Should I stay or should I go now?

wockawocka

New poster here!

http://www.rightmove.co.uk/viewdetails-5070441.rsp?pa_n=1&tr_t=buy

I put my house on the market a couple of months ago, had some good interest but a few weren't too keen on the area and the others were still trying to sell their house etc....usual story...

Then I had a BTL'r around to look at the property, nice lady...said it was perfect for what she wanted to do, then promptly put an offer in 20k below asking..tsk tsk.

That's just background info though. She got me thinking that maybe I should rent it out myself too. The only reasons I had for selling was that I wanted to move into rented for a while (closer to the gf 90 miles away) and have the money in the bank gaining interest...yet if the house sells for 180k after the mortgage is deducted (60k) I think I'll only get about £300 a month interest after tax so perhaps I should rent it out instead.

The lady intended to put TV points in each room, and rent 4 rooms out, the front room becoming a 4 double bedroom (Has 3 double bedrooms already).

If I was to do this I would want to do an all inclusive thing, they pay a flat fee each month in rent and I get the Electricity, Gas, Water, Poll Tax and TV license.

Thing is I have no idea how to go about doing this or who I should speak to, what inspections need to be done, approvals, obviously I want to pay tax etc and keep it all above board. With a mortgage of only £330 a month it seems there are more financially astute options instead of just selling it.

The house however is basically new inside and central to everywhere so finding renters should'nt be too hard as I'm not looking to make a fortune.

Am I talking sense or are there other things I could do?

wockawocka

Bump??????

Tassotti

If you want to do this, research Houses in Multiple Occupation, as this is what it would be.

You may find you have to spend thousands to bring it up to current safety regulations

Speak to Private Sector (HMO Officer) at council and get them to inspect it and give you outlines as to what will need doing.

Renting as an HMO needs good management skills, and if you are 90 miles away, will be difficult. May need a decent agent.

lynzpower

if he rents it to one family it wont be an HMO though will it Tass?

I also make it that if you put the 60k in 5.15 ICHIHI whatever its called bank account by the end of the year you will have made 3090 on it.

wockawocka

lynzpower wrote:

if he rents it to one family it wont be an HMO though will it Tass?

I also make it that if you put the 60k in 5.15 ICHIHI whatever its called bank account by the end of the year you will have made 3090 on it.

Thanks for the advice so far, 3k interest is good however is that not a comparitively small percentage of what I could potentially earn as well as keeping the property long term?

A_Nice_Englishman

You need to compare your net profit after tax and all expenses (not just mortgage interest). For example, you will probably need to employ a letting agent to vet your tenants, do viewings and manage the property if you are living 90 miles away which would be 10% of the rent. Then another 10% for void periods unless you are lucky enough to have tenants stay long-term.


A lot depends on what you think will happen to interest rates and property prices though.

wockawocka

I only have a 60k mortgage though? I know there are a lot of BTL'ers who have much higher gearing so I think I don't have that much to worry about IR's as such, they would have to go to something silly like 10% to affect me (although not unheard of considering 1989...)

As far as property prices go, yes I've considered an dincreas and a drop, I would be in this for the long term though so whilst not immune I would sit out any bad events although it did occur to sell and then buy back in but to be honest it's a gamble I'm not that willing to take.

lynzpower

Sorry, I misread it earlier

I thought you would have a 60k lump sum? Having re-read it, you would have 120 lump sum its in fact 6180 on the 120 for the first year. thats in a bog standard savings account, I dont know too much about investments, but thats not bad.

wockawocka

lynzpower wrote:

Sorry, I misread it earlier

I thought you would have a 60k lump sum? Having re-read it, you would have 120 lump sum its in fact 6180 on the 120 for the first year. thats in a bog standard savings account, I dont know too much about investments, but thats not bad.

Hi Lynz, but that's not accounting for tax paid though is it?

If it is I'll be inclined to take the 6k money and stick half in an ISA each year.

lynzpower

I really dont know, its just in a bog standard account

So I guess, yes, you will pay tax on the interest unles you invest it somewhere

But dont you have to pay income tax on the rent you would get anyway

Plus CGT when you sell it? (if and when that happens)

A_Nice_Englishman

Income tax is payable on the profit i.e. the rental income less expenses such as mortgage interest.

CGT can often be avoided as you can get PPR (principal private residence) relief for the time you lived there plus 3 years and lettings relief too.