Keep current flat to rent out & buy second propety to live in?

1983JK

Hi everyone,

This is my first post so apologies if I'm not up to speed with forum etiquette!

My wife and I are looking to move house. We own a flat already and are trying to work or if it's fesible to keep hold of it and rent out out as a rental property rather than sell it to buy ourselves a new house. We love the flat and would really like to keep hold of it as an investment.

We bought our existing flat 3 yrs ago for £190k, it's now for a market value of approx £210 - £220k. Our mortgage repayments are £652.50/month, similar rental properties in the area get approx £800-£1000/ month. The rental market is strong in our area, I'm confident we could rent it out quickly.

The new properties were looking at are approx £300k, we have roughly £30k in savings and could borrow approx £10k from parents if we needed to.

Does anyone here have knowledge of this sort of situation? Are we getting ahead of ourselves in thinking we can keep the flat AND buy a property?

Thanks in advance!

Guest101

1983JK wrote: »

Hi everyone,

This is my first post so apologies if I'm not up to speed with forum etiquette!

My wife and I are looking to move house. We own a flat already and are trying to work or if it's fesible to keep hold of it and rent out out as a rental property rather than sell it to buy ourselves a new house. We love the flat and would really like to keep hold of it as an investment.

We bought our existing flat 3 yrs ago for £190k, it's now for a market value of approx £210 - £220k. Our mortgage repayments are £652.50/month, similar rental properties in the area get approx £800-£1000/ month. The rental market is strong in our area, I'm confident we could rent it out quickly.

The new properties were looking at are approx £300k, we have roughly £30k in savings and could borrow approx £10k from parents if we needed to.

Does anyone here have knowledge of this sort of situation? Are we getting ahead of ourselves in thinking we can keep the flat AND buy a property?

Thanks in advance!

Well your new mortgage would be income dependant. You should speak to your lender.

As for renting old flat out - could you afford to pay both mortgages ( the flats rate is likely to rise when you decide to rent)

If you get an agent, they'll want a share of the rent.

You will need to learn the regulations ( assuming England )- gas safety, deposit protection and do forth.

LEJC

Personally I would say that the margins are very tight...if your mortgage payments are in the region of £650 on the flat and the rental income is £900 then there is not much potential to make much on the rental above what the property appreciates at.


You may need to change your mortgage to a BTL or at the very least obtain consent to let...then you also need to factor in any management fees as these are usually paid by the LL.
add to that any agency fees of marketing or managing your property and the associated costs of certicications of gas appliances etc....not forgetiing a slush fund of repairs and some means of covering void periods when the flat is empty.....


you may decide its a punt worth taking or you may decide that actually its better to sell and pit any capital into your next home.

1983JK

Thanks for the quick response.

As you say I probably need to give our lender a call. I was trying to work out if we were living in a fantasy world first!

We could likely afford both mortgages if for any reason the flat wasn't rented out. It'd be a push but possible depending on what the repayment rates were.

Thanks.

1983JK

LEJC wrote: »

Personally I would say that the margins are very tight...if your mortgage payments are in the region of £650 on the flat and the rental income is £900 then there is not much potential to make much on the rental above what the property appreciates at.


You may need to change your mortgage to a BTL or at the very least obtain consent to let...then you also need to factor in any management fees as these are usually paid by the LL.
add to that any agency fees of marketing or managing your property and the associated costs of certicications of gas appliances etc....not forgetiing a slush fund of repairs and some means of covering void periods when the flat is empty.....


you may decide its a punt worth taking or you may decide that actually its better to sell and pit any capital into your next home.

Thanks.

Although making a profit on the rent of the flat would be great I think we'd be fairly content with breaking even... In the long run someone is still paying the mortgage off.

Is there a way to release any equity in our flat? Eg some sort of remortgage to give us some funds to work with?

Thanks

Guest101

1983JK wrote: »

Thanks.

Although making a profit on the rent of the flat would be great I think we'd be fairly content with breaking even... In the long run someone is still paying the mortgage off.

Is there a way to release any equity in our flat? Eg some sort of remortgage to give us some funds to work with?

Thanks

Sorry forgot to say only the interest is tax deductible. Any equity gain on the mortgage is taxable. Hence the very tight window

nubbins

Hi,

I thinking you need more savings to be honest but it depends what equity you have in your flat. If you was thinking of turning your flat into a BTL mortgage you would get a maximum of 155k mortgage and thats if they agreed with your 220k valuation. Add to that you need 10k in stamp duty and fees for the new property and other fees for turning the flat into a BTL. Consent to let I am not 100% sure how they treat affordability.

kingstreet

1983JK wrote: »

Is there a way to release any equity in our flat? Eg some sort of remortgage to give us some funds to work with?

Let To Buy max is usually the lower of 75% and the mortgage equal to rent / 125% assuming 6% per annum.

So, a property worth £200k would be the lower of 75% (£150k) or the rent (eg £900 pm / 125% = £720 x 12 = £8,640 / 6% = £144k.

ognum

1983JK wrote: »

Hi everyone,

This is my first post so apologies if I'm not up to speed with forum etiquette!

My wife and I are looking to move house. We own a flat already and are trying to work or if it's fesible to keep hold of it and rent out out as a rental property rather than sell it to buy ourselves a new house. We love the flat and would really like to keep hold of it as an investment.

We bought our existing flat 3 yrs ago for £190k, it's now for a market value of approx £210 - £220k. Our mortgage repayments are £652.50/month, similar rental properties in the area get approx £800-£1000/ month. The rental market is strong in our area, I'm confident we could rent it out quickly.

The new properties were looking at are approx £300k, we have roughly £30k in savings and could borrow approx £10k from parents if we needed to.

Does anyone here have knowledge of this sort of situation? Are we getting ahead of ourselves in thinking we can keep the flat AND buy a property?

Thanks in advance!

Well done for thinking this through.

Firstly I note you 'love' your flat, IMO this is not the best place to start a business from and this is a business.

Create a plan, look at realistically what your return will be. Then add up all the likely deductions, mortgage, service charge, ground rent, management charges, tenant referencing, inventory costs, insurance, wear and tear. Plenty of other if you think it through.

Remember voids mean you are paying the mortgage and the council tax and bills with no income.

I have never had a property trashed but it can happen I guess.

So, a proper business plan is the place to start. Good luck.

Pixie5740

Lots of good advice already. The only thing I have to add is asking if your current property is leasehold and if so does your lease allow you to sub-let the property?

1983JK

ognum wrote: »

Well done for thinking this through.

Firstly I note you 'love' your flat, IMO this is not the best place to start a business from and this is a business.

Create a plan, look at realistically what your return will be. Then add up all the likely deductions, mortgage, service charge, ground rent, management charges, tenant referencing, inventory costs, insurance, wear and tear. Plenty of other if you think it through.

Remember voids mean you are paying the mortgage and the council tax and bills with no income.

I have never had a property trashed but it can happen I guess.

So, a proper business plan is the place to start. Good luck.

Thanks. We'll have a pepper sit down and crunch the numbers.

The reason we 'love' our flat is practical rather than emotional - it's in a great location, would get a decent rental income and property prices in the area seem stable and have risen steadily even during the crash - that's why we're so keen to keep hold of it. Long term it'd be a great thing to keep hold of.

Cheers for the advice everyone.