To Let or Sell: Scotland

uberteeb

I own a 2 bedroom flat in Glasgow, I am going to move to Edinburgh where I will be unable to afford a property and will be renting. The question I am wrestling with is should I rent out my current flat or sell it…

I bought it 4 years ago for £102,000, there is an identical flat currently for sale offers over £99,000, so let’s assume that I will get back what I paid for the flat if I choose to sell.

My current mortgage is £420 per month, I then have £55 for the factor which includes building insurance and £14 for boiler cover so in total I am at £490 per month to keep the flat running. There is an almost identical furnished flat currently available online for £590 per month (although sometimes similar flats are as low as £500 per month). Less letting agency fees that would be £530 a month to me.

So with running costs of £490 and income of £530 would you rent out the flat?

I am not intending to convert to a buy-to-let mortgage, letting agencies have told me in my circumstances nobody does that as you still only have 1 mortgage coming out your bank account and they only care about the payment plus doing this means the rent won’t cover the mortgage. I have never signed my own lease, rented a flat directly or been a landlord before so I am not comfortable doing this without a letting agency, especially as I will be living in a different city. If I sold it’s not a good environment to be sitting on £25k so logically it makes sense to rent it out. I will be away for a number of years. The flat is a tenement on the outskirts in the south side but from looking at rightmove the rental listings are all recent so there must be demand (however a lot of the properties for sale have been on the market for a good few months). I’d re-paint it before I go, everything is in working order and kitchen, bathroom and boiler are all around 5 years old.

So for those who know about these things should I rent or sell in these circumstances? And have I missed any other expenses or any other advice?

Pixie5740

You need to get consent to let from your mortgage lender. If you don't you will be in breech of your mortgage T&C.

You will also have to register with the local council as a landlord. Up to £50k fine if you don't I believe.

You will be responsible for your tenants. For example, if your tenants cause a nuisance to the neighbours you will also be responsible.

House prices where you are seem pretty stagnant if 4 years ago you paid £102k and similar properties are being advertised as o/o £99k. So you won't get much in the way of capital gains (so my Magic 8 Ball says anyway).

Your gross rental yield (assuming you can achieve £590) is 6.9% which is all right. That's based on the property being let 12 months a year with no void periods.

Do you see yourself buying in Edinburgh in the future? If so I'd sell the Glasgow property, bank the money (it is possible to get some decent returns using high interest bearing current accounts) so you're ready to buy somewhere in Edinburgh when the time comes.

uberteeb

Thanks for the reply, I don't see myself buying in Edinburgh any time in the next 5 years at least. Beyond that I might well come back to my flat in Glasgow or I might end up selling remotely.

I knew about registering with the council as a landlord and will do that. If my bank is continued to be paid my mortgage repayments from my account every month I don't see them finding out it's being let or them having any suspicions about it. I know you're never going to encourage someone to break the rules or anything but is this really likely to be an issue?

Letting agencies told me not to bother about that and other people have told me similar.

theartfullodger

uberteeb wrote: »

......If my bank is continued to be paid my mortgage repayments from my account every month I don't see them finding out it's being let or them having any suspicions about it......

Oh yeah??
Your lender probably subscribes to this excellent service....
http://www.experian.co.uk/consumer-information/mover-alerts-information.html

There's a kharma/morality question as well: If you plan to break the terms of the contract you have with your lender, then you'll be expecting (and should expect) your tenant to break his contract to rent with you (damage, sub-letting, not paying the rent). What goes around comes around..

If you do decide to rent then join SaL
https://www.scottishlandlords.com
& do landlord accreditation scotland's excellent free courses on what a bleedin' minefield being a landlord in Scotland is..
http://www.landlordaccreditationscotland.com/

e.g. When I started I'd not spotted I needed to be able to prove I'd served an AT5 before the tenancy was signed: Failure to do this meant I'd got an AT not a SaT and had an almost impossible to evict tenant...

agrinnall

uberteeb wrote: »

If my bank is continued to be paid my mortgage repayments from my account every month I don't see them finding out it's being let or them having any suspicions about it. I know you're never going to encourage someone to break the rules or anything but is this really likely to be an issue?

Letting agencies told me not to bother about that and other people have told me similar.

Yes they can find out, and worst case is that they foreclose your mortgage. More likely is that they will require you to switch to a BTL mortgage, probably more costly than getting CTL in the first place.

My advice would be to do it properly, not to use any letting agency that has told you not to bother as they are clearly unethical shysters, and not to listen to people who don't know what they're talking about.

davidmcn

uberteeb wrote: »

My current mortgage is £420 per month, I then have £55 for the factor which includes building insurance and £14 for boiler cover so in total I am at £490 per month to keep the flat running.

Bear in mind that a chunk of the £420 is coming back to you as capital - only the interest element of the mortgage is really a cost.

uberteeb wrote: »

If my bank is continued to be paid my mortgage repayments from my account every month I don't see them finding out it's being let or them having any suspicions about it.

Your details will be on the (publicly accessible) landlords registers. What's going to happen to any mail from your lender?

uberteeb

Thanks again for all the replies, if I apply for consent to lend and tell them I'm moving to Edinburgh to work and rent a flat is there likely to be a big jump in interest rates? I can't find any examples on my lender's website.

I was worried about the costs when I thought my outgoings were £490 and I would be receiving £530. It'd be bonkers to do this if the running costs and money received were the same wouldn't it?

In hindsight I should never have bought as a young single bloke. I don't want to be a landlord either. Jumping off the property ladder seems to go against the grain, particularly jumping off with sod all to show for it (selling the flat at the same price I bought it, I've paid to install double glazing, most of the repayments I've made have gone to paying off the interest rather than capital, no profit to show for the 4 years having made the compromise of moving to an area of the city I wouldn't have lived in otherwise).

Pixie5740

As davidmcn points out, not all your mortgage repayment is interest, some of it goes towards the capital too. Your mortgage lender might increase the interest rate, then again they might not, it varies from lender to lender.

You will need to pay income tax on the rental income too and only the interest portion of your mortgage payment can be deducted when calculating your profit.

You don't seem to like the flat much so even if you were to move back to Glasgow in the future would you want to live there again?

Edit: With regards to not requesting CTL your mortgage can find out, if not by themselves then all it takes is one p'd off tenant who knows what's what.

googler

Many folk commute between Edinburgh and Glasgow, and vice versa. Have you looked into doing this?

Alternatively, there's no obligation to live in Edinburgh to work there. Property is far cheaper in West Lothian, Fife, Midlothian and East Lothian, with many rail stops outwith the city offering short journey times into the centre.

uberteeb

googler wrote: »

Many folk commute between Edinburgh and Glasgow, and vice versa. Have you looked into doing this?

Alternatively, there's no obligation to live in Edinburgh to work there. Property is far cheaper in West Lothian, Fife, Midlothian and East Lothian, with many rail stops outwith the city offering short journey times into the centre.

If I get a job in Edinburgh I'm moving to a rented flat in the city centre, that much is certain. It's what to do with the Glasgow flat that is the dilemma.

Sell or rent?

Pixie5740

Sell or rent? Only you can decide. From what you've told us:

1. Capital gains are likely to be diddly squat.
2. Your rental yield is ok. Comparible to high interest bearing current accounts except you'll have the responsibliliy of being a landlord, and possible void periods.
3. You might want to live in the property again at some point in the future even though you don't particularly like the flat or its location.

So choose or if you can't toss a coin.