Advice for new landlord please

Emm_Eff

OK, had a wee think over everything.

The yield is a bit irrelevant for me because I'm not looking to maximise profits like a business would be. Of course, I wouldn't want to be making a loss but as long as I retain the asset and cover my costs I think I'd be quite happy. I may only be leasing the property for a year or two. Also, if house prices rise then my yield is less... however, if house prices rise it has no effect on my mortgage payments or my rental income so I don't really see too much sense in concentrating on yield in my situation.

Total mortgage payments = 282*12 = 3384.
Total rental income = 475*10 (allowing for 2 empty months) = 4750.

Gross profit = 4750 - 3384 = 1366.

Costs:

15% for management fee = 712
Yearly gas safety = £75
Maintenance costs (complete guess) = 200
Landlord's insurance = 250

Total costs = 712+75+200+250 = 1237.

Net profit = Gross - Costs = 1366 - 1237 = 129

So, looking at only gaining 10 months rental income per annum and allowing for £200 maintenance costs per year, I'd still be making a small profit (£129). The one thing I haven't factored in is tax, but surely at those figures it would be very low?

I could maximise this profit by:

a) Gaining the other 2 months rental income
b) Not having to pay the £200 maintenance costs
c) Cutting out the letting agent and saving £712 per year (£850 if I can keep it occupied for the full year).

I have to say that if I did have problems getting rent paid by the tenant, I could probably handle having to pay the mortgage in it's abscence. I would also say that if the loss of rental income kept up, I'd evict the tenant and sell the property.

It's important to note that the net profit quoted above doesn't reflect the fact that as soon as I start leasing the property I'm saving roughly £3,300 in mortgage payments over the year, which is what I am paying now and no-one lives there!

Am I making sense? I'm not asking anyone to say "yeah, go for it!"... obviously it's my decision. I suppose what I am asking, is am I convincing myself that something is a good move when in reality it would be a disastrous move for me? On the surface, it looks like the best thing to do in my situation, given that I want to retain ownership of the property and that I don't want to have to continue paying thousands on a mortgage for a house I no longer live in.

As always, many thanks to anyone who can take the time to reply. It's been a very interesting conversation so far!

madeupname1

Emm_Eff wrote: »

Am I making sense? I'm not asking anyone to say "yeah, go for it!"... obviously it's my decision. I suppose what I am asking, is am I convincing myself that something is a good move when in reality it would be a disastrous move for me? On the surface, it looks like the best thing to do in my situation, given that I want to retain ownership of the property and that I don't want to have to continue paying thousands on a mortgage for a house I no longer live in.

Yes you are making sense. No it doesn't look disastrous.

Emm_Eff

OK, I'm happy with the financials in that even with a 15% management fee (still to decide on that), I can make it pay for my situation.

I'm now looking at all the legals. I will be leasing in Scotland under a short assured tenancy (form at5). I believe I have to issue at5 to my tenant and get it signed before I get them to sign the tenancy agreement.

AT5: http://www.scotland.gov.uk/housing/leaflets/at5-00.asp

I will then get a tenancy agreement signed. Something similar to this service: http://www.lawpack.co.uk/Property/LandlordAndTenancy/product700.asp

The initial agreement will be for the minimum 6 months. I will then have one drawn up for 1 month.

Questions:

1. Do I have to give any notice that I will be requesting the second (1 month agreement) at the end of the initial (6 month agreement). Basically, can I just turn up with a week to go and request the 1 month agreement? I'm assuming if the 1 month agreement is refused by the tenant, then we are on another 6 months?

2. Similar to above, when the 1 month agreement is signed there is no need to keep signing agreements any more. At the end of each month, common law dictates that another 1 month agreement has effectively been put in place... just like a 1 month rolling agreement.

17. What if the landlord has not served a notice to quit and the agreed last date of a tenancy is reached?

if -

a.. the landlord has not served a notice to quit;

b. the last date as agreed between the landlord and the tenant of a tenancy has arrived; and

c. the tenant does not leave voluntarily, the principle is that the tenancy simply continues at common law, on exactly the same terms as before that date and for the same period, except that if the original tenancy was for more than one year the tenancy will continue for only a year at a time.

3. If I want the tenant out, I need to do 3 things. Serve a notice to quit (1 month notice). Serve a notice of proceedings. Obtain a court order for possession from a sheriff court. Is this a simple process, and will I need a solicitor to get the court to grant me possession?

The last question is the one that is really bothering me.