advice need re selling vs letting

flossiemoo

Hello..

Me and my boyfriend wish to move in together. We both own one bedroom flats in London, and we have the dilemma of mine being in a better position, but tiny (and worth more) - his is further out but better suited to two (but would mean larger rail fares).

Ideally I'd like us to get our own place, but we both are relatively low-earners (for London prices) and would struggle to get a mortgage in order to buy where we would like to live. So we would possibly have to move further out and... there's the price of rail fares again!

Do we let ours both out and rent somewhere for ourselves? Sell both and buy somewhere? Rent out one, stay at the other, then think again in a few months?
The options are so endless we've ended up doing nothing.

Also, my mortgage is currently on SVR with C&G - if I wanted to let out my flat would I need to get a different mortgage? If I wanted to rent it to a friend would I need to do the same?

I'm aware there are plenty of questions here, any guidance would be very welcome, thank you.

Notmyrealname

First of all you need to find out if you can get permission to let from your respective mortgage companies before you go any further.

You mention the higher rail fares if you move to his place but the costs involved in letting his property as well as yours or going to the letting mortgages would probably outweigh the larger rail fares for a good couple of years.

It sounds like you're relatively early in your relationship and I think selling wouldn't be a good idea just quite yet until you've had some time living together as sometimes a great relationship falls when people find out they can't actually live with one another.

flossiemoo

Thanks for the advice...

We've been together nearly 3 years and more or less live together (most of the week at my place, weekends at his), so we're not too worried on that front.

The costs of letting are something I'm wondering about too.. Gosh being a grown up sucks!

Fire_Fox

Welcome! It's worth running an advanced search, this comes up regularly. You would need to apply for consent to lease from your lender, possibly also from your freeholder depending on the terms of your long lease. You probably won't get consent to lease from your lender without a decent amount of equity unfortunately. Register for income tax, get safety certificates, landlord's insurance, lodge the tenants deposit .... and reams of other legislation. If you wish to let to a friend you must comply with ALL this exactly the same, the law and your lender will still deem you a landlord.
http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

Do you have any savings? If not this should be your priority: how will you pay the mortgage(s) if your tenants do not pay rent, trash the flat, gaps between tenants, something major breaks down and needs urgent repair, you fall ill or injured and cannot work, unplanned difficult pregnancy, redundancy? The state doesn't pay residential mortgage interest nor service charges for three months, and will not be eligible for these or other means tested benefits if you have an extra income from rent.

If you can get some savings together you could buy new dual purpose furniture - wall beds or loft beds, gateleg dining table, stacking or folding chairs, floor to ceiling shelves or cupboards, under-bed or under-sofa storage. It's truly amazing how much space you can create. Also have you had a serious declutter lately? eBay stuff to raise money.

Werdnal

You would need permission from the lender(s) to let - some agree, some add extra costs and clauses, dictate who you can let to, for how long and how much rent you must charge. Some refuse - so this must be your first step as it may be a non-starter.

Flats are often leasehold - you would need permission from your freeholder to let.

Then you need to comply with lots of legal stuff, and the thread mentioned above is a good starting point. Read that and all the links it contains to make sure you really want to start a letting business - Yes, even letting one property is considered a business, with annual tax returns required.

Once you understand what you are required to do, ask yourself whether you can really afford to do this - having a mortgage on a letting property, plus paying rent/mortgage on the property you live in is fine when you have a good salary and regular rent coming in. How would you manage if the tenants stopped paying, one or both of the rental properties had a major repair bill, you had a gap in letting, tenant did a bunk and left damage that you needed to sue through the courts to recover. It may sound like scaremongering, but it happens - I've had it happen to me, but have no mortgage to pay on either my own home or my letting property, so can manage if the !!!! hits the fan occasionally - can you?

flossiemoo

Thanks for the replies - very helpful. If rather daunting!

somethingcorporate

Being a landlord is a business - with legal requirements that have very serious consequences if breached. IIRC if you do not have a Gas Safety Certificate the fine can be up to £50k and you can face jail time (if it explodes and kills someone).

Being a landlord should not to be entered into lightly!