Three houses, two houses or one house?

Ab1ga1l

Hello,

My partner and I own two houses. One of them we live in and another we have as a BTL.
The BTL has a mortgage of 130k with a value of 180k, the one we live in has a mortgage of £70k with a value of £165k.
We are looking to move to a larger property which will have a mortgage of £230k (2.7x joint) with 25% deposit.
We are considering converting our existing home to a BTL also.
This is making me a tad nervous and I wondered if this is too risky a venture (as you cannot guarantee the rental income - even though we've been lucky so far).
I guess I'm just looking to hear from the older and wiser (or just simply wiser!) community to see what you'd do.
Would you sell one house, both houses, or keep them both?

Many thanks x

Whirlee

Just to clarify do you mean that you can put down the 25% deposit without selling either house?

Assuming that is what you mean: it would depend on the area each house is in and how comfortable you are that the properties will always be rented out relatively quickly, and how long you could afford to pay the mortgage on all three properties if the worst happened.

Personally, assuming that the rental market was pretty good in each area, I would want to know that I could pay the mortgage on all three properties for 3 months (as a bit of a buffer) before deciding to keep both houses.

However, it will also depend on how much of a worrier you are - you might feel more comfortable just having one of the rental properties. And there is no point doing something that will only stress you out for the next 25 years.

Ab1ga1l

Thanks Whirlee,

The 25% is without selling the properties. All the houses are in the South East, there is a good rental market here at the moment, but this could change quickly of course!

Good advice about the 3 months to cover all. The housing market is pretty scary at the moment, maybe my nerves couldn't take having the two BTLs, although my partner is a lot more relaxed about it!

lvm

Personally I would probably keep them both and buy another BUT...I'm no expert but you pay tax on the gross profit of your B2Ls so I'd probably see if I could get a better deal if I took the £25k (or more) out of current home to use as a deposit to reduce the tax I'd pay. Would depend on if you could do this easily and if it would be worthwhile in the long run though...

franklee

1. Property 180K, mortgage 130K, equity 50K.
2. Property 165K, mortgage 70K, equity 95K.
3. Property 306K, mortgage 230K, equity 76K.

So that totals property 651K, mortgage 430K, equity 221K.

Joint salary is 85K. Your total borrowing will be just over five times joint salary. If you get any non paying tenants can you cover it?

Overall equity is 34%. If house prices fall 17% you halve your equity shaving 110K off the total property value.

A tad nervous seems about right.

Xiderpunk

Can understand your nerves, fact is, by your suggestion you are sitting on a 25% cash deposit. Where is that invested currently? With the on-going stock market woes putting it into property seems a sensible choice. I guess it really boils down to this: any investment is in essence a gamble, either it will pay off or it won't. Golden rule number 1 is only gamble what you can afford to lose.

With the figures franklee has clarified it would seem like a real risk, with all due respect your joint income is quite low against a relatively large borrowing sum, could you afford a drop in house prices?

It would seem to make good sense to repay the 25% deposit amount against your current borrowing?

samroo

Have you checked that mortgage finance of 230k and finance for 2nd buy to let would be a possibility for you.