Renting out your house to allow you to move

nickpe

Hi Guys - please can members offer positive/constructive advice regarding what your thoughts are on my scenario regarding moving houses.

We currently live in an end terrace property and would like something abit bigger and a little bit nicer.
We have a reasonable deposit to lay down on a new house from savings we have made, however we need to sell our house first. Our house has been up for sale a few months and weve had 2 viewings but no offers as yet......but it seems very clear that the buyers market is dead and theres very little activity so a buyer doesnt at this moment look forth coming..... we are not in a position where we feel we need to reduce our house price to a silly low amount to get a sale.
I should add at this point we have seen a house that we like VERY much and it has just been reduced by £15k to a price we feel is very reasonable.

Now heres the scenario - my adviser has said if we are really keen on this new house that we would like to move into then i may wish to consider approaching my current mortgage provider over a "consent to let" - essentially this means renting my current property out rather than sell it................ and this is was i would like your views on?????

The rent that we have been told we can expect to receive WILL cover our current mortgage payments with a small extra also in profit.
But what realy scares me is the thought of either really bad tenants that smash the place up / or tenants that want constant repairs doing that would make it financially impossible to make me afford it / what also concerns me is the thought of not having it tenanted and essentially have 2 mortgage payments to have to pay out.

Does anyone have experiences of the above please???

BitterAndTwisted

Just sell up for whatever you can get for your property and then buy.

dopester

I'm monitoring a thread, and 2 Righmove listings in which an MSEer did exactly this. I'm monitoring the selling listing, and the renting listing.

They put their house on market for £172K, with what seems like a worse case scenario of selling it for £162K. Their stated plan was buying another house for more space, cause it's nicer, cause "we deserve it" yada yada, and they could "always rent out their first house" if it doesn't sell.

On the sales listing it's been reduced to £157,500. Yet another house has gone on the market recently (4 now on their short run) at offers over £149,950.

Their house been up for rent for best part of month and I don't see any let-agreed tag on it. Also I'm a bit shocked at their monthly rental asking price. Someone has to cover the mortgage and council tax, not just on that house, but their new house too.

In the meantime the new house they've bought is likely to have lost more value. Wouldn't surprise me if they end up £50K+ in a hole they just didn't expect in their fairytale 'children of Labour where nothing bad happens to individuals stretching in debt', and forget risk analysis, quest, or worse (repossession).

Werdnal

There have been numerous threads here recently about people in your position who have become "accidental" landlords. For some it has worked out OK, others are here relating nightmare scenarios of how they have made mistakes through lack of knowledge of the legal obligations of becoming a landlord and got themselves in trouble, or their tenants have done the dirty and its all gone T1ts up!

Letting a property is always a risk. Do you honestly feel you would have sufficient spare finances to cover loss of rent and unforeseen repairs and costs, and still keep your own head above water? You need to budget for voids in letting, damage and repairs, possible court eviction costs if the tenants go bad, gas safety checks, landlord insurance - and on top of this you don't know yet how much your mortgage company will sting you with extra costs for consent to let (those that do agree to CTL don't do it for nothing as there are higher risks in having tenants)!

Oh, and declaring rental income for tax too, don't forget that one. If you are already earning a reasonable wage, there may be implications here too.

It would possibly be worth the risk if you could hang a timescale on it like - "In 2 years time, property prices will be flying high again, and I will sell at a profit", but who has a crystal ball and can tell how long this "risk" will be hanging over you.

Drop the price, move on, buy a new place, risk free and be happy!

nickpe

Wow - now that does scare me!!
However i really do appreciate worse case scenarios as if you dont account for this then to be frank working only on a best case scenario is pretty stupid.

Please can i share my financial situation and again please be blunt with your thoughts........

Our house is currently on the market at £72k - i owe £60k on the mortgage.
I have £15k in savings that we aim to use as deposit and some of it as "back up" if things gets tight for us.
The house we want to buy is on at £105k.

Now heres the scenarios that we are facing.........
Best scenario...... if somebody buys our house at £72k (or around that) then we would have £12k plus our £15k in deposit = £27k minus solicitors fees £4k call it £23k - the new house would be £105k (im aware we would hopefully get it cheaper but just using a base figure) - therefore we would only need a mortgage of £82k and everything would be great.......HOWEVER BUYERS DONT LOOK LIKELY.

So theres a second scenario a worst case financial scenario but we still get the house......
if somebody buys our house at £62k (or around that) then we would have £2k plus our £15k in deposit = £17k minus solicitors fees £4k call it £13k - the new house would be £105k (im aware we would hopefully get it cheaper but just using a base figure) - therefore we would only need a mortgage of £92k and everything would still be okish.......BUT THE MAIN THING IS BUYERS DONT LOOK LIKELY......

Now we dont want to start reducing our house price to something silly that makes things unaffordable, thats why our mortgage adviser has said to us consider renting our out.

The Estate Agents have said we can expect 425 to 450 a month if we did rent it out - and this would cover the £350 mortgage so would gain a small profit which we could let build up if there were "void" periods.
But as i say im scared to death of the idea of the "void" periods and if they built up because that would mean we would have to shell out £350 a month ontop of our exisiting mortgage.

dopester wrote: »

I'm monitoring a thread, and 2 Righmove listings in which an MSEer did exactly this. I'm monitoring the selling listing, and the renting listing.

They put their house on market for £172K, with what seems like a worse case scenario of selling it for £162K. Their stated plan was buying another house for more space, cause it's nicer, cause "we deserve it" yada yada, and they could "always rent out their first house" if it doesn't sell.

On the sales listing it's been reduced to £157,500. Yet another house has gone on the market recently (4 now on their short run) at offers over £149,950.

Their house been up for rent for best part of month and I don't see any let-agreed tag on it. Also I'm a bit shocked at their monthly rental asking price. Someone has to cover the mortgage and council tax, not just on that house, but their new house too.

In the meantime the new house they've bought is likely to have lost more value. Wouldn't surprise me if they end up £50K+ in a hole they just didn't expect in their fairytale 'children of Labour where nothing bad happens to individuals stretching in debt', and forget risk analysis, quest, or worse (repossession).

nickpe

ps - to throw things into the mix i should also include the detail that im on a tracker mortgage and this means one thing........ if the rates do start rising so does the tightness.

With regards to how much would Nationwide charge extra they have said 1.5 percent after 6 months... our current mortgage is 300 per month and would be 350 which i have accounted for once the 1.5 percent increase is added.

I guess the main reason we are exploring this situation is because we do really like the new house and it "seems" acheivable/affordable.

The plan would be lay down the minimum amount deposit on the new house and put any monies left over from our savings into a pot to cover any potential void periods.

silvercar

The first thing to do is ask your lender if they will allow you consent to let and then seriously investigate how much rent you can get. Any estate agent can quote you a likely rent, they want your business. Rents are as negotiable as house prices.

Once you have sorted the above points you will be in a better place to decide what to do.

G_M

Read this post here.
Then read the links.

Then decide.

Euphoria1z

find out what the rent is like in your area for your type of property. High demand for rental properties will mean less void periods, so is your house in a high demand area? location? universities near by means students. Lots of offices means professionals etc etc. If its in the middle of nowhere then it will be hard to let. Every one worries about tenants trashing the place (a professional could come home drunk one night and trash your place, similiarly a hard core junkie might hoover your place daily and keep it spotless). Point being you just cant tell. You do the interviews and you decide who you let your property to. You just need to be a good judge of character.

As long as you have permission to let, and your rent covers the mortgage + plus expenses and you declare your rental income then stop worrying and let it out. Change your insurance policy also. Kepp your property till you can sell it for the price you would like to sell it for.

Make up a good sound tenancy agreement. make sure you have gas/heating/plumbing breakdown cover for when things go wrong. These days you can get cover for most things inluding electrics from the same company ( i think even scottish gas do this).

Stop worrying about the little things. do some research, so you know what to expect. Be a good landlord to your tenants , should any issues arrise, deal with them in a friendly and prompt and professional manner, and youll probably find your a much better landlord than most professionals out there these days!

DannyboyMidlands

"......thats why our mortgage adviser has said to us consider renting our out."

Hmm, I'd be a bit wary of this advice if I was you. Sounds like he is thinking of some juicy commission.

In the current climate I'd want to limit my exposure to property not double it. Simply reduce the price, sell it and move on.

If the house has been on the market for months and only had 2 viewings I reckon that the current asking price is silly.

Annisele

nickpe wrote: »

The Estate Agents have said we can expect 425 to 450 a month if we did rent it out - and this would cover the £350 mortgage so would gain a small profit which we could let build up if there were "void" periods.

This would be same Estate Agent who told you that the sale price your house is up for is reasonable, yes?

Unless you have very good reason to believe that they'd find it easier to pull in tenants than buyers, treat their valuations with a good handful of salt.