you borrowed (as well as interest) you then become eligible for better deals, but in order to get them you would have to remortgage: this is not something that happens automatically. And the process is likely to take a good deal longer than three years...
    Originally posted by Voyager2002
    Thanks and yeah quite aware of this, yes of course its not an automatic process lol ( it's quite safe to assume for a moment I know what remortgage means ;-) ).

    Seriously I see the big picture, and looking long term.

    For those interested three years is just the minimum length of the contract ( so infer it as a 3 year rolling, but there are longer terms) - "If" I went ahead then and they turned out to be pretty good then I would probably go the term ( or at least half ), at that point the LTV should kick up some pretty good deals.

    Hence eventually equalize.

    Now obviously if interest rates increase significantly in these 3 year terms then well I just cant sell up ( not that selling would be quick anyway )...... something to balance out.

    Now its a shame people here haven't dealt with the council ( kinda was looking for their experience ). Though I do know someone who A the voids ( puts the houses back to standard after tenants leave ) for a house association and its mainly just minor work ( everyones mileage varies of course).

    But now going to put everything on hold, elsewhere things are not all roses as I thought. Thats life though. Will revisit in 3 to 6 months time.
    • MEM62
    • By MEM62 13th Oct 16, 11:38 AM
    • 965 Posts
    • 634 Thanks
    MEM62
    The shortfall is a problem and my thinking is as they pay the bulk of the mortgage i should not be to long before it equalizes.
    Originally posted by mstr
    Have you also taken into account your tax liability when calculating your figures? There are some allowable costs against which you can offset the tax but basically you will be loosing 20 or 40% of your rental income to tax depending on which tax bracket you fall into.
    • MEM62
    • By MEM62 19th Oct 16, 10:10 AM
    • 965 Posts
    • 634 Thanks
    MEM62
    Maybe not then :-)
    • eddddy
    • By eddddy 19th Oct 16, 11:15 AM
    • 3,852 Posts
    • 3,485 Thanks
    eddddy
    Regarding leasing to the council - the issues I've heard about include:

    1) An LL lived in the property before leasing it to the council. The council tenants dealt drugs, petty crime immediately around the property rocketed. The LL's ex-neighbours knew the LL personally, and traced her new address, and blamed her for the situation, and badgered her to do something about it.

    2) Councils don't like to evict - especially without cause. Ask the council what happens if a tenant refuses to move out after 3 years.

    3) Does the council's contract put a cap on the damage they will pay for at the end of the 3 years? Sometimes the cap is 3 months rent. If the property is trashed, that may not be enough.


    Here's a couple of similar horror stories:

    http://forums.moneysavingexpert.com/showthread.php?p=42455250&highlight=#post42455250

    http://www.landlordzone.co.uk/forums/archive/index.php/t-24706.html
    • abby1234519
    • By abby1234519 19th Oct 16, 11:21 AM
    • 1,729 Posts
    • 2,693 Thanks
    abby1234519
    Evidence please.....
    Originally posted by Crashy Time
    Do I count as evidence? House that is close to my work went up for rent thats bigger and at a lower cost. I like my house enough not to move even though the double glazing is shot and our neighbours are horrific.
    Money money money.

    Debt
    Dec 2016: £25158.71

    December pay off target: £0/£887.71

    Budgeted spends (car maintenance, phone contracts, food, clothing etc) for £2017: £11,100

    Spend 10% less goal is £9990.

    Must underspend by £92.50 a month
    • x-caitlin-x
    • By x-caitlin-x 19th Oct 16, 1:55 PM
    • 165 Posts
    • 154 Thanks
    x-caitlin-x
    Do I count as evidence? House that is close to my work went up for rent thats bigger and at a lower cost. I like my house enough not to move even though the double glazing is shot and our neighbours are horrific.
    Originally posted by abby1234519
    I can add my own anecdotal evidence to this. Lived in the same flat for 4 years and never looked for somewhere else. If I could have got somewhere else for less money I wouldn't even have known about it! That was despite multiple rent increases. I don't think it's unfair to suggest that most people would value stability over a few quid saved in rent.
    • Pixie5740
    • By Pixie5740 19th Oct 16, 2:22 PM
    • 8,872 Posts
    • 11,889 Thanks
    Pixie5740
    Sometimes it's better the devil you know when it comes to renting.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • Crashy Time
    • By Crashy Time 19th Oct 16, 2:32 PM
    • 2,951 Posts
    • 1,688 Thanks
    Crashy Time
    What does that have to do with the fact that even after being reported to the council she continues to commit a criminal offence by renting out properties? Yes landlords must be registered with the council(s) in which they let out properties but I have yet to hear of one rogue landlord being prosecuted.
    Originally posted by Pixie5740

    The good news is that the tide is turning up there now, anyone who lets out substandard dross is going to have a lot of voids IMO.


    https://www.eveningexpress.co.uk/fp/news/local/latest-aberdeen-house-price-drop-the-worst-in-uk/
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