Renting out current house and buying another?

sleepymans

The figures look exceedingly "tight" to me.
Have you allowed for:
Income tax
Landlords insurance
Letting/managing agent fees
Legal costs
Gas safety inspections and certificates
Voids
Wear and tear
Ongoing maintenance
Possible non-paying or bad tenants
tying yourself into non liquid assets, possibly for years
interest rate rises
possibly deteriorating future property market




It might seem a very slow process but maybe change that bathroom now and market your "refreshed" and decluttered current home and THEN move without all the hassle and expense becoming a professional LL.....

gazfocus

kingstreet wrote: »

That I don't know. I've never tried to do what you're doing.

I suspect the lender will want to cover both. It doesn't make sense not to, TBH.

Thanks for your post. The rental income will cover both but won't be 125% of both so will have to take a chance I think.

sleepymans wrote: »

The figures look exceedingly "tight" to me.
Have you allowed for:
Income tax
Landlords insurance
Letting/managing agent fees
Legal costs
Gas safety inspections and certificates
Voids
Wear and tear
Ongoing maintenance
Possible non-paying or bad tenants
tying yourself into non liquid assets, possibly for years
interest rate rises
possibly deteriorating future property market




It might seem a very slow process but maybe change that bathroom now and market your "refreshed" and decluttered current home and THEN move without all the hassle and expense becoming a professional LL.....

Thanks for your input. I understand what you're saying, however, the key thing for us is to get a 'quick release' from the house I own to enable us to get a mortgage for the house we want. We're not looking to make a 'profit' as such, so there will be zero (or very little) income tax to worry about.

I have considered the costs you've mentioned and some of the things on the list are difficult to gauge (such as voids and wear and tear), but, at the moment, I have about 8 months left on my fixed term mortgage and if I sell up, I will have to pay a £3000 redemption fee so it would be better to put that £3000 in a reserve pot for anything that needs doing to the house, then after the 8 months, I can decide whether to sell up or pay off a big chunk of the mortgage and continue renting it out.

[Deleted User]

Here is my news...

I just had the bad news from the HA, "3.15.1 Not to underlet or part with possession of part only of the Premises"

I'm told this means "No you cannot sub-let". I have asked a property lawyer to take a look to see what can be done with this.

I read online that someone sub-let regardless of this and was allowed 2 years from their HA to do this and then return to the original agreement.

I hope we get some change from the HA :-/

Thrugelmir

gazfocus wrote: »

I have considered the costs you've mentioned and some of the things on the list are difficult to gauge (such as voids and wear and tear), but, at the moment, I have about 8 months left on my fixed term mortgage and if I sell up, I will have to pay a £3000 redemption fee so it would be better to put that £3000 in a reserve pot for anything that needs doing to the house, then after the 8 months, I can decide whether to sell up or pay off a big chunk of the mortgage and continue renting it out.

When it comes to selling the property. You may well be paying the mortgage and rent, along with costs such as rates with no income. Your tenants are unlikely to vacate the house on the day of completion.

Factor in void periods and tenant defaults into your rental income projections. As there's no guarantee of receiving a rent cheque every month.

gazfocus

assj wrote: »

Here is my news...

I just had the bad news from the HA, "3.15.1 Not to underlet or part with possession of part only of the Premises"

I'm told this means "No you cannot sub-let". I have asked a property lawyer to take a look to see what can be done with this.

I read online that someone sub-let regardless of this and was allowed 2 years from their HA to do this and then return to the original agreement.

I hope we get some change from the HA :-/

Hi assj. I'm sorry to hear that. There is a glimmer of hope for me seeing as the house has been previously rented out by the lady I bought it off. From reading online, one of the crtieria to enable the HA to allow sub-letting would relate to market conditions making it difficult to sell the house.

On our street there are 16 shared ownership houses and 2 of them are currently for sale. One has been up for sale for 18 months and the other one has been up for sale for about 3 months. Neither have sold and so I don't see why mine would. I also think that having 3 houses on such a small street would have a negative impact on all 3 house sales, so this is the angle I'm going to try.

Furthermore, the redemption fee charged by my mortgage lender means that there would be a significant financial implication to selling now as appose to 6 months down the line.

gazfocus

Thrugelmir wrote: »

When it comes to selling the property. You may well be paying the mortgage and rent, along with costs such as rates with no income. Your tenants are unlikely to vacate the house on the day of completion.

Factor in void periods and tenant defaults into your rental income projections. As there's no guarantee of receiving a rent cheque every month.

Thanks Thrugelmir. I guess ultimately, I am going to have to wait on a decision from my housing association as to whether they will let me sublet.

My wife and I earn a combined £2500 per month and the mortgage payments on the new house will be approx £800 so I hope we can make this work.

[Deleted User]

I have a very similar situation, from reading the news article online it appears that some people just do it and then are allowed a set period of time to stop by the HA, i.e. 2 years in the case I read. :-)

leveller2911

Any tenancy agreement will say if Sub letting is allowed. Gaz ,what does your TA say regarding sub letting?.

I extreme cases some allow short term SL under exceptional circumstances such as illness/death etc but I don't think your case would be deemed as exceptional circumstances.

gazfocus

assj wrote: »

I have a very similar situation, from reading the news article online it appears that some people just do it and then are allowed a set period of time to stop by the HA, i.e. 2 years in the case I read. :-)

Only problem being that to get consent to let from my mortgage lender, they will want a letter of consent from the HA as well.

I also read that case you've seen and the only reason that person was allowed to let for 2 years was because he already had a tenant that was in a 2 year tenancy agreement.

leveller2911 wrote: »

Any tenancy agreement will say if Sub letting is allowed. Gaz ,what does your TA say regarding sub letting?.

I extreme cases some allow short term SL under exceptional circumstances such as illness/death etc but I don't think your case would be deemed as exceptional circumstances.

As I said, I will need to wait to see what the criteria is that the HA are sending me. The HA have been very reasonable so far to date and I'm really REALLY hoping they continue to do so.

[Deleted User]

Ok thanks keep me updated, I have got a lawyer now to deal with this for me, I hope to find a floor in the lease. Wish me luck.