Buy to let landlords? Please can I ask....?

bloom1234

Hi,

We seem to be stuck in a home in negative equity, paying a high interest mortgage and recently discovered from an estate agent that the homes on our road rent out really well but don't sell. Not unless we dramatically reduced the asking price or asked for a low price. So low that we'd be about 20k out of pocket.

So, we don't currently have 30% loan to value and pay far more than it would let for but we're going to overpay as much as we can to try to increase the ltv as much as we can over the next couple of years as we have decided that letting out in order to move is our best option.

Does this sound like the best course of action over surrendering the house in order to get out? Our thoughts are that we are better off owning something that in 20-30 year's time will either have increased in value or at least still be earning rent than surrendering now.

Have any of you got any advice or experiences to share that may help? Would we be able to decrease monthly payments if we did pay in about 15-20k? Who values the home? Homes are advertised for what we paid but not selling, is that the true value?

Thanks.

Werdnal

You would first need to request permission from your lender, known as Consent to let, which they may agree to, but can add extra monthly costs, an annual set-up fee or both. They may also refuse consent.

Then you need to change your insurance to LL based. You also need to do an annual self-assessment tax return, as you may be liable for tax on the rental income - its not just a case of covering your mortgage, as only interest payment on the mortgage are accepted by HMRC - any capital is not.

Then you must read this:

http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

Even if you use an agent to find tenants and manage the let, you as landlord are still legally and financially responsible for the property, any repairs and maintenance, and ultimately taking a tenant to court should you need to evict, reclaim damages or any lost rent.

Also, beware any agent who says "these places let well" as he may be looking for rental commission, as he cannot get sale commission out of you.

Becoming a LL sounds like the answer to many people's prayers in the current climate, but ask yourself whether you have sufficient emotional and financial reources to deal with it all. And how will you cover your own living expenses/mortgage, and the mortgage on the letting property, if something goes wrong!

bloom1234

Thank you for the link!

It's not something we are in a position to do yet but seeing as either way we'd need to keep overpaying as much as we can it is definitely something we hope to do in the future when we have enough paid into the mortgage. Just unsure of how interest rates will change when we do have more and more loan to value. Hoping we can negotiate better. We can afford to stay here but just don't want to. Planning to rent a cheaper property (than mortgage) therefore saving a lump sum each month that would have been overpayment that could cover rent if we weren't paid.

Consent to let is different to buy to let isn't it. I have read a few posts here about it. I know that horrendous things can occur when you're a landlord but thinking of general maintenance a new kitchen/bathroom or boiler would be cheap in comparison to a possible 24-30k loss that 'could' make in the long run.

We are quite aware that the for sale signs don't come down and if they do they're not replaced with sold yet the to let signs come down within a week and we see new tenants so in this case it seems like the estate agent is probably right. A house around the corner (same style) to my horror had a notice on right move stating that an offer that was 30% below the price we all paid so we either jump ship and ruin our credit rating or hold tight in the hope of not completely losing out in the long run.

jamie11

My opinion is that if you sell now then you are locking your loss, if you can afford to hold on to it without too many problems then the market will turn around in it's own good time and you will start to recover equity in it, but it might be a while.

GDB2222

I found this thread rather confusing, so forgive me if I have misunderstood, please.

If you let your flat out and go and rent another flat, you need to compare the difference between the 2 rent figures to see whether you are financially better off. You have not mentioned that. You have just compared the rent with your mortgage payments. By the time you have allowed for void periods and estate agency charges, as well as increased interest rates because you are letting the place out, the rent you pay will have to be miles lower than the amount you are able to let your flat for.

Of course, if you rent somewhere much cheaper than the rent of your present place, it is quite likely to be grotty.

So, I am really confused by what you are trying to do?

carslet

you can overpay, so why do you want to sell? just because you are in NE, if you dont need to move then keep overpaying , or you just want to move ?

bloom1234

Basically we want out as the area has really gone down hill over the past 2 years. we've been here 6 and I don't want my children growing up here. It's a 3 bed house with decent garden space so us beinf able to rent a house in a nicer area while still being home owners is very appealing. If we could sell this and increase our mortgage a bit that's the option I would go for but it isn't happening.

They are too young to be out of the garden at the moment but think average area on the side of an estate with most homes bought turning into mostly rented out and an abundance of horses and unruly youths with no respect and scrap metal collection. I know it's not like this on the outskirts of every estate, we just seem to have been really unlucky.

We're trying to decipher whether it's best to get out right now and either surrender the house, make a huge loss and work out a way to repay the loss as a loan or try to stick it out and rent it out as soon as we can. I'm loath to surrender because we can afford the repayments and to overpay a bit but the NE is a lot to lose.

If the area had stayed the same I wouldn't be bothered but I hate living here. It's my sensible head saying keep hold of it or we might never get back on the housing market,

To be honest every time something is stolen from the garden, there's a commotion heard outside or abuse shouted at my neighbour who seems to be a target of youths who don't even live close, just pass through etc I want to just get our things and go regardless but I want to do what's best in the long run. I'll just have to stay regardless of how it makes me feel.

runninglea

If the area is as bad as you decribe then any tennant will either leave after 6 months due to not liking the area etc

or the tennant will be as bad as the local yobs

Either way it sounds like renting could be a problem with possible void periods every 6 or 12 months

abankerbutnotafatcat

Also, if the area is going down hill visibly that will affect any hoped for increase in the housing market.

carslet

if things are that bad might be worth taking the hit and getting away from it all, sounds like you are in the position to pay more ok a few thousand might not be to your liking, but sounds like it could be getting worse and could turn into a worthless property , i have seen this in the past before

bloom1234

That's a huge concern too. If we managed to let it out then the tenants may be unsavoury or decent, hard working people would feel driven out.

Any idea what happens to the difference if you sell at a loss? Does the debt stay with mortgage provider or is it transferred?