Is renting our house out and buying now a big gamble?

macgirl

Hi KCMatt69

I'm in a similar situation to you and I'm inclined to agree with silvercar.

Why not wait til you've repaid most of your debt? It is a significant amount and coupled with 2 mortgages it could add up to sleepless nights should you:

A) Have period when the rental is empty
Your Partner's business hits a dry patch
C) You lost your job (maybe not likely but always a possiblity)

I'm not judging - you sound abit like me, debt is very easy to run up but a nightmare when it mounts up and gets out of control.

I want to move RIGHT NOW but have accepted that I have to wait and know it will be all that much sweeter when I really can afford it.

Good luck whatever you decide!

confused31_2

kcmatt79 wrote: »

That was based on our current mortgage rate

yeah but you wont get that rate as you will have to get a new mortgage for the new property.

Nenen

I'm not an expert by any means (never been a landlord) but something else you might want to think about is that the money you receive in rent will preumably be taxed and I think I've read on these boards that if you sell a house that you don't live in yourself, i.e. your BTL in a year of so, then it will be liable for capital gains tax.

Also, the rent you receive (less mortgage payments) is not all pure profit because as a landlord you have to pay for upkeep of the property and for things like the boiler going wrong. If tenants move out then you may have to decorate to attract new ones and replace carpets etc. You said you would leave some of your furniture... is this stuff you don't want any more because if not you could be upset if you got a tenant who didn't look after it. Hopefully you will get model tenants (like us ) who take care of your property and are reliable payers etc but you only have to read the boards to find some real horror stories of tenants trashing the place or LLs spending months to get people evicted for non-payment of rent etc. In theory it sounds great but in practice you need to know what the pitfalls are! There is a good website somewhere for landlords... try searching MSE for it as it has lots of good advice.
Good luck

silvercar

I'm not an expert by any means (never been a landlord) but something else you might want to think about is that the money you receive in rent will preumably be taxed and I think I've read on these boards that if you sell a house that you don't live in yourself, i.e. your BTL in a year of so, then it will be liable for capital gains tax.

The mortgage payments (interest part at least) are an allowable expense, so I doubt there would be income tax to pay. As for CGT, if the property has been your home there are loads of relief available so it would be years before you hit a CGT liability.

Also, the rent you receive (less mortgage payments) is not all pure profit because as a landlord you have to pay for upkeep of the property and for things like the boiler going wrong. If tenants move out then you may have to decorate to attract new ones and replace carpets etc. You said you would leave some of your furniture... is this stuff you don't want any more because if not you could be upset if you got a tenant who didn't look after it. Hopefully you will get model tenants (like us ) who take care of your property and are reliable payers etc but you only have to read the boards to find some real horror stories of tenants trashing the place or LLs spending months to get people evicted for non-payment of rent etc. In theory it sounds great but in practice you need to know what the pitfalls are! There is a good website somewhere for landlords... try searching MSE for it as it has lots of good advice.
Good luck

All true. Even with money set aside its a hassle and worry when rent doesn't come in.

landlordzone.co.uk is a very good site.

Nenen

silvercar wrote: »

The mortgage payments (interest part at least) are an allowable expense, so I doubt there would be income tax to pay. As for CGT, if the property has been your home there are loads of relief available so it would be years before you hit a CGT liability.

I know you've since provided more realistic figures Silvercar but originally the OP was talking about making £550 per month 'profit' after paying the mortgage. I realise he could then make certain deductions for maintenance etc but, out of interest, if it had been realistic, isn't that sort of profit taxable?

silvercar

Nenen wrote: »

I know you've since provided more realistic figures Silvercar but originally the OP was talking about making £550 per month 'profit' after paying the mortgage. I realise he could then make certain deductions for maintenance etc but, out of interest, if it had been realistic, isn't that sort of profit taxable?

For the sake of arguement, I would expect on a rental income of £800 a month, property value around 200k:

annual rent = 800 x 11 (1 month void) 8800

mortgage costs 230 (!) x 12= 2760
agents fees (find only @10% or managed @15%) 960/ 1440
property building insurance 200
10% wear and tear allowance 880
tenant deposit scheme 50
gas certificate 80
total 4930 /5410

likely profit 3870/3390

I've only included compulsary insurance of the building. Landlords often take out insurance to safeguard rents as well.

But then remember that a mortgage doesn't have to be secured on the let property. So with a property value of 200k (at the time of initial letting) and a mortgage of 50k, there is 150k of mortgage unused for tax purposes. Provided the landlord has taken out this amount of mortgage elsewhere he can argue that without the BTL he would not have had (such a large) this mortgage and so interest on 150k of his residential mortgage would be an allowable expense of the BTL. 5% mortgae on 150k, interest only would be another 7500. So the landlord would be declaring a loss.