New to renting and confused

j2140b_2

Hi there
We have been having trouble getting a mortgage as we have recently become self employed. As we need relocate due to work we have decided to rent our property out and rent somewhere near to work. I had no idea how expensive this would be.
We are using LA's to rent ours out and also to rent.

We need to pay our mortgage provider £250 admin fees for giving us permission to let.
£240 fees to our LA + the 7.5% management fee. Then there are all the costs involved as tenants with deposits and bonds, referencing fees and agency fees - it seems to be endless!

Can anyone help me out with the whole deposit/bond thing which is a bit confusing (well it is to me). Am I right in thinking that the deposit and bond we receive for our property goes into a scheme so it is rightly protected? Being new to this I originally thought that we could use the deposit/bond from our property to pay the deposit/bond on the property we rent ! It looks like we have an awful lot of money to find for this to work for us. If anyone can clarify how these deposit/bond schemes work I would really appreciate it.
Many thanks

HappyMJ

You must lodge the deposit and use your savings to pay for a deposit on another property.

marliepanda

Honestly you need to forget about it.

If you honestly thought you could use someone elses money to pay your own rental bond you are crazy... How would you pay it back at the end? You clearly don't have any savings to cover rental void periods and any necessary repairs.

Being a landlord isn't as simple as having someone else pay your mortgage for you.

Kynthia

Letting your property is running a business and you need to treat it as such. You must comply with legislation around the property being safe and maintained, provide an annual gas safety certificate, EPC, deposit protection, tax, etc.

The fact you are renting too is irrelevant and completely separate. You cannot use your tenants money and you cannot take into account your rent or the capital mortgage repayments when calculating your tax liability. Also you should have some funds to deal with any repairs, as you can't delay things like you might for your own home, or a non-paying tenant, as it can take 6 months to evict.

Werdnal

Never mind the bond/deposit situation, as you seem to know nothing about the responsibilities and legal regulations of becoming a landlord.

Read this, and all the link it contains:

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

The costs involved in letting are probably far more than you think. Have you got your gas safety certificate sorted? What about landlord insurance? Then there is the tax you have to declare on your rental income.

If your are paying the mortgage and your own rent, how will you cope when the tenant stop paying or you have voids in letting? What about repairs - you cannot just tell the tenant to put on an extra jumper when the heating fails with a foot of snow on the ground outside - you must attend to all repairs quickly, otherwise tenant can stop paying or get environmental health to force you to get repairs done.

Did you really expect to use your tenant's deposit money to pay your own rental deposit? What happens when that tenant moves out and you need to repay the deposit - where would that money come from? The deposit is the tenant's money, and will remain so until the end of their tenancy, when you apply to the scheme if there are any deductions to be made. If the tenant and scheme agree, then you get the deductions and the rest goes back to the tenant. At no time is the money yours and at no time can you use it for anything other than approved deductions when your tenant moves out!

It worries me that you, like a lot of other "accidental" landlords, have obviously not thought this through or have a clue what you are doing!

tbs624

j2140b wrote: »

Can anyone help me out with the whole deposit/bond thing which is a bit confusing (well it is to me). Am I right in thinking that the deposit and bond we receive for our property goes into a scheme so it is rightly protected? Being new to this I originally thought that we could use the deposit/bond from our property to pay the deposit/bond on the property we rent ! It looks like we have an awful lot of money to find for this to work for us. If anyone can clarify how these deposit/bond schemes work I would really appreciate it.

There are three tenancy deposit schemes - DPS, mydeposits and TDS. The first is free to use and is custodial, ie the LL hands over the deposit monies to the scheme. The other two are insurance backed and charge fees ( which you can set down on your tax return). Under these schemes the LL retains the deposit money for the duration of the tenancy and has to hand over to the scheme any amount that is in dispute at the end of the tenancy.

Go on to each of the 3 schemes respective websites - there is clear guidance on there about how they operate. You have 30 days from receipt of the deposit ( and if payment is made by cheque that's the date when you receive the cheque not when it clears) in which to (a) get the deposit scheme registered and (b) provide the T with a copy of the scheme's precribed information. Don't do either of those things on actual day the tenancy agreement is signed, and when you do give the T th e prescribed information, keep a copy yourself and get the T to formally sign to acknowledge receipt.

As the others have said, you have to separate the finances/record keeping from the rental of your own property, and the other rental that will be providing a roof over your head

You may want to have a look at Tessa Shepperson's excellent landlord law website. There is plenty of free information and guidance on there: should you sign up as a member you would have access to free documentation and greater detail etc. Membership fees can be set down for tax purposes and you can get discounts on some LL insurance premiums

simonm_3

I rent out and couldn't agree more with many of the comments that might appear negative. It is a business and as with all businesses it might run at aloss! The deposit is not your money and is returned to the tenant at some pointor used, if used, normally there is a shortfall.

If you do go through with this, select your letting agent very verycarefully. There are some brilliant ones and some utter sharks that will preyon you as much as they might prey on the tenants. Any contract with the lettingagent, read all of it, don't assume its okay just because others have signed.

Again, if you go through with this. Don't necessarily take the first tenant that is offered, you are a newbie and the letting agent will get you moneywhether they send a known bad tenant or the best, you risk your house.

Also remember, once you have let your house, it might be yours, but it is their home and they have rights to their home.