Buy to let

jamels2

Hi, I'm looking for some advice on whether to sell or keep a flat I own which is currently let with consent to let and a residential mortgage?

The flat has been valued at 180,000 with. 62 year lease. To extend this will cost 20k approx and can be done for a buyer during the sale process. So I could expect to get about 210k to sell it with or without tenant, they are on a rolling tenancy as the Ast 12 months has nearly ended.

On the other hand I could get a buy to let mortgage (already approved in principal) for 135k (75%) which would cost £280 a month interest only so the rent of 750 will easily cover this. My current mortgage is 72k so I can release 63k equity by doing this.

I will also be looking to buy or rent a property for myself as I am only lodging with a friend and I would like a place to myself. Before it's suggested I don't need the space of my own flat as its two bedroom and I also would not want a lodger.

If I keep the first flat my budget for another place is about 200k minus about 7500 for stamp duty. I would get a residential mortgage of up to 138k plus my 63 k equity as a deposit.

If I sell I have a bigger budget of about 220-230k and I won't have the 3% stamp duty to worry about.

I'm currently 35 and have no other savings or investments, just the one property and one bank account. Would be great to hear some advice from the experts on here, should l expand now or just have one place and pay it off asap?

Guest101

Just a couple of things:


Can you afford both mortgages? Lets say your tenant stops paying rent.


Presumably tax is all up to date with the rent? As the amount you receive after tax will be lower than you do now.


Without your salary its difficult to say if it's affordable. What's the state of the sinking fund?

hazyjo

Don't forget that fee to extend will rise yearly - significantly!!


Jx

hildosaver

The 62 year lease is a problem - would be a massive turn off for many people (including myself) who might be looking to buy it - it's also a problem if you decide to keep the flat because you will need to extend the lease eventually at great expense.

There is also no guarantee you will continue to get permission to let from your bank. The 63k equity you could get from remortgaging to a BTL should be used in part to extend the lease if you intend to keep it which would leave you with around £40k for a deposit.

Guest101

hildosaver wrote: »

The 62 year lease is a problem - would be a massive turn off for many people (including myself) who might be looking to buy it - it's also a problem if you decide to keep the flat because you will need to extend the lease eventually at great expense.

There is also no guarantee you will continue to get permission to let from your bank. The 63k equity you could get from remortgaging to a BTL should be used in part to extend the lease if you intend to keep it which would leave you with around £40k for a deposit.

Would be a massive turn off to any lender, as they simply wont lend on it. But I presume the OP would extend it in any case at sale.

Pixie5740

Can you get a BTL mortgage secured on a 62 year lease? (Genuine question as I have never tried to get a mortgage for a leasehold property.)

jamels2

Hello, if I sell it, the flat will sell for full market price on the condition the lease is extended before completion. The cost will be deducted from what I receive. So if I sell for 210k and the lease costs 20k I will receive 190k (minus other fees etc).

If I keep it I will not extend straight away but it will not be a problem as the buy to let lender accepts leases 55+ years. I will look to extend anyways maybe with a personal loan.

I can afford both mortgages if the tenant doest pay but they have been pretty reliable for the last year.

marksoton

jamels2 wrote: »

I will look to extend anyways maybe with a personal loan.

I can afford both mortgages if the tenant doest pay but they have been pretty reliable for the last year.

You need to do some calculations.

Guest101

jamels2 wrote: »

Hello, if I sell it, the flat will sell for full market price on the condition the lease is extended before completion. The cost will be deducted from what I receive. So if I sell for 210k and the lease costs 20k I will receive 190k (minus other fees etc).

If I keep it I will not extend straight away but it will not be a problem as the buy to let lender accepts leases 55+ years. I will look to extend anyways maybe with a personal loan.

I can afford both mortgages if the tenant doest pay but they have been pretty reliable for the last year.

They're unlikely to be your tenants for the term of the mortgage though, and that's what needs to be considered. This tenant might pay, the next might not, or the one after that... But it's just a consideration, if you can afford both then great

jamels2

I am just wondering really , on one side I hear people say you can't go wrong with bricks and mortar, property always rises long term etc and thst it's the only way to retire early by having rent coming in and small interest only mortgage going out.

On the other hand I am put off by the question of if it's immoral, borrowing money because I have capital then charging a tenant (who would probably love their own home) market rent to pay the mortgage and give me some profit.
Also if I am feeling risk adverse I wonder whether if interest rates go up it could all go wrong. Plus the new stamp duty charges, is the govt trying to get rid of buy to let slowly?

Is there anything else to invest in and make money or is it best to live a simple life and pay your house off then work less when you only have a few bills to pay ?

Pixie5740

You're not investing in bricks & mortar though, you're investing in lease and the shorter that lease gets the less it's worth.

Letting property isn't immoral. There is a market for private rental accommodation, not everyone wants to, or is in the position to own their home for a whole host of reasons. Being a crap landlord and shirking your responsibilities is immoral.

There are loads of things you can invest in but it all depends on your appetite for risk. I'm a firm believer in not putting all your eggs in one basket. Does your employer offer a work place pension? If so are you making use of it because it is free money.