Renting - is this right?

Lifeisbutadream

Cannon_Fodder wrote: »

Oh, yes it is! She might not have planned it as a business, but being a landlord has commercial, legal and financial obligations.

Her choice to rent somewhere else has no bearing on the choice to rent out a property. (she could go home to the parents/lodge with friends/buy another property if she had the cash to convert first mortgage into BTL and put a deposit on new place, a host of choices..)




How can it cost more elsewhere? Assuming she is charging the going rate for the type of property, the same type of property that she moves to will be much the same rate round the corner, a few streets away, or whatever.

Even downsizing costs more than she would get for her house after agency charges - I dont know why - thats life I suppose?

If she chooses not to charge the going rate, that is a business decision she may come to regret.


Has she tried asking her Lender if they will port the mortgage to a property of the same value elsewhere ? Sometimes, they don't mind if the end result of her negative equity position comes out the same...

No she cant as she has just started her own business, so has no job history.

She needs to tackle the serious element of stalking/abuse properly. Get him charged for it and locked up, if need be. Who would want to be the tenant when the abusive ex has been knocking on windows at 3am for a couple of weeks? Its not going to be a solution, imo.

SHe has been there done that got the tee-shirt with the stalking business, this would be last case scenario.

clutton_2

if the property she is going to rent out is mortgaged and she pays the mortgage then she can claim the mortgage interest element as a legitimiate expense against her rental income...
give us some figures then we can advise more successfully

sonastin

How much negative equity? Can she speak to the lender about selling the house and turning the shortfall into an unsecured loan?

Jowo_2

can she get permission from the lender to let the property? Some charge a fee and won't do it if there isn't sufficient equity in the property. I don't know how agency fees work but wonder whether the agent may expect their full percentage upfront rather than as the rent is paid once they've found a tenancy - perhaps an experienced landlord could answer this and estimate potential upfront expenses that the landlord needs to find for a managed let.

tbs624

See here and here for futher info an allowable expenses, and how rental income is taxed. If your firend wants it from the horse's mouth try this HMRC link

Lifeisbutadream

Thanks to all - It looks like it is just not feasible for her to do it - she wants to move and so I think she will have to just wait until she is able to remortgage.

Paul_the_Painter

As no one has thrown any numbers in I will!

If she has negative equity I'd be surprised if she would have ANY tax to pay, as clutton said - she has to make a profit first

Numbers

Rent on "new place" £600/month

Mortgage on "old place" £700/month (£650 interest repayment £50 capital repayment)

Rent being charged on "old place" £650/month

--

Profit on renting out "old place" (£650-£650) - £0 - no tax to pay as she makes no profit - only the interest element of the mortgae is an allowable expense.

Cashflow analysis -
before moving - paying £700
after moving - paying out £600 rent £700 mortgage - recieving £650 rent - net result £650 paying out - £50/month better off


It may be that you/she are thinking of the wrong cost to allow against when working out the tax - forget the rental she would be paying on the new place, what matters is the mortgage interest she is paying out on the old place.

Personally think the whole plan is bad news - if the guy is that irrational, he may to try to make her life hard, by making the tenants life hard - if they move out she is stuck with a rental contract on her new place, and no rent coming in for the old place.

Other things to consider

Does she own the house - or does the ex have a share/any rights to it?

Does she have any chance of paying off the negative equity?

PasturesNew

Get a beefy lodger in.

sonastin

Any friends/family she can lodge with to cut the costs down until he goes away?