Buy To Let Question

Charitymanager

Hi All,

We have recently accepted an offer on our property and subsequently had an offer accepted on a property ourselves. It turns out that our purchasers have ground to a halt with the underwriters, and they are not terribly forthcoming with why that is.

I have asked the EA to contact them and ask them for:
- The reason for the delay
- The likely solution
- Indicative timescale

Our vendors are getting twitchier by the day as we have slowed things down to take account of this.

So I have a few questions:
- Am i being too impatient? We finalised the offer 4 weeks ago and have heard nothing since until yesterday we responded to some queries from their solicitor.
- Is this in all likelihood underwriters being ultra cautious?
- Should I push them for greater transparency?

Naturally we have started thinking about contingencies and we could make a sensibe financial case for letting our current property out. TBH we just didnt fancy the hassle of it. However if we were to go down the road of BTL, and making the assumption that we meet the lending criteria which we should. How long would it take to complete a BTL mortgage?

Not sure whether that is an easy question to answer, but hey you get nothing if you dont ask!

Werdnal

You could approach your existing lenders for consent to let, they may agree, they may add extra costs and clauses, or they may refuse. If you need to start again on a BTL basis, you will usually need a minimum of 25% deposit.

But what you need to ask yourself is do you really want the costs, hassle and stress of becoming landlords when your long term aim is to sell the property. Do you know what letting involves? Have you looked into all the legal requirements? You can only charge the interest portion of the mortgage against the rent, so you have to declare your rental income (less allowable costs) to HMRC and may pay tax on any profits - could affect any benefits, tax credits etc you already get. Could you afford to cover your own mortgage and living expenses and support the let property if a tenant stopped paying - could take several months and a court order to evict them, with no rent in the meantime.

If you still think its a good idea, you must read up on all the legal requiremtns and obligations of letting. This is a good starting point:

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

You have obviously prepared your property to present it well for the selling market - are you prepared to do that all over again once a tenant has been in and possibly used and abused it?

Sorry, I may sound negative, there are good points in being a LL, but you must do it for the right reasons and go into it with your eyes wide open and A1 grades for all the homework you have done in advance! Choosing to be a LL is one thing, doing it because you feel you have no option is a totally different ball game, with many pitfalls and problems along the way.

Oh and if you still intend to sell, trying to market with tenants in place is never a good idea - they can obstruct viewings, do not have any obligation to keep the place tidy and presentable and may put buyers off, as you cannot exchange on a residential property unless it is vacant, and could take you some time to evict tenants - and you think your sale is delayed now!!

Charitymanager

Hi thanks so much for your feedback I have put some clarification below.

Werdnal wrote: »

You could approach your existing lenders for consent to let, they may agree, they may add extra costs and clauses, or they may refuse. If you need to start again on a BTL basis, you will usually need a minimum of 25% deposit.
We have 25% but could raise as much as 40%

But what you need to ask yourself is do you really want the costs, hassle and stress of becoming landlords when your long term aim is to sell the property. Do you know what letting involves? Have you looked into all the legal requirements? You can only charge the interest portion of the mortgage against the rent, so you have to declare your rental income (less allowable costs) to HMRC and may pay tax on any profits - could affect any benefits, tax credits etc you already get. Could you afford to cover your own mortgage and living expenses and support the let property if a tenant stopped paying - could take several months and a court order to evict them, with no rent in the meantime.
Yes if necessary....we are moving to a house that we can afford currently with our current expenses. Currently we have £900 a month in childcare costs. The IO portion of the BTL mortage we would need would be £300 a month @6%. Obviously rates are lower than that currently. So if we assume that childcare costs will reduce significantly in 18 months time when my son hits school then we will have significant residual income.

We dont get any benefits, tax credits etc. Our plan would be to create a separate bank account with a £5k maintenance fund in. Use that account to pay rent into and pay mortgage out of. Presumably some maintenance is tax deductable also.

In reality - no we dont really want the hassle, however the house we are buying is 500yds away so wouldnt be too bad to manage. In addition if we were to let we would be looking at it as a 10-20yr investment. Even capital growth on average of 1% per annum would be far greater than we could achieve on savings.


If you still think its a good idea, you must read up on all the legal requiremtns and obligations of letting. This is a good starting point:

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

That is really useful thanks. We have let a property before and let the agent take care of most things.

You have obviously prepared your property to present it well for the selling market - are you prepared to do that all over again once a tenant has been in and possibly used and abused it?

Yes, where we live isnt the sort of place to attract short term tenants. It is likely to appeal to families who want to be near what are a collection of amazingly good schools. Our home is a 3bed family end of terrace. We intend, if we do let - to spend some money up front on easily replaceable fixtures and fittings.

Sorry, I may sound negative, there are good points in being a LL, but you must do it for the right reasons and go into it with your eyes wide open and A1 grades for all the homework you have done in advance! Choosing to be a LL is one thing, doing it because you feel you have no option is a totally different ball game, with many pitfalls and problems along the way.

If I am honest, my inclination is for a quiet life. However there is quite a compelling financial argument presuming you are in it for the long term. (we dont plan to leave this area).

Oh and if you still intend to sell, trying to market with tenants in place is never a good idea - they can obstruct viewings, do not have any obligation to keep the place tidy and presentable and may put buyers off, as you cannot exchange on a residential property unless it is vacant, and could take you some time to evict tenants - and you think your sale is delayed now!!
Yeah I know, my mother in law has been in exactly that position. Not fun!