Moving house - rent out old one?

granada42

Hello

We are in the process of buying a new house and are in the fortunate position in that we don't have to sell our old house. I bought the old one about 10 years ago and have since paid off the mortgage.
With our new house we are paying about £650 per month in mortgage payments so it's going to obviously have an effect on our monthly income (both work part time).

We have 2 options

1 - sell the old house - it's probably worth £90,000 now if indeed it will sell
and pay off a big chunk of our mortgage.

2 - rent out the old house - probably get £400 per month.

I'm thinking of renting it out as I don't have any pension provision so could keep it for a future investment. Never rented a property out before, obviously there's quite a lot to take into consideration.

I'd be keen to hear what others would do in this situation.

Cheers in advance

thriftyamy

Speak to your bank first and foremost, ours were extremely helpful and understanding - my property isn't worth enough to justify selling it and they basically said as they're stuck with it on their books it's in their best interest to ensure we pay the mortgage off, so they've agreed to us letting it out without having to change to a BTL mortgage!

Don't forget any outstanding mortgage on your old house will affect how much you can borrow for the next one (they don't really take the rental income into consideration because it's not guaranteed)

Mini_Bear

Surely if the OP doesnt have a mortgage on the house he is renting out he doesnt have to speak to the bank - he owns it completely and wont need permission?!
OP make sure you understand the tax implications of renting, along with the necessary safety checks and insurance.
I feel it makes sense to rent it out at the mo BUT there are many horror stories on here of nightmare tenants so bare that in mind!
Good luck whatever u decide!

thriftyamy

sorry, my fault for skimming!

point 1 confused me I see now, if they sold it, they could pay off a big chunk of the NEXT mortgage, I thought they meant that house's mortgage

In that case I'd definitely rent it our if you're happy to do that long term, it's only ever going to go up in value (eventually!) now as you know, it's a buyers market!

00ec25

400pcm BEFORE COSTS and INCOME TAX gives a gross rental yield of 5.3% (400x12/90000)
remember you will not clear 400pcm, you will have costs of running the property and whilst its value may well rise in the future, if you cannot increase the rent level at the same rate that means your yield will reduce

if you had a lump sum of 90,000 now in cash could you invest it in something really simple like a cash deposit and get an interest rate approaching 4.5 - 5% (you probably can quite easily) becuase that would make it comparable with the rent yield without any of the risks of dealing with the tenant from hell and all the risks of big repair bills etc in the future

your choice

theartfullodger

ONLY rent of you can cope with the financial & emotional agrro of the "Tenant from hell" who you can't get out for 9 months whilst you keep paying the mortgage etc./ etc... and legal fees (to get him out) and then he 'phones you saturday 10:22 pm "Toilet's bust wodja gonna do..." "Sorry to hear that dear sir, when did this start" "Wodja goona do... wodja gonna do - dunno 3-4 weeks maybe,.,.. wossat gorra do 'wiv it??" "OK, I'll get my man to call you Monday 1st thing..." "Nah, you gorra fix it nah..>""""


(PS Yes, you have a legal requirement to fix the gentleman's toilet, notwithstanding his not having paid you for 7 months,.....")

If you are not sure you can cope, find another business to go into...

Cheeers!

Lodger