Cost of Letting our property

Pili-Pala_4

Hi,

Hubby and I will be away for 2 years (work contract) and hope to rent our house out in the meantime to cover costs. We've talked to a couple of letting agents but are wary that the picture they paint is a little too rosy :rolleyes:
We need to make sure that everything is covered and although don't need it as an income we do need it to cover it's own costs (including paying off the mortgage whilst we rent elsewhere).

What costs do we need to bear in mind?
Our house is a 3 bed semi and looking at the market in the area similar houses (in size / location) tend to rent out for a minimum of £550 up to £700.

Thanks,
Pp

andrewbrydon

Hi

My advice is if your home is rented on a AST(assured shorthold tenancy) for 12 month I would look at you actually receiving 10 months of the 12
Why?-
If you rent through a letting agent they normally charge 10-13% for full management and there maybe rental voids while you find a new tenant
so 2 months will be taken this way

The most important thing is YOU are responsible for paying the mortgage even if you dont have a tenant

Also remember any repair are your responsibilty as well as maintenance to the property and insurance too

Pili-Pala_4

Thanks for that AB.

So if we rent for £550 pcm

Letting agents fees will be approx £55 - £72 pcm
Work on £550 x 10 (months) = £5500
Less agents fees (max) = £72 x12 = £720
= £5500 - £720 = £4780

Mortgage fixed 2 years = £450 pcm x12 = £5400 pa
This would allow £5400 - £4780 for other costs = £620 pa

Do agents charge even if it's empty?
I was interested in having an idea about things like any insurance costs too?

We'd rather keep the rent down and have someone in it all the time (as long as the mortgage and other costs are covered) so the aim is to break even plus a bit in case any work needs doing.

Anyone got any more advice on this?

Pp

King_Of_Fools

You will also need to take into account a few extras that agents usually charge like advertising the property, drawing up a contract, etc.. You also have to pay for any gas appliances to be serviced once per year. For insurance you need to cover buildings and your furnishings.

budget_counsellor_shaz

You also need to take into account any repairs to the property during the next 2 years.

You will need to pay for a corgi registered plumber to check the boiler and any gas a ppliances as you will need a certificate this costs about £50. You will need a new one for each year.

You will also need to pay for someone to look after your deposit for you (this has only been introduced recently).

I would also recommend that you let the property part furnished if not totally furnished as you can replace any items that need replacing and these are liable against tax that you will need to pay. Also if you have problems getting the tennants out after 2 years you have more rights over the property if your furniture is in there.

My uncle and aunt let their property out for 1 year when they went away with work. When they came back and wanted the house back the tenants refused to move and they didn't pay any rent they became squatters.

Finally after many months the police moved them as they were growing drugs in the green house.:eek:

Don't let this put you off though......... Most people are fine just check the references carefully.

Shaz

dondonsinspain

You will need to get a 'landlords' insurance policy to cover you, the one I use is http://www.orwellinsurance.co.uk/online/contact_us.html, and they give the cover you need. Remember you can negotiate with the letting agent re their fee, mine wanted 15% but I got it down to 10%. Also your agent will have to declare the income to the tax man if you are a landlord living abroad.

Lazy_Runner

I have been charged council tax for the period the property was empty. Got a 10% discount.

I would investigate with your council.

Other utilities are fine as long as you tell them the day you move out and the day the tenant(s) move in. (Imaging you have 2 tenancies over the 2 years).

real1314

Pili-Pala wrote: »

Thanks for that AB.

So if we rent for £550 pcm

Letting agents fees will be approx £55 - £72 pcm
Work on £550 x 10 (months) = £5500
Less agents fees (max) = £72 x12 = £720
= £5500 - £720 = £4780

Mortgage fixed 2 years = £450 pcm x12 = £5400 pa
This would allow £5400 - £4780 for other costs = £620 pa :eek:

Do agents charge even if it's empty?
I was interested in having an idea about things like any insurance costs too?

We'd rather keep the rent down and have someone in it all the time (as long as the mortgage and other costs are covered) so the aim is to break even plus a bit in case any work needs doing.

Anyone got any more advice on this?

Pp

Erm, I think you've reversed the sums in there (look for the :eek: ).

You've used the mortgage as the income and taken the income from that to end up with an allowance for "other costs".

Try this: Rental Income 10 x £550 = £5500.
Take off agents fees 12 x £72 = £720

This leaves £4780

Mortgage costs 12 x £450 = £5400

This leaves a DEFICIT of £620 pa. based on your figure
Then you've got the "other costs" which will include an annual gas certificate (£40-50 for a boiler and hob/cooker, more if a gas fire is present). Possibly extra buildings insurance, possibly a charge from the mortgage lender to allow letting.

Gorgeous_George

Furniture makes no difference when it comes to getting the property back these days.

10% of the rent can be offset against income tax.

Buildings insurance around £150 - £200.

Risk of bad tenants.

Risk of no tenants.

Might need mortgage lender's agreement.

Stress.

You might never want to live there again.

Unless you believe taht the property will increase in value or you really only want to own this house, I'd recommend selling and investing elsewhere.



GG

Pili-Pala_4

real1314 wrote: »

Erm, I think you've reversed the sums in there (look for the :eek: ).
Try this: Rental Income 10 x £550 = £5500.
Take off agents fees 12 x £72 = £720
This leaves £4780
Mortgage costs 12 x £450 = £5400
This leaves a DEFICIT of £620 pa. based on your figure

Oops - thanks for that real1314.

OK some real figures.
Advised that could get a rent of 650 - 750 in area for a 3 bed semi but since it's small for a 3 bed will stay at £600 (looked at the market and think it's more realistic)
Start up fee of £250 (deducted when someone moves in);
Agents fees of 10% (only charged when property has tennants)
Gas & Elec certs £160
Building insurance comes to approx £170 (best I can get so far).

Working on renting for 10 months for every 12:
Costs
Mortgage = 5400
Start up fee = 250
Agents fee = 10% of (600 x 10) = £600
Certificates = £160
Insurance = £170

Total = £6580

Total possible income = £600 x 10 = £6000

We'd still be down on the deal by £580
So we're better off selling and putting the equity in the bank and then buy again in 2 years time?

King_Of_Fools

Pili-Pala wrote: »

We'd still be down on the deal by £580
So we're better off selling and putting the equity in the bank and then buy again in 2 years time?

Definitely, especially as the same money will most likely get you a bigger property in two years time!