Advice for new landlord please

Emm_Eff

Hi Guys,

I own a property that I intend to let around August. I've spoken to an estate agent and would be quite happy to have them manage the letting for their 15% fee. However, one of the neighbours says their daughter is interested in renting the property.

I'm thinking of renting to the daughter and cutting out the estate agent in order to save the 15% (I'll split the difference between me and the tennant).

I'm assuming I'll need to get a solicitor to draw up a tenancy agreement for me, and I'll need to arrange repairs/maintenance myself. I'll also need to arrange a gas safety check every year.

Will I still need to get a home energy report? If i deal with the solicitor to draw up the tenancy agreement, what is the cost likely to be and will it be a "one-off" transaction, or will I have to deal with the solicitor regularly? I'm thinking I might need to get the solicitor to write to the tenant with a new agreement if I decide to up the rent or whatever?

Any advice appreciated as this is the first time I'd be doing this, and I really don't have much of a clue what I'm doing!

Oh, and the property is in Scotland and as I have a LTV of 50% on my mortgage, the bank has given me written permission to lease with a review required in 3 years time.

If you need any more info, just let me know.

Cheers

BitterAndTwisted

Join a landlords association pronto to find out what you may be letting yourself into. For a rough idea log on to the landlordzone forum

00ec25

as it is in Scotland you will need to register with the council as a landlord - failure to do so is a criminal offence in Scotland

you really need to join a professional LL association

tbs624

Have a look here here here here and here You may also want to go onto Shelter Scotland's website and read up on T's rights.

Even if you did use an LA, you still need to understand the rights and obligations of both LL & T or you may have a hard time of it. The fact that you know your potential T doesn't necessarily mean that things will be straightforward.

IIRC the requirement for an EPC for rental properties in Scotland came in in January 2009 - very few Ts seem interested in looking at them but you still need one.

Emm_Eff

I'll have a look through all this info. I'm getting the general feeling that advice here is to be careful. Do you guys think it would be better for me to use a letting agent to make sure everything is legal and above board, and just take a hit for the 15%?

TheBrutalTruth

Emm_Eff wrote: »

Do you guys think it would be better for me to use a letting agent to make sure everything is legal and above board, and just take a hit for the 15%?

Yes, just use the professionals and reduce your liability. If you are worried about the 15% then you are probably not making enough money on the property for it to be worth the hassle.

I think it is an extremely bad idea to have the neighbour's daughter for a tenant. If things go sour she knows exactly where you live and it could damage your relations with your neighbour.

A lot of people get involved with renting for the wrong reasons, thinking it is a simple way of making money. Remember you are providing a roof over someone's head, and if something goes wrong, tempers will fray very very quickly.

Emm_Eff

TheBrutalTruth wrote: »

Yes, just use the professionals and reduce your liability. If you are worried about the 15% then you are probably not making enough money on the property for it to be worth the hassle.

I think it is an extremely bad idea to have the neighbour's daughter for a tenant. If things go sour she knows exactly where you live and it could damage your relations with your neighbour.

A lot of people get involved with renting for the wrong reasons, thinking it is a simple way of making money. Remember you are providing a roof over someone's head, and if something goes wrong, tempers will fray very very quickly.

Hi,

If I use the estate agent and pay the 15%, then once I've paid the mortgage and landlord`s insurance I will have 25% of the rental income left over. I'm leasing the property because I don't live in it anymore, but I'm still paying mortgage and all the bills!

As for the neighbour's daughter, you make a fine point but I think it's maybe a double edged sword. She has partner and a kid and is from a good family, so the house will not be trashed (hopefully)

I'm thinking 25% yield is pretty good for a property I don't live in that is costing me money every single month! I understand I will have maintenance costs over the year, but surely 25% is a good yield?

TheBrutalTruth

I am not a property professional, but my understanding is that yield is calculated thus:

Gross yield = Current house value/Annual rental income
Net yield = Current house value/(annual rental income-expenses)

So, I'd be surprised if either of those yields exceeds 10% in your case. Ideally you'd want a net yield of 10% as at that level you don't need to worry about house prices. If whether or not you think it is worth it depends on house prices going up would be a red light in my opinion.

Why don't you simply liquidate the asset?

poppysarah

A years rent - 15% - insurance, gas check, tenant checks, mortgage (only interest is tax whatsitable?) ...
and you have 25% left for repairs and tax...

TheBrutalTruth

Sorry for the multiple posting, but I forgot to ask - are you on a fixed rate?

pyueck

Emm_Eff wrote: »

Hi,

If I use the estate agent and pay the 15%, then once I've paid the mortgage and landlord`s insurance I will have 25% of the rental income left over. I'm leasing the property because I don't live in it anymore, but I'm still paying mortgage and all the bills!

As for the neighbour's daughter, you make a fine point but I think it's maybe a double edged sword. She has partner and a kid and is from a good family, so the house will not be trashed (hopefully)

I'm thinking 25% yield is pretty good for a property I don't live in that is costing me money every single month! I understand I will have maintenance costs over the year, but surely 25% is a good yield?

I completely agree, if you know the girl and she is a decent person, this is way better than any reference you can get. And considering most landlords margins are pretty low, taking out the 15% fee is huge. You can get a gas check done for £40, just look in your yellow pages. As far as the tenancy agreement you can get one for £10. There is loads of advice on here that is a lot more legally accurate than any letting agent.