Can you please read this

rosie_drew

I keep getting told different figures by diff people.

If you can please work this out for me.

I want to let my house our for say £1200
I want to rent a house for £625

I have an interest only morgage which is £720

Will I be better off or worse off???:j

PasturesNew

£1200 In
£720 Out
====
£480 on paper

But then there are letting agent fees, let's say £180/month (15%)

So that's £300 on paper
Then you pay tax on that £300, at, say, 20%, so that's £60

So you'd be £240/month better off. IF it was rented and not empty. Then there are repairs and insurance, so call it £200 a month 'in your pocket' if no repairs are needed and it's not empty.

New place £625, £200 in your pocket from renting yours = new rent is like £425/month

Not sure what the question was really though.

And there are variables:
- if your lender makes you take out a different mortgage, costing a bit more
- if it's empty
- if the agent fees are different
- if it needs work to get it legal for renting

Sambucus_Nigra

rosie_drew wrote: »

I keep getting told different figures by diff people.

If you can please work this out for me.

I want to let my house our for say £1200
I want to rent a house for £625

I have an interest only morgage which is £720

Will I be better off or worse off???:j

Better or worse off than what?

Paying a mortgage means £720 going out.

Letting yours minus rent minus mortgage means £1200-£625-£720 = -145 or £145 going out.

As long as your income from the house covers your rent then you are better off. Remember all the other things that go with renting out a house though - insurance, repairs, the house being vacant for periods etc.

BitterAndTwisted

You haven't mentioned the tax payable on the rental income. Or taekn into account the possible ongoing costs of repairs and maintenance. On an interest-only mortgage the equity is very important indeed. If you have none you may not even get consent to let from your lender

rosie_drew

PasturesNew wrote: »

£1200 In
£720 Out
====
£480 on paper

But then there are letting agent fees, let's say £180/month (15%)

So that's £300 on paper
Then you pay tax on that £300, at, say, 20%, so that's £60

So you'd be £240/month better off. IF it was rented and not empty. Then there are repairs and insurance, so call it £200 a month 'in your pocket' if no repairs are needed and it's not empty.

New place £625, £200 in your pocket from renting yours = new rent is like £425/month

Not sure what the question was really though.

And there are variables:
- if your lender makes you take out a different mortgage, costing a bit more
- if it's empty
- if the agent fees are different
- if it needs work to get it legal for renting

Well, firstly I am not going to pay agency fees only a one off which will be £500.

My partner will do my repairs which will save some money. The extra income will be paying of my interest only mortgage.

So, I guess I will be a couple of hundred better off??


I got confused as I was writing down the following:

money from rental £1200
less money for me to rent a property £625
less money for my interest only mortgage £720
which showed a loss.

tbs624

rosie_drew wrote: »

Well, firstly I am not going to pay agency fees only a one off which will be £500.

My partner will do my repairs which will save some money. The extra income will be paying of my interest only mortgage.

So, I guess I will be a couple of hundred better off??


I got confused as I was writing down the following:

money from rental £1200
less money for me to rent a property £625
less money for my interest only mortgage £720
which showed a loss.

Note that you cannot offset what you will be paying to rent somewhere to live yourself when accounting to HMRC for your "unearned income" on the property that you will be letting out.

Do you have a contingency fund to cover a non paying T/a void between lets etc?

There's more to letting a property out than the figs you have listed above.

For example, if you're on a resi mortage you will need your lender's consent to let ( see B&T's comment above about equity). You will need LL insurances, any furniture supplied by you must meet fire/furnishing regs, you will need an annual gas safety check/cert of gas CH/appliances at the property. Any tenancy deposit must be scheme registered and you need to be able to ensure that you can keep up with what are called your "s11 repairing obligations"

Benji

rosie_drew wrote: »

which showed a loss.

Well, it does show a loss, but a smaller loss than the £720 you currently have going out.

With regard to other posts regarding landlord obligations and financial planning - it may pay you to get a book with a title like 'how to be a landlord'. Amazon do several and they start at less then a tenner - delivered.

Benji

rosie_drew wrote: »

So, I guess I will be a couple of hundred better off??

Yes, if you have tenants 365 days a year AND they pay their rent - this is not guaranteed income. You will need a contingency fund of at least 5 months mortgage money (which with permission to let will be more than £720) to cover the time it takes to get a non-paying tenant out.

G_M

Your maths is so simplistic it is staggering!

You need to work out a proper budget. As others have said
* you cannot base it on 365 days rental income a year. 10 months is sensible to allow for gaps between tenants, non-paying tenants etc
* your mortgage may increase in cost when you apply for Consent To Let
* you need landlords insurance - costs more than normal
* annual gas safety crtificate
* and MUCH more besides.

You need a spreadsheet with ALL the costs involved with letting, including tax, and only then will you know if it is worth doing financially (never mind the time and stress especially as you plan not to use a letting agent).

More here. Research it all thoroughly!

t0rt0ise

You seem to be simply asking if £625 plus £720 is more or less than £1200.

Are you for real? If you are then I don't think you should become a landlord as you really do need basic Maths skills along with common sense and intelligence.

Swans1912

t0rt0ise wrote: »

If you are then I don't think you should become a landlord as you really do need basic Maths skills along with common sense and intelligence.

The person might be looking to do this as they need to move with work etc...