Buying a house, getting a mortgage and renting it out?

lazymoezy

I must say, I am really fascinated in buying and selling house, even renting, since I was a child and this is what has made me to chose my current Business course in college.

I was talking to my friend yesterday, both his parent died in a car crash few years back and all his brothers and sisters got like £8k each, not sure why, maybe insurance or money left over from his parents. Couldnt really ask as its a sensitive issue.

He was telling me how he was buying a house in Slough, Middlesex I think or London. He said he needed to pay a deposit of around £10k and £2-3k would cover other expenses such as solicitors.

He then would get the house on mortgage and worked out that he would be paying around £800 p/m. To cover this cost he was going to rent out all 5 rooms (5 bedroom house) and get around £1100-£1500 p/m.

Basically, his making a profit out of this and plus when his mortage is over he has a whole house to himself, basically, paying nothing (well, about £14k as rent covers the mortage).

His family members were telling him to do this and he has found a house, he is currently 17!!!! Thats what amazes me, 18 in a few weeks so I think he'll buy it then.

I didnt ask him much but he does know what he is doing as his cousins tdo the same thing, I was wondering, is that it? Or are there other things to consider like getting some sort of license to rent? health and saftey issues? how do you get a mortage on a £200 a week salary? or doesnt wage come into consideration?

Im 17 as well, sorry if this is a bother, but I just wanted to know thats all. Dont worry I am not about to dump £14k on a house, I havnt even got £14 on me:D .

Thanks,

-MoE-

Idiophreak

It depends who he's going to let it to. edit: (ie, whether it's joint occupancy)

I assume by your op that you mean he's going to rent out all five rooms to different people.
That being the case, yes, there's a bit more to it. There have to be firedoors, stuff like that - a bunch of H&S things need to be in place. (I think some of this is quite new).

Plus there's maintaining the house, fixing things that break, building insurance, etc.

From the financial side, he'll have to get a Buy To Let mortgage, but whether or not you can do that on £200/week way beyond me I'm afraid.

ems2

This is a briliant idea but I wonder:
How is he going to find a 5 bedroomed house for 200K in london/middlesex?
How is he going to get any mortgage, buy to let or other with such a low salary?

urbanmac

I'd take what your friend is doing with a pinch of salt.

To buy a property to let you need to have a 'buy to let mortgage' if you use a normal mortgage on it and rent it out you will most likely be breaking the terms. Normally with buy to let mortgages the provider will only stump up a maximum of 80% of the property cost, you must put down the other 20% in full.

If you are letting a 5 bed house to 5 individuals with shared bathrooms, kitchen and living room then there are all sorts of health and safety regulations you must adhere to and they can cost a fortune to implement. Also think wear and tear, redecorating every 2 years at a minimum including replacing carpets. Replacing kitchen appliances regularly, replacing bathroom fittings regularly, having gas and electrical testing regularly, being phoned up at 3 in the morning because a tennant is locked out - its not as easy as it may appear. If it was we would be all doing it.

Also think about what if you only rent 3 of the 5 rooms could you still pay the mortgage on the property? You will be surprised how long some rooms may go un-rented!

Bossyboots

Slough isn't in Middlesex or London and there are some pretty crummy areas around there although maybe not where the 5 bedroom houses are. However, even in that pit of a place you won't get five bedrooms for £200k. Leastways if you did, it certainly wouldn't be fit to live in by the owner, never mind being letting standard.

lazymoezy

Did I say £200k? I dont know how much is it buts its actually more around the £300k mark I think.

Also, its joint with ihs sister or brother, one of them! Im not sure but 1 think is he knows what he is doing, half his family do this and by the looks of it they arent doing too badly.

Not sure where Slough falls under.

clutton_2

with this number of separate occupants, he will certainly be operating a HMO - house in multiple occupation. He will have to comply with the newly implemented 2004 Housing Act, and if he does not, he will be subject to fines of up to £20,000. He will be committing mortgage fraud if he lives there himself. At 18 years of age, he is MOST unlikely to get a mortgage in his own name to do this, and yes he will need 15% deposit in cash.

lynzpower

this sounds like a nightmare

3x owners
5x prospective tenants
a host of building and legal work all of which costs time & money

what projections have they got for the return on this property? I expect they will make little if no money on this for some years, if at all.

I wouldnt want to live in a house with 4 people I didnt know and didnt know each other.

if anything his best bet is to turn property into family home & let to one family which avoids all HMO stuff.

Bossyboots

Slough is in Berkshire on the border with Buckinhamshire.

Jon211

lazymoezy wrote:

Did I say £200k? I dont know how much is it buts its actually more around the £300k mark I think.

Also, its joint with ihs sister or brother, one of them! Im not sure but 1 think is he knows what he is doing, half his family do this and by the looks of it they arent doing too badly.

Not sure where Slough falls under.

If he's buying a £300K house with £10K deposit how on earth does he work out the mortgage will cost £800pcm?

Even on an interest only mortgage he will be paying >£1200pcm