Want to buy a house but keep existing property and rent it out, need advice please.

cooliegirl

Hi

I am not very good at all of this mortgage stuff so would appreciate some sound advice in laymans terms

Basically I own a 2 bed house and have done for 7 years now. My husband and I want to move in approx 2 years time to a bigger house and get a mortgage together.

I would like to keep my 2 bed house and rent it out. There is a mortgage on the house, I would say that based on it's current value (my estimation) around 25% of it value is equity and the rest is mortgaged. I am on an interest only mortage.

Firstly, is this a good idea/a profitable venture? Current rents pcm on a property like mine are around 1000-1100pcm so it would take many many years to clear the mortgage from the rental income.

Secondly, is this feasible/likely that the bank would give us a decent mortgage for another property with my husband with the mortage still exisiting on the 2 bed house?

I have always wanted to invest in property other than my own and I thought that this may be the way to get started but I am not sure if it is.

Thanks
Sam

sonastin

You'll need to convert the mortgage on your existing property to a Buy-to-Let mortgage. You generally need about 25% equity so you should be OK. The interest rate will be higher than on a residential mortgage though. Provided the numbers stack up OK, there is no reason why you can't be on a residential mortgage while you also own a BTL place but the lender will need to be convinced that you can afford it.

Your own sums need to take into account what you'll do when there isn't rent coming in (e.g. void periods between tenants). Will you be able to afford the mortgage on both houses?

danielley

I am in a similar position, yet my partner cannot sell his house due to negative equity, so if we were to buy a house together we would have to rent his house out.

A mortgage advisor told me that the other mortgage would not be taken into consideration by a lender when calculating the amount of mortgage you can get on a new property as the existing mortgage is 'self funding'.

If you need the details of the mortgage advisor PM me.

clairet707

sonastin wrote: »

You'll need to convert the mortgage on your existing property to a Buy-to-Let mortgage. You generally need about 25% equity so you should be OK. The interest rate will be higher than on a residential mortgage though. Provided the numbers stack up OK, there is no reason why you can't be on a residential mortgage while you also own a BTL place but the lender will need to be convinced that you can afford it.

Your own sums need to take into account what you'll do when there isn't rent coming in (e.g. void periods between tenants). Will you be able to afford the mortgage on both houses?

Not necessarily, we didnt have to convert our mortgage to BtL, we just got lenders permission to let...

We also have a 2nd residential mortgage on teh house we live in so it is definitely possible

It is very hard work being a LL, there are hundreds of posts on here from reluctant landlords doing things wrong and coming on here for help (and lots of posts from professional LL too)

You do need to make sure you work out exactly what being a LL is going to cost you - and remember your tax return..



Though 1000pcm for a 2 bed house - where on earth are you?? We dont even get that for our 3 bed

cooliegirl

clairet707 wrote: »

Not necessarily, we didnt have to convert our mortgage to BtL, we just got lenders permission to let...

We also have a 2nd residential mortgage on teh house we live in so it is definitely possible

It is very hard work being a LL, there are hundreds of posts on here from reluctant landlords doing things wrong and coming on here for help (and lots of posts from professional LL too)

You do need to make sure you work out exactly what being a LL is going to cost you - and remember your tax return..




Though 1000pcm for a 2 bed house - where on earth are you?? We dont even get that for our 3 bed

Thanks all great advice!

I'm in enfield (greater london) but not a london postcode...if that makes sense :-)

So was the amount that you got on the 2nd residential mortgage affected by the exisitng mortgage?

I have my own business, so I am used to the tax returns - unfortunately. My mum and dad are LL so can maybe pick up some tips from them.

All in all though, when does being a LL become profitable for most? I mean in particular, when you are like me and you cant afford to own the property outright? It could take 10-15 years to pay off the mortgage from rental income, maybe more. Does that seem sensible or just plain stupid? I mean, when do i see the benefit in my pocket from becoming a LL...when I am retired?

I do have a child and it would clearly be a good investment for her (and any more children to come) though.

kmmr

I am in the same situation. Rented out my little London flat when I bought another one.

It's on a lovely low rate, and I got consent to let easily, so it certainly makes money at the moment. There are things to learn, but so long as you are professional, and get good tenants, it is worth it in my experience.

I have ended up with a bit of turnover in the flat, and you do need to be available at the start of a tenancy for a LOT of calls and emails, but now I have a settled tenant it is all running smoothly. Just do the right thing that you would expect someone to do for you. Such as:

- fix annoying things like broken heat etc immediately. Get BG homecare - almost all LL's here rate it as an excellent investment for both LL and tenant.
- Keep tenants informed (of anything, like how long for repairs, upcoming gas safety inspection, how to use the dishwasher, good local supermarkets etc). But don't be overbearing.
- Be flexible and friendly. Then they will keep you informed of things like their long term plans to stay/leave, which is always useful.

I was recently renting again for a short time, and I realised one of my big frustrations is the lack of power over lots of things. I hate not being able to decide which TV service to get, what washing machine I can use, which mattress I sleep on etc, so I try to think of that with my tenants. If they want to change electricity providers, or mess with my nicely set up TV systems, or want a new bed, I try to negotiate with them rather than say no. In the end it's their home, and if a few quid here and there means I can keep good tenants, then it's always worth it.

One minor downside is that tenants will expect things done that you didn't worry about. eg if your shower seal is leaking a bit, and you normally just wipe it up after a shower, your tenants won't normally accept something like that. Or your washing machine works if you move the controller 'just so'... but its a bit fiddly.

So you will get a good lesson in the first few weeks of what you think is ok that annoys other people! But if you do a good job fixing it all at the beginning, then it is all just maintenance.

Anyway, I quite enjoy it. It's a nice little side business, not too much drama, and I am ready to do what is needed for nice tenants.

rilou81

Just seconding the 'buy to let' mortgage thing. I thought we would have to do this for our house but our mortgage company told us that its a 'notice to let' and thats it, same mortgage just have to pay the mortgage company £95 a year for the privilidge x

theartfullodger

ONLY rent out property if you have the emotional & financial reserves to cope with no rent paid for (say) 7 months whilst you keep paying all bills, mortgage, legal fees to get tenant out & you STILL have to make repairs or the Judge may decide you are harassing tenant and allow him to stay longer. e.g. on month 6 he 'phones you at 10:37pm Saturday night & lets you know the toilet is leaking - and has been for 4 weeks.. and you gorra get it fixed...

If you are not sure you can cope (and yes, forget those silver-tongued promises from smoothie letting agents - they'll scarper when it goes wrong...) don't start. Me, I make money from letting most years...

welcome to the fun world of property lettings!

Artful

Hammyman

I did this a couple of months ago.

It is not a Buy to Let mortgage that you want but a LET TO BUY - the two are not the same thing. There are quite a few LTB lenders and the requirements are different in regards to your income. Some will want to know your income but some are only interested in the rental income. Most, if not all, want a monthly rental valuation of at least 125% of monthly interest payments.

When it came to the mortgage for the house we moved into, the existing house we were letting out never came into it and in fact the rental income counted as income for calculating how much we could borrow for the new house.

BitterAndTwisted

Hammyman wrote: »

I Most, if not all, want a monthly rental valuation of at least 125% of monthly interest payments.

Would that still hold true on an interest-only mortgage? I suspect not.

Emmzi

where is the deposit for new house coming from?