Renting out my one bed flat yay or nay?

Robomb

I own a one bedroom flat in the suburbs of London. I bought it back in 2012 just before prices rocketed, I have lived in it ever since. I am now in the position where my boyfriend has asked me to live with him and so I am seriously considering renting my flat out to tenants. However there seem to be so many financial factors to consider that I feel a bit lost and am starting to wonder if it is a realistic move.

I do not expect to make any profit from the rental, only hope that it pays for itself plus money aside for maintenance. Can anybody advise me if my calculations/expectations are accurate? Or if I am missing something?

I currently have a repayment mortgage of £450 a month. I know the rental value to be £850 a month. I also pay approx £600 per annum in ground rent and buildings insurance. I intend to manage the property myself as I know how the property ‘works’ and have a some good handymen nearby. I am also going to try to find tenants myself (initially at least) through putting the word out to friends and family. However I would like a letting agent to take care of the contracts, deposit, admin, credit checks and money collection. In terms of the mortgage I am in the middle of a fixed 5 year term. I intend to call the bank and explain my situation, are they likely to increase my mortgage? Try to change it to a Buy to Let? How much more is this likely to be? How much tax will I have to pay on my additional gains from the rent? I recently went down to part time at work, so my current income is only £24,000. I am also aware that I will need landlords insurance and safety certs for the boiler. How much do these things cost on average? As a leaseholder do I need to tell the freeholder (management company) that I intend to rent the property?

Can anyone advise me if they think this is too risky a move? Or give further advice?

anselld

Robomb wrote: »

I do not expect to make any profit from the rental, only hope that it pays for itself plus money aside for maintenance. Can anybody advise me if my calculations/expectations are accurate? Or if I am missing something?

If you rent at anywhere near market rate you *will* make profit and you have to declare that to HMRC.

Robomb wrote: »

I currently have a repayment mortgage of £450 a month. I know the rental value to be £850 a month. I also pay approx £600 per annum in ground rent and buildings insurance.

Only the interest element of the mortgage is allowable cost.
Ground rent and insurance are allowable.

Robomb wrote: »

However I would like a letting agent to take care of the contracts, deposit, admin, credit checks and money collection.

That is not "managing yourself". If you want to manage yourself then these are the easy bits, don't waste your money on an agent.

Robomb wrote: »

In terms of the mortgage I am in the middle of a fixed 5 year term. I intend to call the bank and explain my situation, are they likely to increase my mortgage? Try to change it to a Buy to Let? How much more is this likely to be?

Depends on the bank. They may refuse all together.

Robomb wrote: »

How much tax will I have to pay on my additional gains from the rent? I recently went down to part time at work, so my current income is only £24,000.

All profit is taxed as income, 20% at that level. You are probably far enough below higher rate band not to be troubled by restrictions on mortgage relief.

Robomb wrote: »

I am also aware that I will need landlords insurance and safety certs for the boiler. How much do these things cost on average?

Gas safety - £40-£70
Insurance not much more than normal household insurance for the equivalent property.

Robomb wrote: »

As a leaseholder do I need to tell the freeholder (management company) that I intend to rent the property?

Read your lease.

Robomb wrote: »

Can anyone advise me if they think this is too risky a move? Or give further advice?

It is not particularly risky so long as you can be bothered to do the research to do it properly.

Cakeguts

Will you be able to afford to pay the mortgage if you don't get any rent?

Crashy_Time

https://residentiallandlord.com/landlord-tax-section-24/

anselld

Crashy_Time wrote: »

https://residentiallandlord.com/landlord-tax-section-24/

Section 24 is irrelevant on the OP's income.

glasgowdan

anselld wrote: »

Section 24 is irrelevant on the OP's income.

When does he ever post anything relevant?

Crashy_Time

https://residentiallandlord.com/london-rents-see-rare-decline/

Crashy_Time

Cakeguts wrote: »

Will you be able to afford to pay the mortgage if you don't get any rent?

Chances of not getting ANY rent are probably slim, although 850 p.m might be ambitious?

boliston

I would imagine you would need freeholder subletting consent (check your lease) which might involve fees. Also you might get charged a higher rate by your mortgage company. Don't forget about rules regarding registering the deposit as penalties can be high otherwise. Most laws also favour tenants rather than landlords.

G_M

If you're going to use an agent at all, use them to find the tenant. Then do the contract, deposit etc yourself.

If the agent registers the deposit, but then does not manage the letting, you have issues returning it as you're not the one in control (deposit in their name, not yours).

Pay an inventory clerk yourself for a good inventory.

Relying on friends/family is a bad move. That's how riends and family fall out! Would you evict if they lost their job and struggled with the rent?

Now read these posts plus the links within them:

* New landlords: advice, information & links

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

As you plan to self-manage, this thread will help too:

* Tenancies in Eng/Wales: Guides for landlords and tenants

agrinnall

Robomb wrote: »

I do not expect to make any profit from the rental, only hope that it pays for itself plus money aside for maintenance.

In that case why not sell it and bank the (tax free) profit that you have made since 2012?