Renting house out.

Badger_Lady

Silly question, but why are you letting it out?

If you're going to be making a loss each month (£5 mortgage interest plus other costs), then wouldn't you be better off selling? You could then reinvest in a more profitable (flat?) if you're keen to let, rather than whittling money away.

Sorry if I missed the point!

dolce_vita

Using these guaranteed income schemes can work out more expensive.

If you are going to use them, either re-negotiate the fees or put the rent up by £5. Or better still more if you can get away with it.

rdty21

Not doing it to make money. At the moment we pay two lots of bills, mortgage,council tax and all the rest of it. So paying £5/month towards the mortgage and renting the house out so we can move in together seems logical to me. We wouldnt then be paying two lots of bills so how does that work out as a loss?

Badger_Lady

Rather than comparing it to your current arrangement, you need to calculate profit and loss on the 'empty' house in isolation. From what you've said:

Outgoings
Mortgage interest - £A
Management fees - £B
Insurance - £C
Wear and Tear - £D

Income
Rent - £A-5

So, when you balance this out, the property is making a loss of more than £5 a month. That's why you don't pay income tax - there is no income!

In comparison, if you sold the place, you would still only have one lot of bills etc to pay and you would be saving the cost of renting out an 'empty' house.

If there's equity in the house, you could withdraw this and use it to invest elsewhere (whether it's another property or savings). This would mean paying mortgage redemption fees / selling costs, so it depends how long you intend to keep the house anyway.

I'm sure you already know this stuff and have a perfectly good reason for pursuing this - I'm just being nosy, that's all :-)

boyse7en

>Not doing it to make money

So why are you doing it? You are going to lose £5 per month minimum as the rent is less than the mortgage interest (if the mortgage company even agrees to it, most want rent=125% of interest payments) + buildings insurance + repair costs over the year + gas certificate + electrical inspection.

Unless you can quickly ramp up the rental to cover all of this, I'd sell the property and invest the equity/pay off part of the mortgage on the other property.

A_Nice_Englishman

It's probably worthwhile doing this and subsidising someone elses housing for say six months or a year. That way you can easily get your own place back if living together doesn't work out.

Once you've decided you want to live together permanently, consider whether having considerable amounts of (borrowed) money in residential property fits in with your overall investment strategy. If you have similar amounts in your pension schemes, shares, government bonds and other investments it may be. If not, I don't think it is sensible to have all your (borrowed) eggs in the same basket.

Melissa177

I think Nice Englishman is sensible - why would you want to sell your property when you've just moved in? Rent it out for six months, and see how the relationship goes. If it doesn't work out, you might want to go back to your own property.

In the meantime, the "loss" on renting out a property isn't a loss if house prices continue to rise (which I am sure in the long term, they will).

benb76

Another good reason not to sell even though it is costing you a few quid a month in interest is that the whole value of the house will be appreciating. E.g. if your house is worth 150K, it probably goes up in value by somewhere between 350-400 quid a month on average (assuming a conservative annual increase of approx 3%).

pcwilkins

rdty21 wrote: »

We were thinking of renting through northwoods platinum scheme.

If it's the Swindon branch of Northwoods, don't bother! They are rubbish. And that's putting it politely...

I know someone who uses them and gets about £400pcm from them. The rental value of the property is around £550-600pcm.

I would advise against the "platinum" scheme. Just too expensive and you'll still have to foot the bill for any repairs to the property.

Another good reason not to sell even though it is costing you a few quid a month in interest is that the whole value of the house will be appreciating. E.g. if your house is worth 150K, it probably goes up in value by somewhere between 350-400 quid a month on average (assuming a conservative annual increase of approx 3%).

And of course we all know that house prices will rise at least 3% pa for ever...

I'll be amazed if you can show me a £150k house that's increasing in value by £400 a month! In any case, 3% is not a very good return, better off sticking it in a 6% savings account and making twice as much.

Peter

rdty21

i agree with A Nice Englishman. We are trying to do this from a sensible point of view, that is something we have said all along. The way we see it is we woulndt be making money or losing money, just saving money we would have spent on the property anyway. The money we would save is more than the cost of renting it out.