Renting house out.

benb76

pcwilkins wrote: »

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.

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

You clearly haven't thought this through as in this case you'd be making 3% on the entire value of the house, not just the equity. If you put your savings in a 6% account you'd only make interest on your deposit. e.g. if you owned a house worth £150K, of which 100K was mortgaged (the interest of which is more of less covered by the rent received in our original poster's case ) you get £4500 increase in value a year (at 3% increase), if you stuck your £50K in a 6% savings account you'd only get £3000 a year.

I don't know where you live, but there are lots of houses worth around 150K that rise in value by at least £400 a month btw, since this would only equate to an anual increase of 3.2%, hardly unheard of!

Sapphire

benb76 wrote: »

You clearly haven't thought this through as in this case you'd be making 3% on the entire value of the house, not just the equity. If you put your savings in a 6% account you'd only make interest on your deposit. e.g. if you owned a house worth £150K, of which 100K was mortgaged (the interest of which is more of less covered by the rent received in our original poster's case ) you get £4500 increase in value a year (at 3% increase), if you stuck your £50K in a 6% savings account you'd only get £3000 a year.

I don't know where you live, but there are lots of houses worth around 150K that rise in value by at least £400 a month btw, since this would only equate to an anual increase of 3.2%, hardly unheard of!

If, if, if . . . what makes you so sure that prices are going to 'rise in value by at least £400 a month'? Are you one of those people who has deluded themself into thinking that house prices will only ever go up? Absurd, given the amount of debt people are in, the prices of houses and the general economic indicators!

It beats me how people can be so naive and blinkered. :rolleyes:

franklee

silvercar wrote: »

Letting out a property that was your residential home is "merely" a breach of the lenders terms and conditions and a civil matter. I've never heard of a lender taking a mortgagee, with no arrears, to court for breach of contract.

If the lender becomes obstructive and you decide to let anyway, make sure you have the correct insurance. You don't want to have a claim and then find you are not covered.

It's also stitching up the tenant as without permission to let the tenant does not have the protection of the tenancy agreement. Therefore should the property be repossessed, which is likely given the kinds of monthly losses mentioned here, the tenant will have no rights.

There are even appalling cases where landlords let the property to a new tenant after the lender has commenced repossession thus the tenant doesn't even get the initial warnings of what's happening.

rdty21, If you are using a half decent agent they should check that you do have permission to let. If you don't have this they should show you the door.

Lenders ask for rent=125% of interest payments or so in order to cut down the risk of the mortgage falling into arrears. I expect they would be ticked off should they find out the property is rented out without their permission and with the rent less than the mortgage interest especially if there isn't much equity in the property to act a a cushion should they repossess. If the lender doesn't think your plan is a good risk then maybe you should heed them for your own financial good

benb76

Sapphire wrote: »

If, if, if . . . what makes you so sure that prices are going to 'rise in value by at least £400 a month'? Are you one of those people who has deluded themself into thinking that house prices will only ever go up? Absurd, given the amount of debt people are in, the prices of houses and the general economic indicators!

It beats me how people can be so naive and blinkered. :rolleyes:

given that increase in wages is around 2.5-3% per year and there is a continued increase of demand for housing in this small island of ours, I think that there are enough drivers to ensure that the average increase over the next few years is going to be >3%.

I dare to be naive every day

tomstickland

If wages are increasing by 3% pa then that's pretty much the inflation rate, so a 3% increase in house value is actually nothing, apart from the gearing effect. Capital gains is just gambling.
Anyway, if letting it out is allows an escape route if the moving in doesn't work, then that's a reasonable idea for the short term. In the long term I'd advise selling the house.

A_Nice_Englishman

tomstickland wrote: »

Anyway, if letting it out is allows an escape route if the moving in doesn't work, then that's a reasonable idea for the short term. In the long term I'd advise selling the house.

I'd agree with you there,Tom. I don't normally advocate going into the property rental business if you don't know what you're doing (see my posts in other threads) but in this case I feel the risk in the OP renting out their existing house for six or twelve months while they 'test out' living together is worthwhile.

Melissa177

Sapphire wrote: »

If, if, if . . . what makes you so sure that prices are going to 'rise in value by at least £400 a month'? Are you one of those people who has deluded themself into thinking that house prices will only ever go up? Absurd, given the amount of debt people are in, the prices of houses and the general economic indicators!

It beats me how people can be so naive and blinkered. :rolleyes:

People have been saying stuff like this for the past five years. I wouldn't rule out a HPC, but is it very very likely that house prices will continue to rise in the long term, just as they have done over the past 50 years or so.

benb76

tomstickland wrote: »

If wages are increasing by 3% pa then that's pretty much the inflation rate, so a 3% increase in house value is actually nothing, apart from the gearing effect. Capital gains is just gambling.
Anyway, if letting it out is allows an escape route if the moving in doesn't work, then that's a reasonable idea for the short term. In the long term I'd advise selling the house.

not really, your theory of the cost of houses remaining constant in relation to wages only applies if you're not already on the property ladder, the mortgage on your house doesn't increase with inflation/house price increase. e.g. if you buy a 150K house with a 100K mortgage which in increases by 3% your mortgage remains at 100K (and interest payments remain constant-ish), but the value increases to 154.5K, and the rental income should increase in proportion as do your wages.


besides, this 3% discussion started with a comparison of the returns from puttting your capital in a 6% savings account and compared with that from renting your house, taking the rent as well as the 3% increase from the entire value of your house. furthermore, owning a house now and not selling effectively protects you against any increase in the price of houses, e.g. if the original poster keeps her house, and things don't work out with her other half and she wants to live on her own again in 2 years, her mortgage will still be the same ammount and there is no chance of her getting priced out of the market due to an above inflation increase (which given the UK's shortage of houses is not unlikely).

tomstickland

I don't have any theory other than if houses rise by 3% pa and wages by the same amount then house prices are static.

benb76

tomstickland wrote: »

I don't have any theory other than if houses rise by 3% pa and wages by the same amount then house prices are static.

I have a theory that if I buy a house now for 100K, the mortgage payments in 12 months time will be the same but my wage will be 3% more. Hence you're better off buying now (or not selling).