How to work out if its worth keeping my flat and renting it out?

martinsurrey

chelseablue wrote: »

My current salary is £30,000

Flat was valued by a surveryor in August this year at £160,000
Mortgage still owed is about £96,000

My mortgage payment is £450 a month. Flats rent in my block for £800 - £850 a month

lets assume a 4% BTL mortgage on £100k (easy numbers)

mortgage interest cost = £4,000
rental income (at 75% of rental value to cover fees, costs and voids) = £7,200
gross "profit"= £3,200
Tax on profit at 20% leaves
Net profit = £2,560

Now if you get a 4% residential mortgage your flat equity of £60k would save you £2,400 per year

so it becomes a matter of risk.

if you think you can get a good tenant, have low costs and voids, and house prices rise, rental wins.

if you worry you might get a terrible tenant, need to rplace the boiler every other winter and house prices will stagnate, selling up wins.

somethingcorporate

We did something similar 3 years ago, couldn't sell our flat so rented it out and bought a new house at £250k 200 miles North.

We've had a single corporate tenant consistently, never missed rent etc. and couldn't be better. We're still looking to bail out at the earliest opportunity because being a LL is a pain in the backside. There is considerable amounts of capital tied up there and we'd rather put it to better use elsewhere. Managing tenants, mortgage companies, GSCs, insurance, rubbish managing agents (ours was criminally negligent) etc is all a major headache for a flat that sucks out a lot of cash. You may have mortgage rate issues in a few years so don't bank on paying £450 per month for ever.

If you can stomach the risk and want to be a LL then go for it but for us we'd rather do something a less annoying! Personally I'd rather a far lower mortgage on my own home than have two properties to worry about.

chelseablue

somethingcorporate wrote: »

We did something similar 3 years ago, couldn't sell our flat so rented it out and bought a new house at £250k 200 miles North.

We've had a single corporate tenant consistently, never missed rent etc. and couldn't be better. We're still looking to bail out at the earliest opportunity because being a LL is a pain in the backside. There is considerable amounts of capital tied up there and we'd rather put it to better use elsewhere. Managing tenants, mortgage companies, GSCs, insurance, rubbish managing agents (ours was criminally negligent) etc is all a major headache for a flat that sucks out a lot of cash. You may have mortgage rate issues in a few years so don't bank on paying £450 per month for ever.

If you can stomach the risk and want to be a LL then go for it but for us we'd rather do something a less annoying! Personally I'd rather a far lower mortgage on my own home than have two properties to worry about.

Yes this would be appealing, especially as there is currently approx £64,000 equity in my flat

LEJC

chelseablue wrote: »

Yes, I will spend the next 3-4 years saving as much as I can

As you can see I like to plan things as much as I can

on the face of it with the information you have given on this thread its perfecly possible...

However am I also right to conclude that you are currently expecting so your salary predictions/income/expenditure are not going to remain the same over the 4 year time frame.

The birth of your child will have an impact and you need to factor this into your plan going forward.

chelseablue

LEJC wrote: »

on the face of it with the information you have given on this thread its perfecly possible...

However am I also right to conclude that you are currently expecting so your salary predictions/income/expenditure are not going to remain the same over the 4 year time frame.

The birth of your child will have an impact and you need to factor this into your plan going forward.

Yes that is correct :)

I have enough to cover my maternity saved up seperatley
The plan is to go back full time after my maternity leave

dimbo61

" The Plan is to go back full time" but plans can and do change.
For the moment I would save what you can and consider Offset mortgages when you do buy your dream home

chelseablue

Yes it seems like being a landlord is a headache, especially with a young family

Im leaning more towards selling the flat and being able to buy a better house