We’d like to remind Forumites to please avoid political debate on the Forum.

This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Renting Out A Flat

Hi,

I'm hoping someone can tell me whether I'm going in the right direction.

My fiancee is thinking abobut renting her flat out to her neighbour for a short period, say 6 months, and moving in with me.

Would the following be tcorrect? I'm making up numbers, as we are still in the "thinking about it" stage:

Rental Income 600 x 6.....................3600
Expenses:
Mortgage 300 x 6.........................(1800)
Ground rent and service charges...... (500)
Insurance.....................................(100)
..................................................1200

Tax @ 40% = £480

Leaving £720 profit

Does that sound right?

What about if the mortgage was £500 a month.
This would leave expenses equal to income, so no tax to pay?

Thanks in advance.

Comments

  • If I remember rightly, you can only offset the interest part of the mortgage payment. I believe that you can also allow a certain amount for 'wear and tear'. I'm sure someone with more recent experience will be along with other info.
    From Starrystarrynight to Starrystarrynight1 and now I'm back...don't have a clue how!
  • agrinnall
    agrinnall Posts: 23,344 Forumite
    10,000 Posts Combo Breaker
    Your fiancee would either need to get consent to let from the mortgage holder or convert to a buy to let mortgage. If she can get consent then only the interest part of the mortgage payment can be set against tax. If she has to convert to BTL then that is likely to be an interest only mortgage so it's all allowable, but there will be an up front cost to convert. If there is gas in the flat a gas safety certificate will be required.

    You have to ask yourselves whether it's worth the hassle and responsibility of being a landlord for just 6 months. You say tax will be paid at 40% so presumably your fiancee is already earning over £42K, is an extra £720 really going to make that much difference?
  • agrinnall wrote: »
    Your fiancee would either need to get consent to let from the mortgage holder or convert to a buy to let mortgage. If she can get consent then only the interest part of the mortgage payment can be set against tax. If she has to convert to BTL then that is likely to be an interest only mortgage so it's all allowable, but there will be an up front cost to convert. If there is gas in the flat a gas safety certificate will be required.

    You have to ask yourselves whether it's worth the hassle and responsibility of being a landlord for just 6 months. You say tax will be paid at 40% so presumably your fiancee is already earning over £42K, is an extra £720 really going to make that much difference?

    Yes - she's called the mortgage holder and there would be an increase of 2 or 3% on what she's paying now.

    You're right - it doesn't sound like it's worth it, but we'll have to look at real numbers and see.

    For example, if it worked out to be (only) £720 profit, it might still be worth it as the mortgage will be paying itself. We're looking at moving in together properly sooner rather than later, so to have a property sitting there doing nothing seems worse.

    Again, we'll need to check with the mortgage company, but maybe a rent a room scheme might be more beneficial?
  • If it's let as 'Furnished' you can also claim 10% of the rental income as wear and tear allowance.
  • Thanks everyone for your help.
    agrinnall wrote: »
    You have to ask yourselves whether it's worth the hassle and responsibility of being a landlord for just 6 months.

    We've decided that this is the main stumbling block. When we put in more realistic numbers, we weren't making any profit at all!

    Thanks again.
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 352.1K Banking & Borrowing
  • 253.5K Reduce Debt & Boost Income
  • 454.2K Spending & Discounts
  • 245.1K Work, Benefits & Business
  • 600.7K Mortgages, Homes & Bills
  • 177.5K Life & Family
  • 258.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.2K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.