Rent to Rent?

Squiggly_Diddly

I know that there are tax implications etc with BTL, I wonder though if anyone has any advice/suggestions/knowledge they could pass on re 'rent to rent' as this is what I am considering.

I couldn't possibly afford to buy the type of house I would like to rent, but would like to move from the property I currently own. Having owned it for 18 months it's not practical to sell at this time either & to be honest if I find I then can't afford the bigger house I know I could come back (not that it is likely but who knows these days). I do like my existing house, but with 3 teenage girls in a 3-bed semi, we are desperate for space & also to be in a better area.

So my plan is to rent this out, for which local letting agents advise I could get around£750-£795 p/m for, and then obviously that would be minus about 8-10% their fees. (I would be happy to consider someone receiving HB - I am having a conversation with the bank re implications of renting mine out next week). The houses I am looking at renting are around £850 pm, so I would be paying about an extra £150 pm which is within my budget. I do have an 'emergency fund' should I not have tenants in place at any time, or for repairs, etc.

Is there anything else I should be considering / have missed????

Thanks in advance

theartfullodger

Having owned it for 18 months it's not practical to sell at this time

- How much negative equity?

we are desperate for space & also to be in a better area.

- members of a large, growing, club then...

How much is your mortgage cost/month? Is that interest only (chargeable against income from rent) or repayment? Has the lender OK'd you renting out?

What other expenses of renting (insurance, travel, maintenance, repairs, legal costs, landlord association membership etc etc etc..) have you budgeted for?? Do you expect to make a profit/break-even/lose money?

If you get the letting-agent-from-hell, the tenant-from-hell, legal bills to sort both out and have some other family crisis (illness-can't-work, lose job, unexpected expenses..) - how long will you be able to survive for??

If property prices drop another 20% (some forecast this, others are more optimistic..) how will you be fixed?? If interest rates increase (they will, they will, I remember paying a mortgage at 15% some 30-odd years ago/..) can you survive? (Tenants don't seem to want to pay more rent just because interest rates have gone up...)

Cheers! Welcome to the fun world of property management..

Lodger

zzzLazyDaisy

Remember also that it is not a straight 'rent for rent' calculation.

Even if you don't have a mortgage, the rent you receive is taxable, so it is only the net rent after tax and other expenses that is available to offset the rent on the new house.

G_M

local letting agents advise I could get around£750-£795 p/m for,

You need to calculate on only getting 10 months rent per year. Gaps between tenants. Costs of re-letting each time tenant changes, maintenance costs, tax on rental income.... Go to Waterstones or the library and get a good book on letting to read up on everything that's involved. A letting Agent may tell you some stuff, but they'll basically be interested in getting you signed up on their books!

poppysarah

I know someone doing this to move within a school boundary. I think it's insane. It might not work and get them a place and there's so many risks putting a tenant into your home.

silvercar

If you are happy to let to HB tenants, then you could just contact the council and ask if they have anyone they can refer to you. Save you the letting agents fee. Remember to still credit check them even if they come from the council; you would be looking for someone with no CCJs etc even if the credit check shows insufficient income to pay the rent. Your council may have a deposit bond scheme.

If you are happy to take HB tenants, i doubt you would have that many voids, particularly if the rent is near HB levels for your area.

Tax wise, the mortgage interest is an allowable expense against your rental income; as is insurance, gas safety certificate, any maintenance etc.

Ask your lender for "consent to let" initially, rather than changing to a BTL mortgage.