Landlord Discussion

Cotta

Hi All,

Just opening up a topic for LL to get some general feedback as to how you are getting on with your property/properties. I fell into being a LL by accident, I had just purchased a house and the company I worked for went into administration. I decided to rent out the house and to a really nice family, this was almost six years ago and I've since moved away and the same family are living in the house.

I just sat down last night to do my figures and while everything is progressing reasonably well, taking the mortgage and other costs into account the house returns a loss in the region of £50 per month. I haven't had any problems in relation to the house in the past six years and I have never increased the rent either and I'm still very reluctant to do so but it's a possibility. Other than that I think everything is good and I am thankfully free of some of the horror stories that other people have.

How are things with fellow LLs?

Pixie5740

How are you calculating your loss? Are you including capital repayments?

Cotta

Pixie5740 wrote: »

How are you calculating your loss? Are you including capital repayments?

Yes all expenditure including mortgage repayments and insurance etc.

Pixie5740

Capital repayments are included when calculating profit/loss. Only the interest portion of your mortgage payment is used in the calculation. How do you work out your profit/loss when reporting it to HMRC?

You've not increased the rent in 6 years. That's quite a long time. How does the rent you charge compare with similar rental properties in the area? It's a fine line between keeping good tenants and keeping your business profitable.

booksurr

if you are on a repayment mortgage then you are not making a "loss", you are in reality simply not having the full amount of the capital being paid off by your tenant. Therefore the property requires a small subsidy from you which you will get back when you sell it an therefore release the capital currently locked up in your investment

if you are on an interest only mortgage then your position is as Pixie says - a choice between raising the rent by a modest amount after 6 years (bearing in mind interest rates will go up again soon) at the risk of losing a good tenant.

you admit to being an accidental LL but after 6 years you should certainly by now have formulated your exit strategy and therefore are now a professional LL fully informed as to your trade off between revenue and capital return

Cotta

I use the capital and interest when calculating my profit with my mortgage repayment of £510 per month on a mortgage that has an interest rate of 4.75%. Obviously I only use the interest accumulated and costs when completing HMRC.

It's probably slightly out of line and about £10 per week too low in comparison to other houses.

Cotta

booksurr wrote: »

if you are on a repayment mortgage then you are not making a "loss", you are in reality simply not having the full amount of the capital being paid off by your tenant. Therefore the property requires a small subsidy from you which you will get back when you sell it an therefore release the capital currently locked up in your investment

This is the part that applies to me, I probably just poorly worded the original message. There is only seven years left on the mortgage so I'm happy to keep the property until then.

AlexMac

I'm content and happy to stick with being a small amateur LL.

Like you. I've go one really great (self-managed) long-standing tenant so I'm happy to keep her on a slightly soft rent as, if she moved, the costs of the void period and expenses to find and check another would outweigh a couple of years at and extra £10-30 a month on the rent. The second little palce, also an ex-Council 2-bedder, is let on a 3-year licence to a social landlord, so I get a market rent, no hassle or running costs, (they maintain everything and even arrange the Gas certs) and I'm ready for a bit more wear and tear.

I'm also doing really well in terms of Capital gains- having owned one place for 16 years (with never a bad tenant) and the other (social let) only three; bought after the 2008-9 price crash. As you bought, presumably, in 2007 or so, you might have bought as the market peaked but, round here, prices have gone up over one third since then (I won't say how much the other place has appreciated in 16 years; you'll go green).

But even though your place is barely ticking over, as you're on a repayment mortgage, unlike my (low rate) interest only one, you'll have a nice nest egg in a few years time.

So if, like me, you're 'glass half full' not a pessimist, I'd stick in there.

Cotta

It's important to have a great tenant and sometimes the cost of replacing a good tenant possibly due to a rent increase is not worth it.

slopemaster

Cotta wrote: »

It's important to have a great tenant and sometimes the cost of replacing a good tenant possibly due to a rent increase is not worth it.

That's true, but it doesn't stop you negotiating a reasonable increase with your tenant.

Cotta

slopemaster wrote: »

That's true, but it doesn't stop you negotiating a reasonable increase with your tenant.

Good point, their contract ends at the begining of 2014 and I think I will implement a small increase of 5%.