Quick question from a potential new LL

zcrat41

Hi guys,

Hoping I could pick your brains. I was wondering what the best way to approach my bank is to get a Certificate to Let? I would prefer to phone due to work but I was wondering if I may get a better response from going into a branch?

I really want to get the certificate rather than go for a BTL. I have just over 25% equity, am 1 year into a 5 year fix with Nat West on 4.8%. I am moving in with the boyf (who proposed yesterday..whoop!!) who's a farmer so has a house already so no mortgage/rent to contribute to there.

Similar properties to mine rent for about £25 a month more than the mortgage. I'm aware thats not considered a great ROI for BTL but due to my circumstances I'll be able to afford the mortgage easily whether I have a tenant or not.

Thanks

ZC

Annisele

I'd phone them; the decision is likely not made by the people in the branch anyway.

I'm guessing you want to do this as a safety net in case moving in with your partner doesn't work out? If so, I'm not sure that letting the place would necessarily give you enough flexibility.

Say you rent to tenants on a six month contact, you move in with your partner, and you decide the very next day that it's all a horrible mistake. The tenants would be allowed to stay for the full six months - and if they didn't leave then, it could easily take you another four or five months to get them out, during which time you'd have to rent yourself.

The margins are so tiny that if the rent is £500 a month, one single void period will cost you 20 months of profit. Similarly, if you use an agent to find a tenant it's not unusual for the tenant finding fee to be one months rent - and so it would take 20 months to recover a cost that you'll likely have to pay every 12 months. That's before you pay for gas safety certificates, insurance, repairs, etc.

In your position, I think I'd work out how much I'd get if I sold now (estimated value of property, early redemption fees, estate agents costs etc). Then I'd try to guesstimate what I might get if I sold later (eg at the end of the fix), and take away the losses I anticipated on the letting (making reasonable assumptions for void periods).

(Above assumes your mortgage is interest only - the 'income loss' isn't anywhere near so bad if it's repayment).

zcrat41

Hi Annisele,

Thanks for your reply.

I am on a repayment mortgage.

I'm not really doing it as a safety net. If anything did go horribly wrong and I had tenants in for 6 months I'd just have to move back home. (I work at home on the farm anyway) so it wouldn't be the end of the world.

I'm doing it really because I don't think its a bad place for my money to be at the moment. I bought the house and did quite a lot of work to it. I'm pretty sure I've added value to it even in the current climate. Not much but I've covered my costs and then some. (Neighbours house has just sold for 5k more than I bought mine for and what I spent on it combined)

I could sell I guess. Its an option I'd not really considered. Maybe I should be!

Annisele

You should definitely consider selling. I'm not saying you should sell, but you definitely shouldn't dismiss the idea out of hand!

Much depends on what you think property prices are going to do over the next few years. If you think they are going to stagnate or fall, you should probably sell - the hassle of being a landlord can be significant. If you think prices are going to rise, you should probably keep it.

00ec25

far be it from me to suggest selling - I would not do so in your shoes but I have a lot more equity and can wait 10 - 15 years for the prices to stablise, but your financial position is ludicrous as a surplus of £25 pcm (£300pa) over your (admittedly fixed rate) mortgage means you will be making an annual loss in real cash terms:

- does the property have a gas supply (cooker or heating)? You will need an annual LL gas safety inspection £?pa

- you will need an annual LL insurance policy covering at least third party liability otherwise you will lose the lot if the tenant is injured and sues you £?pa

- you will incur one off costs for: EPC and tenant vetting,
the list of costs you have not mentioned goes on...

zcrat41

Hi,

I know there are more costs - I am fully aware of them. I have factored them in.

I do not envisage having to sell ever. It will be a choice if I do and I think there is somewhere better for my money. I'm well open to suggestions if anyone has any!

I am aware being a landlord is not easy. Our family business has a fair bit of commercial property so I have a number of contacts such as plumbers, carpenterst etc.