Clueless Landlords needing a little advice!

GibsonSt19

Hi all, here's our situation.

My wife and got married in August this year. She moved out of her [bought] 2 bed apartment (100% mortgage), into my [bought] 3 bed semi (which is on the market, so that we may purchase a new home of our 'own').

We reckon her apartment is worth the same or perhaps a little less than what she paid for it (although not 100 sure this is the case).

At the moment, we're renting the apartment out through a local Estate Agents' Managed Service (tenant moved in end of November this year).

From what we understand, we can rent the apartment for up to 12 months without changing the mortgage to Buy-to-Let, for a fee of £450 (Scottish Widows, who don't allow permission to let for more than 12 months, and don't offer Bu-to-Let Mortgages).

We're getting to the point where we're now considering selling the apartment at an opportune moment, but would of course need to wait until the current tenants' lease has expired (May 2011).

- Basically, what things should we be thinking about, in terms of potential tax payable on the rental income (is this on the full capital and interest amount, or interest only?).

- Are there any Buy-to-Let mortgage providers who will lend at at anything more than 75-80% LTV ratio?

- If we do have to sell the apartment, what's the recommended strategy for dealing with the negative equity (is this something we could absorb using the equity in our semi detached?)?

Your thoughts and advice would be hugely appreciated!

Thanks lots,

theartfullodger

a)
http://www.rla.org.uk/landlord/courses/course1.shtml

b) Only let any property out if you have the emotional & financial reserves to cope with the "tenant from hell" ... (say 7 months of no rent, keeping paying the mortgage & legal fees to get them out...)

Cheers!

Artful

PS Oh, c) Do a search here for answers to your question posed over the past few year...

MissMoneypenny

GibsonSt19 wrote: »

- Are there any Buy-to-Let mortgage providers who will lend at at anything more than 75-80% LTV ratio?

The mortgages board will be the place to ask.

GibsonSt19 wrote: »

- If we do have to sell the apartment, what's the recommended strategy for dealing with the negative equity (is this something we could absorb using the equity in our semi detached?)?

Take out a short term loan to cover the negative equity perhaps and then pay it off from your equity? Another question for the mortgages board maybe?

I'm not convinced this is the best time to get into BTL, especailly with an apartment. Mortgage rates are going to rise soon and the governmnent (who pay 40% of rents) will be forcing the rents down again with rent reductions, rent caps, benefit caps and raising dependant charges, starting from April 2011.

Annisele

GibsonSt19 wrote: »

We're getting to the point where we're now considering selling the apartment at an opportune moment, but would of course need to wait until the current tenants' lease has expired (May 2011).

Have you checked whether yours is an area where BTL landlords are looking for properties?

Normally you can't sell unless you can give the buyer vacant possession (because that's a requirement for their mortgage lender), but it is possible to sell with tenants in situ to a cash buyer/to a buyer with a BTL mortgage.

In some areas that's near-impossible, because BTL LLs aren't interested in the properties in those areas. In other areas it's (relatively) easy - so if you haven't already checked with a couple of estate agents, it's worth running it by them.

swottysam

Hiya


Can I ask whether you are in Scotland or England as the law is different. In Scotland everyone who rents out must be registered as a landlord with the local government and central.

Also I let out a flat that I have a residential mortgageon, and have been doing so for the past 3 years and legislation states that you must get permission from your mortage lender or the mortgage could be void and you can be fined. Housing Scotland Act

I pay £95 a year to let out my residential property.

For the tax - im sure that its like a second job income. There are good leaflets on the HMRC website. this information will be no use at all.



As I said the rules are different in Scotland and England - so sorry if you are in England as the above will be no use at all.

G_M

GibsonSt19 wrote: »

Hi all, here's our situation.

My wife and got married in August this year.Who did she get married to? :rotfl:

From what we understand, we can rent the apartment for up to 12 months without changing the mortgage to Buy-to-Let, for a fee of £450 (Scottish Widows, who don't allow permission to let for more than 12 months, and don't offer Bu-to-Let Mortgages). Why not confirm this with SW?

We're getting to the point where we're now considering selling the apartment at an opportune moment, but would of course need to wait until the current tenants' lease has expired (May 2011). Unless a) you sell to another landlord or b) the tenants agree to leave early - offer them an incentive? Even after May you can't assume the tenants will just leave.

- Basically, what things should we be thinking about, in terms of potential tax payable on the rental income (is this on the full capital and interest amount, or interest only?).In each tax year you have to declare the full rental income. But there are expenses you can offset. See HMRC here.

- Are there any Buy-to-Let mortgage providers who will lend at at anything more than 75-80% LTV ratio? No

- If we do have to sell the apartment, what's the recommended strategy for dealing with the negative equity (is this something we could absorb using the equity in our semi detached?)? You'll have to pay off the mortgage in full. Savings? Loan? Increase mortgage on the other property?

Your thoughts and advice would be hugely appreciated!

Thanks lots,

Notes added above

tbs624

swottysam wrote: »

....legislation states that you must get permission from your mortage lender or the mortgage could be void and you can be fined. Housing Scotland Act..

Obviously a LL who lets out a property in which he merely has a standard residential mortgage will be in breach of his/her mortgage terms ( CML lender's Handbook) but am interested in your assertion of specific statutory provision and a "fine". Do you know *which* Housing (Scotland) Act ( & which Section) this comes under?

There are obviously the provisions under the Home Owner & Debtor Protection (Scotland) Act 2010 ( similar to the Act in Eng/Wales which came into force this October) which go some way towards protecting "unauthorised" tenants, but I'd be interested to know more about CTL legalities in Scotland.

Hammyman

FWIW, someone I know made the mistake of letting out their house without their mortgage companies permission thinking they'd never find out. Well they did and they foreclosed. As he didn't have the money or the credit to get a new mortgage, he lost the house.

swottysam

tbs624 wrote: »

Obviously a LL who lets out a property in which he merely has a standard residential mortgage will be in breach of his/her mortgage terms ( CML lender's Handbook) but am interested in your assertion of specific statutory provision and a "fine". Do you know *which* Housing (Scotland) Act ( & which Section) this comes under?

There are obviously the provisions under the Home Owner & Debtor Protection (Scotland) Act 2010 ( similar to the Act in Eng/Wales which came into force this October) which go some way towards protecting "unauthorised" tenants, but I'd be interested to know more about CTL legalities in Scotland.

Ok I didnt wasnt to overload Gibson st19 with lots of legislation. I gave basic information. And to be fair.....its not obvious that you need permission to rent out a residential property!!

Is that not why people use these forums to find this information out from others who have had this experience.


If you rent out a property in Scotland and are not regsiterd and are caught then you will be served a RPN rent penalty notice - which means that the tenants will not have to pay you rent until you do - this is in the Antisocial Behaviour etc (Scotland) Act 2004.


Legislation is as follows..........


Private rented housing (Scotland) bill. Part 1 section 7. (Penalty for acting as an unregisterd landlord).

Sorry tried to post link - but not allowed as new user


There is legislation in one of the Housing Scotland Acts - but I cannot find it and it states that you are causing a criminal offence.
As soon as I come across it - I will post it. There are many pieces of legislation regarding this area and the acts are all different.

As I said before, I was giving basic information so that Gibson st19 can be a bit more informed and if they required further information - then all they have to do is ask.

In conclusion however - all the above might not be any use at all if Gibson st19 lives in England.

Hope the above is any use.

Happy new year to all.

tbs624

swottysam wrote: »

Ok I didnt wasnt to overload Gibson st19 with lots of legislation. I gave basic information. And to be fair.....its not obvious that you need permission to rent out a residential property!!

Is that not why people use these forums to find this information out from others who have had this experience.

The need to seek consent to let is in the Ts and Cs of every residential mortgage you sign up for - you don't "own" the whole of the house if you have a mortgage on it and your lender needs to know that they can safeguard their money/share of the property until that mortgage is redeemed.

Yes, we all use the forums to exchange information/expand our own knowledge: I was unaware that there was legislation specifically within one of the Housing Scotland Acts which dealt with CTL, and that failure to seek it could mean the imposition of a fine as you describe.That's why I asked if you could provide further info on that part. We can state that the law says x, y or z but if people might rely on that info it's as well to offer a specific source if you are able to so that they can check it out for themselves.:)

The OP's property may well be in Eng/Wales - the only reference to anything Scottish is the name of the lender and they lend both sides of the border - but others interested in CTL issues will read the thread too.

swottysam wrote: »

If you rent out a property in Scotland and are not regsiterd and are caught then you will be served a RPN rent penalty notice - which means that the tenants will not have to pay you rent until you do - this is in the Antisocial Behaviour etc (Scotland) Act 2004.

The legal requirement for a LL/LA to be registered is the part I *am* familiar with - note that though there is provision for a LL who gets "caught" to be served with an RPN, the most likely result is that s/he will reported to the Procurator Fiscal, given a slapped wrist and told to get registered pronto unless there are other "dodgy" issues. The registration system was meant to be handled in a "soft touch" manner. IIRC ArtfulLodger (a LL with Scottish properties who posts on here) has posted about how few LLs have actually been taken to court for non-compliance.


You said "legislation states that you must get permission from your mortage lender or the mortgage could be void and you can be fined. Housing Scotland Act"

and

swottysam wrote: »

There is legislation in one of the Housing Scotland Acts - but I cannot find it and it states that you are causing a criminal offence.
As soon as I come across it - I will post it.

This bit on the actual CTL issue was what I was asking about, so thanks - that would be very helpful