Property Renting

elaine32

I have a 4 bedroom house in a council estate It's been on the market for 20months now with few viewers really want to move, so was thinking of renting property out.
As I feel property would rent no problem hubby reluctant to do this but I think I can change his mind.

details 4 bedroom house, mortgage outstanding £32,000 6yrs approx, house value £115,000 no savings for dep for another mortgage,would we get a mortgage to buy elsewhere, what are the downsides of renting.

Fire_Fox

Why isn't the house selling, is it cluttered or overpriced? Why don't you have any savings, haven't you been saving for the last twenty months? You would need consent to lease from your lender, letting a house in a council estate might be more likely to attract those on a lower income who might not pay or might not treat the house with respect (this depends how well kept the area is).

You won't get a second mortgage without a deposit, you could MEW from your existing house but that makes that mortgage larger. Would the predicted rent cover the mortgage, income tax, letting agency fees etc.? Could you afford to pay two mortgages if your tenants don't pay the rent or the house is empty for a few months? The bank will want to be satisfied you have a large enough income to do this. If you can't save then I suspect you can't afford to run two houses.

elaine32

Don't know why house isn't selling, Not cluttered or overpriced according to 3 EA's, savings I have a ISA due to expire April 2011 which should release £10K+, Have 3 Kids been on Mat leave so unfortunately no other savings, at the moment our joint earnings £40K I could put current mortgage over longer term which would bring payments down. think I'll go speak to bank.

clutton_2

""think I'll go speak to bank.""

pleeeeeease dont do that until you have read up on renting and the problems you may have

read www.landlordzone.co.uk for a start and there you will find out the horrors that can befall a newbiew landlord......

FF above is absolutely right when he says can you afford 2 mortgages payments ?

If a tenant stops paying you - worse case scenario you could be ploughing through the courts for 6 months or 12 months to get them out... being a landlord is no where as easy as folks imagine.. and i have been doing it for 10 years.....

Mischa

I think renting is a great idea! Do beware of capital gains tax, as if the rental income is more than the mortgage you will pay tax on that profit. I rent out a house and the rent pays for my mortgage, so I do not pay capital gains tax on it because I am not making a profit. I contacted my mortgage lender and changed to a buy to let mortgage with ease and did some online research for tips and advice. I found this webiste really useful: http://www.legalcentre.co.uk/tenancy-agreements/guide/tenancy-deposit-schemes/ it also sells all the legal documents like tenancy agreements and things you may need. I can totally see why your other half is reluctant, it's not a decision to be taken lightly and you need to be able to rid yourself of any sentimental feelings towards the property as it may be abused by your tenants. make sure it's right for you, book a consultation with your mortgage lender to discuss your options. Also see http://www.legalcentre.co.uk/tenancy-agreements/ so you have an idea of costs too and who is reponsible for what. I know this is obvious, but aslong as you do sufficient research for either renting out the house or not renting it out and the financial implications of each in the long and shor term, you'll be sure to make the right decision. Don't be hasty. Best wishes.

N79

Mischa wrote: »

I think renting is a great idea! Do beware of capital gains tax, as if the rental income is more than the mortgage you will pay tax on that profit. I rent out a house and the rent pays for my mortgage, so I do not pay capital gains tax on it because I am not making a profit.

What drivel.

Your post confuses capital gains tax and income tax. Also note that you can not offset a mortgage against income tax - relief is only available on interest. Mortgage payments can not be offset against capital gains tax at all.

clutton_2

"" Do beware of capital gains tax, as if the rental income is more than the mortgage you will pay tax on that profit. I rent out a house and the rent pays for my mortgage, so I do not pay capital gains tax on it because I am not making a profit.""

this is where the www is a mixed blessing - the above statement is utterly untrue in every respect..

Capital Gains Tax is payable when you sell an investment property - and it is a highly complex tax to calculate as your residential time in the property determines your tax liability..... CGT is the tax on the difference between the bought and sold price of your property - less the allowances ..... CGT is currently 18%

what Mischa is thinking about is income tax.... you will pay income tax on any profit you make on the letting...... there are many expenses you can legitimately incur before tax is due....

as i said, going into property is a complex affair and needs a lot of research - you will be lending someone your asset worth £115,000 - dont rush into things

Nosht

One important point is are you going to manage it yourself or employ a letting agency?


Regards,

N.

clutton_2

dont even thinkn about managing it yourself till you have spent a few months researching what it means to be a LL

poppysarah

Worth = what it's not selling at? Perhaps it's not seen as worth that much.

Do lots of research - loads of useful threads here and on landlord forums