Looking at buying a property to rent advice on cost etc needed!!

Makemesomemoney

I currently have my own mortgaged property which is due to be paid off in 5 1/2 years. I have some savings and I am looking into buying another property to rent out (I have done a small bit of research but want to do lots more before rushing into this).

In my area I am looking at paying around 70,000 for a half decent house and will probably have to put 20% down to get a buy to let mortgage. I would have a little bit of money for small improvements but nothing drastic.

Looking a the market I would get around £550 rent for the type of property I am looking at.

The main thing I want advice about is what I will need to pay out of the 550 a month besides the mortgage (which will be around 250-320 depending on length of term).

I'm not sure if I would want to privately rent it out or do it via an agent (more than likely the agent though just to protect myself being new to this)

What type of fees are involved in this?

This is more of a long term investment for me something I would like to sell when I retire. I don't really want to make any quick cash or anything.

Any advice would be great. thanks vicki

Werdnal

Most agents will take anything from 10% a month on commission, but check the small print of any T&Cs they offer as some will tie you to paying commission for the length of the tenancy, even if after a while you decide to take on the management of it yourself.

However, using an agent does not necessarily "protect" you. As landlord you are utimately responsible for the tenancy, the tenant's safety, deposit protection etc, and it is you the tenant will take to court if anything goes wrong, and you the EHO, HMRC or H&S Exec will catch up with if you do not comply with everything. Also, agents cannot represent you in court to evict tenants - they can serve the required notices, but you as landlord have to apply for possession order to end the tenancy.

Agent also have no minimum experience or qualification requirements - you could set yourself up as one tomorrow, so choose carefully, get recommendations and look for one who is ARLA registered to atleast give you some come-back if they do screw up.

There is a much recommended post here from GM, which gives more info on letting and the rules, regs and legal obligations of becoming a landlord:

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

Once you have read it, if you have any specific questions, come back and ask again.

Makemesomemoney

Thanks so much for the quick reply! Wow there is a lot involved. If I did this via an agent would they deal with most of the things listed in the article as I would not have the time to do all the listed things or the know how. I would rather someone just take over.

Just one question about the income tax, would this be my responsibly to declare or would the agent work this out for me.

It doesn't seem as straight forward as I originally thought.

Thanks again for reply

Werdnal

For tax, you complete an annual Self-assessment (paper form or online) and submit details of the rent received, less the allowable expenses, and you may be liable for tax. HMRC will take it as a whole with any other income, earnings you receive, and it may also affect benefits, tax credits etc that you are claiming. Allowable expenses are detailed in the HMRC link in the landlord info post I mentioned, but remember only mortgage interest is allowed, so if you get an interest only mortgage, you can deduct the whole payment, but if not, the capital/repayment amount cannot be deducted from the amount you declare for tax.

When you say "will agent handle all the other things" - generally, agents will do as much or as little as you ask - but obviously the more they do the more they will charge you for. Repairs and maintenance for instance - tenant rings agent, agent rings repair man, repair man does the work and bills agent, agent adds % and bills you. Much better if you employed a "tame" handyman/person to do it for you. Similarly, annual gas safety checks, electrical checks etc, agent will arrange someone qualified to do it if you ask and pay their going rate!

You would have to arrange your own insurance on the property, and it would need to cover letting as normal household insurance would not apply.

Above all though, remember that renting is not guaranteed income. You need a good contingency fund to cover repairs and lost rent, or voids with no tenant. It can take 4-6 months to evict a non-paying tenant, and a major repair (boiler failure etc) can wipe out several month's rent in one go. Would you be able to financially support the letting property and attend to repairs asap - you cannot just tell tenant you can't afford to repair heating this month until you have saved up some cash, or they will be knocking on the Environmental Health Officer's door screaming "dogdy landlord"!

I am not meaning to put you off - I have let a property for 13 years, and only had one bad paying tenant who wouldn't leave in that time, but I have also had to rehouse a perfectly reliable tenant twice due to a major flood, so things outside your control can and do go wrong, and you are the one paying for it!

Makemesomemoney

Thanks for more information. I think I need to work out monthly figures and see if this will stack up as a good long term investment. There are clearly lots of things to take into account. Thanks