First time buyer considering being a landlord

Maye101

Hi

I was hoping to pick the brains of the many experience landlords and MSEs on here. Bit of background to the situation. I am 26 and graduated uni a year ago now in a full time stable professional job. I have recently recieved a windfall from inheritance so paid off my debt and now have £25 000 - £30 000 left. I'd love to buy my own property, I live in a popular city centre and want to buy a 2 bed flat proce range £180000 - £200000. However I am planning to take a year out from August 2017. I will mainly be travelling with my girlfriend but will do some agency work here and there when I return to the country (probs will be at most a month work in the whole year). In addition, I have a career that bounces me around the country a lot so chances are on my return I will move to a different city (where I will remain for 3-4 years before another likely move.)

So here is my dilemma do I buy a property live in it for 6-9 months (depending on time scale to buy etc) then rent it out while I'm travelling (and likely beyond). My sister has offered to help out managing it while I am away. Or do I put my money in a 2-year bond (the best rate I can find is 1.8%) and use the money to buy a property in my return. I am sure there are many pitfalls to landlording. Especially a first time landlord who isn't in the country. I have read the guidence on here for new landlords and know about the legalities. Any advice or pearls of wisdom would be ace! Thanks in advance and please ask if you need more info! :money:

beecher2

I'd look at current accounts rather than a bond. Just make sure you can set up the payments ok.

I think it'd be unwise to buy somewhere at the moment, especially as you're not sure where you'll end up . Buying and selling is an expensive business, best to do it when you know where you want to be.

Maye101

Thanks for the quick reply. I woll look into current accounts. I should probably say I won't get to settle in once place with my job until I'm around 40. And I should have been more clear if I buy a property now the plan would be to keep it for 10 years+ as a rental.

tlc678910

Hi,
I would only plan to be a landlord in your circumstances if you have lots of spare cash on a monthly basis. The fact you had to pay off debt with your windfall makes me question that (or was it student debt?).

If you have a repayment mortgage (e,g, let out your own home) you can only deduct the interest part as an expense and will have to pay tax on the "profit" including the mortgage repaid - will you have the cash available?

Over the next couple of years it is being introduced that you will only receive tax back on mortgage interest paid at the basic rate of tax not the higher rate for landlords so you will have to find even more cash for tax if you are or will be a higher rate tax payer.

Will you find the money ok for void periods, repairs, insurance including while you are travelling or renting elsewhere yourself?

The future of house prices in the next few years is also uncertain with Brexit. If you were buying to enjoy living in your home yourself then I don't think that is a problem but if you are buying as an investment, which you will likely have to subsidise each month and then prices fall there was no point in your venture at all - it will have cost you money compared to just buying at a later date.

Tlc

danslenoir

You could probably get yourself a residential mortgage now and live in the property a year before heading off, but when the time comes to start renting it out you are going to need to get permission from your lender to rent it out or change your mortgage product to a buy to let mortgage.

I think you would be unable to get a buy to let mortgage as you typically need a much bigger deposit than you would currently have or would likely have at the time you moved out (at least around 25%) based on the deposit you have now and the property prices you are looking at.

If you want to keep your residential mortgage and request consent to let this is very much dependent on individual circumstances and the discretion of your lender.

If you cease to reside in a property that has a residential mortgage attached you must disclose this to the lender straight away.
Most lenders do not have a set time period before allowing borrowers to rent their property out, however, they will want the reassurance that the property was not purchased as an investment property initially and that it is genuine circumstance that has led to rental request.
It will depend on your lender and individual circumstances, but your mortgage deal could be kept the same and your lender will provide you ‘consent to let’ without any additional charges, however that is very much at their discretion.
They could increase your rate and, or, charge an administration fee for allowing this.
While the legal implications of non-disclosure are open to interpretation it is a clear breach of the mortgage contract between you and your lender should you not disclose of your intention to rent the property.
They could make significant charges should they find out you are renting the property.

http://www.thisismoney.co.uk/money/experts/article-2462805/Can-I-let-new-house-telling-lender.html

So assuming that keeping your residential mortgage is your only option, you could either run the risk of not disclosing to your lender and letting out anyway (not advisable), or run the risk that your lender says you cannot let your place out and be stuck with an empty home you will still have to pay the mortgage on.

Personally, those risks would discourage me completely before even getting into the nuts and bolts of whether it would be a financially good idea or not.

Maye101

Thanks for the replies. As I thought it sound slime far too much effort/risk. If I wasn't going travelling I think I would be more inclined. The debt was student debt and I mow have quite a lot left over after bills each month. On my current wage its about £1500 per month. I do have a £10000 contingency fund and my Mortgage in principle seemed to be happy with the idea. But I think that it will cause me too much worry and stress and I'd rather enjoy travelling. Then when I return me and my partner will probs. Want to buy together. When we are settled we can re-evaluate if becoming landlords is a viable business venthre for us. Thanks for the help!

G_M

Tenancies in Eng/Wales: Guides for landlords and tenants




* Repairing Obligations: the law, common misconceptions, reporting/enforcing, retaliatory eviction & the new protection (2015)

* Deposits: payment, protection and return

* Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

* Rent increases: when & how can rent be increased?

* Repossession: what if a LL's mortgage lender repossesses the property?

* New landlords: advice, information & links

* Letting agents: how should a landlord select or sack?