Renting house out.

MarkyMarkD

That's a dubious theory unless you are taking a fixed rate mortgage, benb. Interest rate increases recently would have way exceeded your 3% salary increase per annum.

Turnbull2000

Melissa177 wrote: »

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.

Erm, please be more specific. Salaries, goods and assets all typcially rise over the long term due to general inflation. So what exactly do you mean? That housing costs will continue to rise ahead of general/salary inflation?

benb76

MarkyMarkD wrote: »

That's a dubious theory unless you are taking a fixed rate mortgage, benb. Interest rate increases recently would have way exceeded your 3% salary increase per annum.

er yes, but interest rates rises will apply to new mortgages taken out next year as well, so even more reason to buy a house now so that the amount you borrow is less and any further rate rises will have less impact on your interest repayments.

this thread has turned into a head banging against wall exercise for me, I sometimes forget that I have a higher level of understanding and mathematic ability than the average Joe :cool: .

benb76

Turnbull2000 wrote: »

Erm, please be more specific. Salaries, goods and assets all typcially rise over the long term due to general inflation. So what exactly do you mean? That housing costs will continue to rise ahead of general/salary inflation?

he means that housing prices will continue to rise relative to salary increase, basic supply and demand

franklee

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!

And if house prices go down by 3% in a year the gearing works against you as you then lose the 4500 and the expenses of letting.

So the way I see it the options are:

1. Sell now and get a guaranteed 3000 income a year with the 50K safe in a savings account.

2. Hold and house prices rise by 3%, gaining you 4500 less all the expenses of letting as the rent is all used up with the mortgage interest payments. These expenses are say 12% agent's fees, one months void, one months rent for repairs. So assuming rent of 600pcm the expenses are: agent's fees 864, void 600, repairs 600. Total expenses 2064. Total income 4500 house price rise - 2064 expenses = 2436, which is less than in case 1.

3. Hold and house prices fall by 3%. Still have the 2064 expenses as before but also a LOSS of 4500 on the house price. Total loss 6564.

So do you want a guaranteed 3000 income, or a risky 2436 income with an equal chance of a 6564 loss? Increase the house price movements to more than 3% and although the potential gains increase so do the potential losses!

martylowrie

Although the finances behind the platinum scheme are sound (it's basically 10 months rent spread over 12 months to protect you from the risk of the house standing empty - it's basically insurance), check the small print in the contract.

I'm just coming to the end of my platinum contract and I want to go privately with my tenants as they are looking at staying long term and it makes sense for both of us. Obviously Northwood's aren't happy with this, but we're both coming to the end of our respective contracts so I don't see the problem.

However, there's a clause in my contract that says I can't have 'their' tenants for the first six months after the end of my contract. They want £930 compensation for me 'stealing' their customer.

There's literally no easy way out. Northwood's have suggested me moving to the Silver scheme, but that means I get less money per month than going privately, and they've still got the same clauses in the contract, so I can't go privately with these tenants at any point. The tenants really want to stay in the house, but it's going to cost me money to let them.

I'm currently pursuing legal action against Northwood's as I can't see how what they're trying to do is legal.

MarkyMarkD

Surely you mean that you don't like the clause in the contract you signed up to, so you are now trying to get out of it?

Given that letting a property is a business transaction, you can't claim the same "big company/little customer" legal dispensation as applies in a normal supplier/retail customer relationship.

Can you not see that it's unfair for you to expect to keep a tenant that an agency finds for you, without paying them any extra at all compared to a tenant who only stays with you for the bare minimum period?

neverdespairgirl

Melissa177 wrote: »

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 wrote: »

I think that there are enough drivers to ensure that the average increase over the next few years is going to be >3%.

Isn't it fun to read these posts from a year ago - hope no-one followed their "advice"!

dopester

benb76 wrote: »

this thread has turned into a head banging against wall exercise for me, I sometimes forget that I have a higher level of understanding and mathematic ability than the average Joe :cool: .

Keep on head-banging miladdo. I think you're off your rocker !

dopester

neverdespairgirl wrote: »

Isn't it fun to read these posts from a year ago - hope no-one followed their "advice"!

Oh.... rofl ! :j