Renting Out A Flat Instead of Selling

kittykatkat

We are trying to sell our flat but as yet it won't sell. We have thought about renting it out and selling it when the market picks up a few years down the line, and have someone interested on a mates-rates basis. At that rental amount it would be a good deal for them, and would more than cover the interest only element of a BTL mortgage we could get for it, fixed for the next 3 years. It would require a small cash injection to get the equity up for the BTL mortgage though, and we would then need to use the majority of our savings to buy a house, so it's not a risk free move, but if it went to plan we would get the equity back on the flat when selling in a few years time, or maybe even keep as an investment.

Has anyone else tried this? What are your experiences? If we didn't rent it to someone we'd know we'd probably charge market rate and get an agency to fully manage it all at about 15% I believe, which would still more than cover the interest only mortgage. Are there other costs beyond that?

G_M

and have someone interested on a mates-rates basis.

Don't do it.

Are there other costs beyond that?

Yes lots.

More here.

Yorkie1

Costs will include a Energy Performance Certificate and Gas Safety Certificate. Will you be supplying any electrical items? - if so, consider getting them PAT tested.

Have you included the costs of the application for the BTL / valuation survey?

Does your lease allow subletting? Check for this and whether you need to pay the freeholder for providing consent.

Would you be prepared to kick your friend out if they lost their job and couldn't pay the rent?

If you plough all your savings into getting the equity of the flat up to spec and then buying a house, what will you when either property has an expensive bill - not uncommon to find in a newly-bought property?

Werdnal

Even if you are renting to mates (which is very rarely a good idea but thats a whole other story), you need to abide by all the legal rules surrounding letting. You must draw up a binding tenancy agreement, get EPC, GSC and if you take a deposit, protect it in a scheme and give the tenants the prescribed information. And you must also declare your rental income for tax.

Read the "more here" link in GM's post to see what you are letting yourself in for. Don't cut corners or do favours just because you know the tenants. Sure recipe for disaster that has been seen here many times.

kittykatkat

We have an EPC from putting our house up for sale.

Capital Gains Tax wouldn't be a problem because I doubt we'd sell at a profit even a few years down the line.

The leasehold allows for subletting.

I would estimate having around £10-£15k left over after equity injection and deposit on new house, so hopefully enough for emergencies but who knows, that's the big risk really.

Anyone know how much PAT testing and Gas Safety Certificate is?

ognum

You would also need to pay tax on your letting income other than the interest element of your mortgage