Renting out your house to allow you to move

franklee

nickpe wrote: »

Another reason im thinking to act now is because (and please somebody put me right if im wrong), the house that we want would 2 years ago have been approx £40k more expensive.... but our house was only valued £15k more back then than it is now..............not sure if ive made that point clear but in essance houses that we COULD NOT AFFORD 2 years ago now seem affordable.......IF i can sell my house !!!!

So by your figures I think the dream house has gone from 145K to 105K and yours has gone from 87K? to 72K. The contradiction here is that the vendor of your dream home has priced realistically as you wish to buy at that price whereas you don't have a sniff of a buyer. Theirs has dropped 25K more than yours, how much of that 25K needs to be eaten up before you get a proceedable offer? Put it another way you couldn't afford the trade up back then but realistically you really don't know if you can afford it now as you really don't know the true worth of your property. Also look at the risk to your 15K savings and maximum 12K equity (72K asking price - 60K mortgage). If you "own" property "worth" 105K + 72K = 177K then a 15% house price fall wipes you out (15% of 177K is 26.5K). Besides what makes you think the market has bottomed out given the gloomy economic news?

nickpe

Its EXACTLY the below kind of advice why i have joined the site - thank You.
I am continueing to make postings to get a greater variety of replies but i do appreciate the info.
Like i said im very much not an expert im just waiting for all the info from members to try and educate me further.

From the advice you have offered below can you make a positive/realistic suggestion as to what you would do in my shoes as you appear to have grasp my situation very well.
Do you think if i reduced my house price to £65k buyers would come flooding in?????? - and would it be better to sell for less and have just the one property than to have the potential noose of having 2 properties in these current times????

franklee wrote: »

So by your figures I think the dream house has gone from 145K to 105K and yours has gone from 87K? to 72K. The contradiction here is that the vendor of your dream home has priced realistically as you wish to buy at that price whereas you don't have a sniff of a buyer. Theirs has dropped 25K more than yours, how much of that 25K needs to be eaten up before you get a proceedable offer? Put it another way you couldn't afford the trade up back then but realistically you really don't know if you can afford it now as you really don't know the true worth of your property. Also look at the risk to your 15K savings and maximum 12K equity (72K asking price - 60K mortgage). If you "own" property "worth" 105K + 72K = 177K then a 15% house price fall wipes you out (15% of 177K is 26.5K). Besides what makes you think the market has bottomed out given the gloomy economic news?

franklee

Is there enough deposit/equity in both properties to get good mortgage deals (you seem tight on this). If house prices fall and there isn't enough equity to remortgage elsewhere to continue getting the best deals, which would need a valuation, it'd mean getting stuck on the lender's standard variable rate which may be great right now but what about in a year or so, on two properties? At some point interest rates will rise possibly causing house prices more pain. How long would any letting go on, what would you want it to achieve and how would it do that, could you afford to sell when you wanted to? In your shoes I wouldn't want to buy a second property in a falling market, if you think yours is a falling market.

Other options I see are try lowering your asking price to see at what level you get interest, no one says you have to accept offers that you think too low. There's staying put and saving and trading up in a few years time. It needn't hold up starting a family as babies don't need the extra room right away.

No one but you knows your attitude to risk or what is right for you except for yourself but I think two properties now is a potential noose I'd rather avoid.

Mrs_Z

As no-one has yet mentioned the Letting Agent's fees - don't forget to calculate these into your figures! We let our first property through an agent for which was to be a long term let, 1 year agreement. They charged something like 6% of the yearly rent as their fee, came to just short of £1,000. Six months later the tenant decides to move out (using break clause) so I'm now left with a void and faced with another potential bill of £1,000 to find another tenant if using an Agent. This would wipe out ANY profit for the WHOLE year! We have now decided to try to advertise it ourselves using an on-line agent and after 2 weeks, few enquiries and viewings later, NO serious prospective tenant. Few wanting also to haggle down the price!

Before deciding to take the plunge into BTL - I kept reading landlords going on about void periods. Now I know what they mean. It's not just the income you lose for the weeks property lies empty, but also the Letting Agent fees if you use one, potentially every 6 months! And most also charge for the tenancy renewal should you find a tenant that likes to stay....

Do you research - have a look at various sites to see if the type of property in your area actually lets out.

I'm sorry to say but often when you can just afford it - you actually can't.

nickpe

Thanks for this.......

My property is still up for sale and still not takers on it, however i have had 2 people both ask me if they could rent it out if i do decide to put up for let......so it doesnt look like i will struggle to rent it out.

Are there any other members that have actually done what i am considering???????
I would like to hear of their experiences?????

Euphoria1z wrote: »

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!

Thrugelmir

nickpe wrote: »

My property is still up for sale and still not takers on it, however i have had 2 people both ask me if they could rent it out if i do decide to put up for let......so it doesnt look like i will struggle to rent it out.

Then channel your energies into repaying your existing mortgage quicker. Thereby increasing the amount of equity you have.

In the current economic climate the risk of loss is extremely high. As by owning 2 mortgaged properties you face the double whammy of higher interest rates and lower prices.

In the credit boom years people moved house every 4 years, whereas the longer term average is 7 years. This is something people need to adjust to. As property does take time to sell and chains to be created.

nickpe

You mean i should concentrate on making larger overpayments on my current house???...... im sorry for sounding daft but how will that benefit me better than renting it out and get somebody else to pay the mortgage for me????

Thrugelmir wrote: »

Then channel your energies into repaying your existing mortgage quicker. Thereby increasing the amount of equity you have.

In the current economic climate the risk of loss is extremely high. As by owning 2 mortgaged properties you face the double whammy of higher interest rates and lower prices.

In the credit boom years people moved house every 4 years, whereas the longer term average is 7 years. This is something people need to adjust to. As property does take time to sell and chains to be created.

Thrugelmir

nickpe wrote: »

You mean i should concentrate on making larger overpayments on my current house???...... im sorry for sounding daft but how will that benefit me better than renting it out and get somebody else to pay the mortgage for me????

To be blunt. You appear to see renting your existing property as an easy solution to achieving a goal more quickly. Whereas the downside risks are enormous. Letting property is a business with all the risks and rewards that go with it. Not merely an issue of collecting a rent cheque every month.

Rather than leveraging up with more debt, look to borrow less.

nickpe

Sure Thrugelmir appreciate your comments, can i give you a brief overview then of where im at and please give me your best suggestion on how you think i should be proceeding.
My outstanding mortgage is 60k and my property is on the market at 72k ........so i do acknowledge there is scope to reduce my price although there is not alot of scope.
Now with regards to my current mortgage im paying £300 per month plus an extra £100 overpayment to reduce the mortgage itself.
Any money i do save over each month is going into my ISA saving account to use as a deposit for when we do move and i currently have 10k in this account.

In your opinion should i be using the money i am saving to reduce the current mortgage or continue to save it up in the ISA.......because ultimatly im going to need at least 10% to lay down on a new house when i move (were looking at properties around the 110k mark so will need 11k from somewhere!!......whether that comes from either A) Savings or Equity in my property which means i cannot sell it at too low of a price.

Thrugelmir wrote: »

To be blunt. You appear to see renting your existing property as an easy solution to achieving a goal more quickly. Whereas the downside risks are enormous. Letting property is a business with all the risks and rewards that go with it. Not merely an issue of collecting a rent cheque every month.

Rather than leveraging up with more debt, look to borrow less.