Should i be the Landlord

Thrugelmir

nickpe wrote: »

So in effect the rent would cover the mortgage

Net income is taxable.

Also you will need to budget on longer term household maintenance bills such as replace doors and windows , boiler, kitchen and bathroom.

bigfreddiel

nickpe wrote: »

Hello Guys - i currently have a few posts running so sorry for keep asking lots of questions.

Im currently really weighing up if i should rent out my current property to ennable me to purchase a property that is on the market at the moment that we feel would be our dream home. (the idea is get a consent to let from our current mortgage provider on the house we have at the moment)

The rent we have been advised by a local estate agent that we may acheive was quoted at £425 to £450 (i have researched lots of properties in my area and this price seems fair as many other properties are priced similarly, also the estate agents have said the renting market is thriving in my area) - my current mortgage payment is £300.......which would rise to £350 after Nationwide add a 1.5% increase on the rate after 6 months.
So in effect the rent would cover the mortgage - but im aware i would also need landlords insurance so the money i would have left over would not be much............and obviously any money left over would be used to add up to cover void periods and repairs etc.

Now my question is - is it worth using the local estate agent to act as my Landlord - they charge 8% of the monthly rent which would be around £45..........this £45 may not seem alot and im sure it would be worth paying it for my inexperience of being a landlord - but i attempted to be my own landlord then a years worth of £45 = £540 which would go along way in covering any void periods or also future repairs.

The estate agents do offer a much lesser service of "Tenant finder" - where they vet, market and supposodly get me a tenant. collect funds to cover a deposit, draw up a shorthold tenancy agreement, for a one off price of £200 - this sounds appealing...............

what are your thoughts??????????

and you have taken tax and vat into account

so your rental inome is £450 *.8 = £360

and your agents fees are £45 * 1.2 = £54

So do your figures still stack up?

and don't forget the funds you will need for running costs, repairs, and renovations in between tenants!

fj

sparklysaver

nickpe wrote: »

Well....with respect i had thought it through - whilst i do not pretend to be an expert i figured that interest rates would only start to rise once property prices started to rise??????........how on earth could interest rates rise and property prices not - first time buyers cannot afford mortgages at the moment so if rates rose then the market would not only be stagnant then it would be finished for first time buyers that cannot buy now - how could they afford to with a rate rise??

I'm not sure what you're getting at here........ the base rate is set by the Bank of England monetary policy committee for all sorts of reasons, the housing market being probably a fairly minor one in the great scheme of things. I've not got a crystal ball any more than anyone else on this board does, but plenty of people who know more about these sorts of things than I do have suggested that rates might have to go up, at least a bit, if inflation doesn't slow down. Remember the 15% base rate during the last recession :eek:. It's not going back there any time soon but could you cover the bills if it went up even a bit?

I don't know whether you should let your house or not, but you do seem to be working on pretty tight margins so you should be confident that you have a bit of wiggle room in your budgets in case of any circumstances changing.

Egg_custard_2

I personally doubt interest rates will rise much over the next few years. It does sound like your margins are quite tight though, when you take into account tax on net rental income, and potential repairs / maintenance.

Also, if you decide to go ahead and use a letting agent, make sure you are aware of all fees - I've had breakdowns from one LA and they charge the percentage fee, but in addition there are other fees such as for sending out a new tenancy agreement (or extending one) - they even had a fee you wanted to write your own tenancy agreement. Fees for each time they managed a maintenance issue, had to send a rent reminder... I don't know if all this is standard, but check the small print.

Also, the LA agreement I received was for a fully managed service. I thought that would mean all I would need to do was take the occasional phone call from the LA. Wrong. There's some areas they don't get involved in. For instance, if the tenant defaults on their payments, they send out a reminder, wait 14 days, send out a second reminder and if payment is still not forthcoming they hand it over to you, and you would then need to take legal action yourself for non-payment. Again, I don't know if this is standard practice with LAs.

I'm not trying to put you off the idea of renting out a 2nd property. I am just throwing out there some stuff that I've learned whilst I've been looking into doing it myself.

Mrs_Z

Hi,
My concern would be that your current mortgage on the property you plan to rent out is a residential one, as you plan to get a consent to let from the lender. They may well grant you one, but as far as I understand, this is normally done only for a limited period of time, say 1 year. After that, they may require you to convert into a BTL mortgage, and the rates are much higher.

Before doing anything else, I'd have a chat with your current lender to find out what their policy would be in your situation. Once you know that, you can start planning the next steps.

theartfullodger

Nick...

Apologies to others for my repeating the following,.... (btw I've been a Landlord for 10+ years and most years make money, but not every year.....)

ONLY rent if you have the financial (ah, yes..) and emotional (oh, 'spose I should think about that..) reserves (money, backbone, not-being-upset-by-problems, spare-time-to-sort-tenant-problems-when-inconvenient-to-yourself, partner who won't get emotional or upset when - yes, when not if - it all goes wrong.....) to cope with the "tenant from hell" or the "agent from hell" who doesn't pay you rent for, say, 7 months whilst you keep paying the mortgage (& increases when rates go up..) , you keep having to pay legal fees to get the b**tard out and he then 'phones you 10:37pm Saturday nite.... "Toilet's leakin' you gorra fix it",,, "Sorry my good man I'll ask the maintenance chappie to call on you Monday morning"... "Nah, nah, ceilings falling down, carpets soaking & minging & mouldy..., gorra fixit nah ,...", "oh, thanks, how long's it been leaking, pray??"... "dunno, 3-4 weeks mebby..".. and you know you must get the old wallet out & fix it or that nice judge at the court possession hearing will decide you're an evil harassing landlord & allow charming innocent Tenant to stay even longer.... Not to mention major & unexpected repair costs ....


Cheers!


Artful

PS My mortgage during the early years of Thatcher's rule went from 8% to 15% in about six months.. BoE rates went to 17% and stayed at or above 10% for I think about 10 years.. Will it happen again?? Dunno. Should you have a plan to cope if it does?? Yup, defo... Yes, that experience was financially painful thank you...

geoffky

Looking at the answer you have given me...you do not have a clue...what has house prices got to do with interest rates? oh dear,,,we will see your clients on here soon enough...read what the dodger has said...my rates went from 6% to 16% in a very short time in the 80s and we have inflation around as we did then..ignore at your peril.

theartfullodger

Lodger not dodger