Letting and renting - how does it work

JimmyTheWig

Hi,

We've been on the market to sell our house since January.
The price started a little high but have since dropped to what people seem to think is about right.
In this time we've proceeded with two offers, both of which have fallen through for different reasons, and accepted a third offer which was withdrawn a few days later when it became apparent they couldn't get the mortgage they needed.
Needless to say we're fed up with the process.

We're moving out of the area and would have loved to have been in the new place ready for the start of the school year in September.

So we've got the idea of letting out our house and renting a house in the area that we want to live in.
We've got no real experience of either letting or renting, so don't even know at this point in time whether it would work, let alone whether we want to do it.

So, how does it work?

If we put our house on the market to let, how long is it likely to take to find someone to take it?
Do we try to find somewhere to rent so that the dates tie up, or do we just move and then hope someone rents our house?
What would we have to do as landlords (e.g. gas safety check) and how much of this would a local estate agent do for us?
What sort of fees and real costs would we be looking at paying out of the rent that we receive?
Our house is owned as tenants in common with a 50:50 split. Would any profit from the rent have to be split 50:50 between us for tax purposes, or could it all go to my wife?
What sort of costs would we have to pay out on top of the rent we would pay where we move?
What would happen when we then come to sell the house (after a year, say) when we have tenants in place?

How much more complicated would this all be if we let the house out as a HMO?


Thanks,

Jim

Werdnal

Start by reading this:

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

and all the links it contains, and if you still have questions after you have digested that lot, come back and ask again!

ValHaller

OK, this sorts you out for September. You have to do it, because you cannot leave your present house stood idle waiting for a sale.

So what is your exit strategy? Because to get a sale you will have to face up to it being stood idle waiting for a sale, unless you are going to sell with tenants in situ..

PasturesNew

Just the cost of not renting yours out and the fees and tax etc .... might mean that the maths says it's easier if you simply drop the price another £20k or more.

JimmyTheWig

ValHaller wrote: »

to get a sale you will have to face up to it being stood idle waiting for a sale, unless you are going to sell with tenants in situ..

That's one of my questions. How difficult (or even possible) is it to sell with tenants in situ?

JimmyTheWig

PasturesNew wrote: »

Just the cost of not renting yours out and the fees and tax etc .... might mean that the maths says it's easier if you simply drop the price another £20k or more.

That's one of the reasons why I need this basic info to work out how much it will cost (or make!) us.

JimmyTheWig

Werdnal wrote: »

Start by eading this:

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

and all the links it contains, and if you still have questions after you have digested that lot, come back and ask again!

Interesting stuff, but that's too much on the specific detail for me right now.
Whether or not I pay £15 or £50 for applicant vetting, for example, doesn't make the difference between it being something worth looking in to and a non-starter.

If we decide it is worth looking in to then I think that is a great post for us to work through. But for now I'm interested in ball-park figures andthe "big picture" questions.

Cornucopia

Whether it is worthwhile depends on how you intend funding it, what the rent is, how easy it will be to let out, etc. etc.

Answering your original questions...

If we put our house on the market to let, how long is it likely to take to find someone to take it? Should be a matter of 2-3 weeks.

Do we try to find somewhere to rent so that the dates tie up, or do we just move and then hope someone rents our house? Do the latter, it is much easier.

What would we have to do as landlords (e.g. gas safety check) and how much of this would a local estate agent do for us? The agent should organise most of this, and you will pay them.

What sort of fees and real costs would we be looking at paying out of the rent that we receive? Agents fees, insurance (for a house), service charges, mortgage costs.

What sort of costs would we have to pay out on top of the rent we would pay where we move? You may find it more difficult to fund this if you are not buying a new property. Your old property will require either consent to let or a BTL mortgage - unless you own outright.

What would happen when we then come to sell the house (after a year, say) when we have tenants in place? You can sell with them in-situ (this is becoming more common), or you can ask them to leave. Why would you expect to find it easier to sell in a year, compared to now? Is it fair to do this to the tenant?

Werdnal

JimmyTheWig wrote: »

That's one of my questions. How difficult (or even possible) is it to sell with tenants in situ?

Selling with tenants is possible, but fraught with problems. Your tenants have a tenancy which you cannot easily end - it must continue to the end of the fixed term, and be subject to formal 2 months notice, and possibly a court possession order to end it. This means anyone looking to buy must either be a BTL investor and take over your tenants in situ, or will be advised to seek confirmation that the property is vacant before the even exchange. They cannot buy with a resi mortgage if tenants are in place.

By the way, you don't mention whether you have a mortgage - if so, you will need consent to let it.

Tenants can also refuse all viewings, present the place in a very poor condition (unhoovered floors, last night's curry smells, dirty dishes) - think about it, would you go out of your way to help your landlord sell the place and make yourself homeless?

You either need to bite the bullet and let it for say 12 months, then give tenant's notice and market it for sale OR drop the price to get a quick hassle free sale and move one with your lives.

Ballpark costs:

Agent fees minimum 10% commission +Vat

GSC - never had one of these (my property all electric) but remember if you get the agent to do anything for you, you will pay for the work and their mark-up!

LL insurance - how long is a piece of string, as will vary on your location, type of property, size etc.

Repair contingency - something major goes wrong, you need to repair/replace it quickly - how much would a new boiler cost you? If you lived there you would cope without heating/hot water until you'd shopped around for a good price - tenant may be calling the EHO if you don't address the repair DPQ.

Lost rent, voids, eviction costs - all difficult to quantify but a regular occurence if you read some of the posts here.

How old is the property? You may be wise to have an electrical safety test - not compulsory but LL need to ensure electrical installation is safe and may save you a manslaughter charge if anything went wrong!

shays_mum

Depends how long you expect to be in this situation. I was in the same dilemma recently & in the end kept my first house as a long term rental which then pays 1.5 x's the mortgages for 2 houses.

I am in the process of researching whether i am going to be a private landlord or give it to one of those housing association people who do everything & give you the rent. The reason the 2nd option this appeals to me, is that house 1 is in a low value area, but with great transport links, you're talking London Bridge/Victoria in 15mins, the rents are high.

I have friends in the local area who have also used the housing association landlord route on a yearly rolling contract for last 5 years & are really happy.

Either way, its going to cost you, so make sure you have contingency money.

We are currently paying 2 mortgages as this is going thru & have put both mortgages on interest only till things settle down.

HTH & goodluck in finding your new place

JimmyTheWig

Thanks guys, there's some helpful info there.