Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • Robomb
    • By Robomb 9th May 17, 9:51 PM
    • 4Posts
    • 0Thanks
    Robomb
    Renting out my one bed flat yay or nay?
    • #1
    • 9th May 17, 9:51 PM
    Renting out my one bed flat yay or nay? 9th May 17 at 9:51 PM
    I own a one bedroom flat in the suburbs of London. I bought it back in 2012 just before prices rocketed, I have lived in it ever since. I am now in the position where my boyfriend has asked me to live with him and so I am seriously considering renting my flat out to tenants. However there seem to be so many financial factors to consider that I feel a bit lost and am starting to wonder if it is a realistic move.

    I do not expect to make any profit from the rental, only hope that it pays for itself plus money aside for maintenance. Can anybody advise me if my calculations/expectations are accurate? Or if I am missing something?

    I currently have a repayment mortgage of £450 a month. I know the rental value to be £850 a month. I also pay approx £600 per annum in ground rent and buildings insurance. I intend to manage the property myself as I know how the property ‘works’ and have a some good handymen nearby. I am also going to try to find tenants myself (initially at least) through putting the word out to friends and family. However I would like a letting agent to take care of the contracts, deposit, admin, credit checks and money collection. In terms of the mortgage I am in the middle of a fixed 5 year term. I intend to call the bank and explain my situation, are they likely to increase my mortgage? Try to change it to a Buy to Let? How much more is this likely to be? How much tax will I have to pay on my additional gains from the rent? I recently went down to part time at work, so my current income is only £24,000. I am also aware that I will need landlords insurance and safety certs for the boiler. How much do these things cost on average? As a leaseholder do I need to tell the freeholder (management company) that I intend to rent the property?

    Can anyone advise me if they think this is too risky a move? Or give further advice?
Page 2
    • economic
    • By economic 10th May 17, 12:40 PM
    • 1,823 Posts
    • 937 Thanks
    economic
    Why bother responding in that case?
    Originally posted by Crashy Time
    to inform others who dont know about you. if people listened to you, they would be much worse off financially. no one wants to be a loser like you crashy.
    • Crashy Time
    • By Crashy Time 10th May 17, 12:45 PM
    • 5,010 Posts
    • 2,157 Thanks
    Crashy Time
    to inform others who dont know about you. if people listened to you, they would be much worse off financially. no one wants to be a loser like you crashy.
    Originally posted by economic

    So you would advise people to fill their boots with debt at 400-500k a pop for London new-builds in dodgy soulless areas then?
    • economic
    • By economic 10th May 17, 12:56 PM
    • 1,823 Posts
    • 937 Thanks
    economic
    So you would advise people to fill their boots with debt at 400-500k a pop for London new-builds in dodgy soulless areas then?
    Originally posted by Crashy Time
    i wouldnt no, and i said this before. but then you have said for years not to buy int this supposive bubble and people listened to you they would have lost out. simple fact. funny thing is you have lost out massively. hence you are what people would call a loser.
    • Crashy Time
    • By Crashy Time 10th May 17, 1:01 PM
    • 5,010 Posts
    • 2,157 Thanks
    Crashy Time
    i wouldnt no, and i said this before. but then you have said for years not to buy int this supposive bubble and people listened to you they would have lost out. simple fact. funny thing is you have lost out massively. hence you are what people would call a loser.
    Originally posted by economic

    You bought back into the London bubble at peak prices hoping/believing prices would keep going up didn`t you?
    • economic
    • By economic 10th May 17, 1:15 PM
    • 1,823 Posts
    • 937 Thanks
    economic
    You bought back into the London bubble at peak prices hoping/believing prices would keep going up didn`t you?
    Originally posted by Crashy Time
    nope, i told you already why i bought. why do you sound like a broken record?

    i bought because i dont want to waste money on rent. i have the money to buy. i am earning 4% income a year on my capital invested in my home. tax free. even if prices fall i would still be better off long term. i hate the idea of renting. i have other invesments as well and my LTV is 50%.
    • agrinnall
    • By agrinnall 10th May 17, 3:04 PM
    • 18,515 Posts
    • 14,228 Thanks
    agrinnall
    But you didn`t say that, you said sell it now and "bank the tax free profit". In response I said that tax on buyers could make this difficult.
    Originally posted by Crashy Time
    It's implied, it's tax free profit now because there is no tax to pay when selling ones main home, if the OP goes ahead with their plan profit may well be liable for CGT in the future. As I'm sure you know but ignore so that you can spout nonsense. The SDLT paid by a buyer has no impact on the profit made by the seller or on any CGT that the seller is or is not liable to pay.
    • Crashy Time
    • By Crashy Time 10th May 17, 3:24 PM
    • 5,010 Posts
    • 2,157 Thanks
    Crashy Time
    It's implied, it's tax free profit now because there is no tax to pay when selling ones main home, if the OP goes ahead with their plan profit may well be liable for CGT in the future. As I'm sure you know but ignore so that you can spout nonsense. The SDLT paid by a buyer has no impact on the profit made by the seller or on any CGT that the seller is or is not liable to pay.
    Originally posted by agrinnall

    It does if the tax makes them more cautious about buying, it could mean less, or even no profit for the seller.
    • Crashy Time
    • By Crashy Time 10th May 17, 3:26 PM
    • 5,010 Posts
    • 2,157 Thanks
    Crashy Time
    nope, i told you already why i bought. why do you sound like a broken record?

    i bought because i dont want to waste money on rent. i have the money to buy. i am earning 4% income a year on my capital invested in my home. tax free. even if prices fall i would still be better off long term. i hate the idea of renting. i have other invesments as well and my LTV is 50%.
    Originally posted by economic

    Safe to say that you have more at stake than me if the London property bubble pops though?
    • Robomb
    • By Robomb 17th May 17, 6:01 PM
    • 4 Posts
    • 0 Thanks
    Robomb
    I would imagine you would need freeholder subletting consent (check your lease) which might involve fees. Also you might get charged a higher rate by your mortgage company. Don't forget about rules regarding registering the deposit as penalties can be high otherwise. Most laws also favour tenants rather than landlords.
    Originally posted by boliston
    Thanks this is useful advice. I will contact my freeholder today. I just spoke to the bank and luckily they will grant me a consent to let for just a one off fee of £100 which is great, no mortgage increase. I will definitely register the tenants' deposit lawfully. Thanks again.
    • G_M
    • By G_M 17th May 17, 7:52 PM
    • 41,441 Posts
    • 47,772 Thanks
    G_M
    If you have not yet done so, please read the links I gave you in my post 10 above. It's not just the mortgage lender's consent you need to learn about/sort.

    I fear you may have been distracted by the 'online debate' (to be polite) in the intervening posts........
    • tweeet
    • By tweeet 17th May 17, 10:20 PM
    • 149 Posts
    • 27 Thanks
    tweeet
    I also bought a two bed house in 2012 (not Londinium tho) and am selling. Rented to friends for two years and if I hadn't got them out sharpish then the house would be in bits....agent looking after it or not...you get dirty lazy people in you're knackered. How much did you buy for in 2012 ? Let's guess £200k....its probably gone up £70k...sell it !!
    • Crashy Time
    • By Crashy Time 19th May 17, 1:39 PM
    • 5,010 Posts
    • 2,157 Thanks
    Crashy Time
    I also bought a two bed house in 2012 (not Londinium tho) and am selling. Rented to friends for two years and if I hadn't got them out sharpish then the house would be in bits....agent looking after it or not...you get dirty lazy people in you're knackered. How much did you buy for in 2012 ? Let's guess £200k....its probably gone up £70k...sell it !!
    Originally posted by tweeet

    Yep, sell it while you can....


    http://www.telegraph.co.uk/news/2017/05/18/stamp-duty-tax-raid-prompts-sharp-drop-buy-to-let-lending/
    • movilogo
    • By movilogo 19th May 17, 2:17 PM
    • 2,272 Posts
    • 1,544 Thanks
    movilogo
    If the property can generate positive cashflow (actual amount is immaterial), considering some insurance factor if things go wrong

    => let it

    If generating negative cashflow => don't let it

    PS: Make sure you understand how tax is calculated on rental income.
    Happiness is buying an item and then not checking its price after a month to discover it was reduced further.
    • Crashy Time
    • By Crashy Time 19th May 17, 6:57 PM
    • 5,010 Posts
    • 2,157 Thanks
    Crashy Time
    If the property can generate positive cashflow (actual amount is immaterial), considering some insurance factor if things go wrong

    => let it

    If generating negative cashflow => don't let it

    PS: Make sure you understand how tax is calculated on rental income.
    Originally posted by movilogo

    The problem is finding a buyer when loads of other BTL are running for the exits?
    • mn2203
    • By mn2203 29th May 17, 1:24 PM
    • 24 Posts
    • 1 Thanks
    mn2203
    I own a one bedroom flat in the suburbs of London. I bought it back in 2012 just before prices rocketed, I have lived in it ever since. I am now in the position where my boyfriend has asked me to live with him and so I am seriously considering renting my flat out to tenants. However there seem to be so many financial factors to consider that I feel a bit lost and am starting to wonder if it is a realistic move.
    Originally posted by Robomb
    Hi - can I ask if you have decided what to do?

    I am in a similar boat and trying to weigh everything up


    I own a 1 bedroom flat with £12k left to pay looking to reduce term of mortgage down to 2.5 years to end in August 2019 as this is when the 5 year fix is up.

    Plan to move into bf's property next April - he has a 3 bedroom new build with help to buy scheme. This would not be our long term home, as would purchase something together a few years down the line.

    I've been researching the renting (either long term or until I want to buy a bigger joint property with bf) vs selling up when I move in with him in April and save my lump sum to use as my share when we buy a joint property down the line.

    I have been told I can get £695 per month rental income, but I know this would be taxed at 20%, plus pay agents fees, insurances etc. I would not necessarily be renting it to make money, but I am reluctant to give up my only asset.

    I am weighing up the pros and cons - with renting I would have income that would cover/ go towards my share of a joint mortgage and I would also not loose my financial independence but does come with added responsibilities and the impact of CGT when I sell eventually (unless this was within 18 months of me moving out of the property) and a higher SDLT as I would be buying a second property - I suspect our joint property would be over £250k.

    If I sell when I move out next April, I would have £125k capital but would not be looking to purchase a joint property for a year as our careers could change in a couple of years which could take us elsewhere in the country, so what to do with this cash in the meantime.

    Thanks
    • Crashy Time
    • By Crashy Time 29th May 17, 1:43 PM
    • 5,010 Posts
    • 2,157 Thanks
    Crashy Time
    Hi - can I ask if you have decided what to do?

    I am in a similar boat and trying to weigh everything up


    I own a 1 bedroom flat with £12k left to pay looking to reduce term of mortgage down to 2.5 years to end in August 2019 as this is when the 5 year fix is up.

    Plan to move into bf's property next April - he has a 3 bedroom new build with help to buy scheme. This would not be our long term home, as would purchase something together a few years down the line.

    I've been researching the renting (either long term or until I want to buy a bigger joint property with bf) vs selling up when I move in with him in April and save my lump sum to use as my share when we buy a joint property down the line.

    I have been told I can get £695 per month rental income, but I know this would be taxed at 20%, plus pay agents fees, insurances etc. I would not necessarily be renting it to make money, but I am reluctant to give up my only asset.

    I am weighing up the pros and cons - with renting I would have income that would cover/ go towards my share of a joint mortgage and I would also not loose my financial independence but does come with added responsibilities and the impact of CGT when I sell eventually (unless this was within 18 months of me moving out of the property) and a higher SDLT as I would be buying a second property - I suspect our joint property would be over £250k.

    If I sell when I move out next April, I would have £125k capital but would not be looking to purchase a joint property for a year as our careers could change in a couple of years which could take us elsewhere in the country, so what to do with this cash in the meantime.

    Thanks
    Originally posted by mn2203

    You are making assumptions about renting out (no voids and the level of rent you can get) and about being able to sell at a certain price sometime in the future, none of this may pan out as you expect. Paying down the 12k and keeping the flat is a good idea, but the tax implications of renting it is something you will need to think about, especially as there will likely be more tax grabs made on BTL in future.
    • mn2203
    • By mn2203 29th May 17, 2:22 PM
    • 24 Posts
    • 1 Thanks
    mn2203
    You are making assumptions about renting out (no voids and the level of rent you can get) and about being able to sell at a certain price sometime in the future, none of this may pan out as you expect. Paying down the 12k and keeping the flat is a good idea, but the tax implications of renting it is something you will need to think about, especially as there will likely be more tax grabs made on BTL in future.
    Originally posted by Crashy Time
    I have considered voids and even considerably less rent per month would cover my mortgage payments, so I am thinking about all options available.

    I also don't necessarily expect to get what the agent has valued it at which I believe is over inflated.

    I would only have approx 1 year left of mortgage to pay when i come to rent it out, so not a buy to let, but yes potentially there could be more changed to regulations down the line - could go either way!!
    • Crashy Time
    • By Crashy Time 29th May 17, 2:51 PM
    • 5,010 Posts
    • 2,157 Thanks
    Crashy Time
    I have considered voids and even considerably less rent per month would cover my mortgage payments, so I am thinking about all options available.

    I also don't necessarily expect to get what the agent has valued it at which I believe is over inflated.

    I would only have approx 1 year left of mortgage to pay when i come to rent it out, so not a buy to let, but yes potentially there could be more changed to regulations down the line - could go either way!!
    Originally posted by mn2203

    Tax implications won`t affect you like they will people who have multiple properties and are over-leveraged on mortgage debt so you are in a good position there.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

4,823Posts Today

9,302Users online

Martin's Twitter
  • Yes. Theyre being paid. They're responsible. Especially for a scam that's been reported over 20 times andseen vulne? https://t.co/Q0pHZ7iH3W

  • Quite right.Broken system as the six week delay forces the most vulnerable into debt at a crisis moment https://t.co/951fogq5ej

  • This is a good brief summary of the evidence I have to the lords on the problems with our student finance system... https://t.co/LQqggZMlgH

  • Follow Martin