Move and BtL thoughts

port7

Currently in a house worth approx £180k with a mortgage of £88k.

Looking to move early next year to a larger house of approx £330k, I would also like to start putting some money in property as a long term investment.

So I am thinking, remortgage current house to release about £30k equity for deposit on new house, so would need £300k mortgage for new house and £120k mortgate for current place. The idea being is to let out my current house.

Even if I end up not fully covering the £120k payments with rental income as I am viewing it as a long term investment for the future.

Thoughts anyone? Anyone done this before? Any things to avoid etc.

*

All I ask is the chance to prove that money can't make me happy

Spike Milligan

HugoSP

Firstly your mortgage company will almost certainly need/want you to convert to a BTL mortgage, the rates on these are higher than homeowner mortgages. Talk to them first.

Secondly, BTLs work quite well. However you should think about whether you want to manage this property yourself or organise it through an agent. If you are going to be living some way from your new house, then a good agent is worth their weight in gold. However if you are just down the road then you may want to manage it yourself.

Thirdly there are several legal responsibilities. Landlords Gas checks, tenancy deposit schemes etc etc. I don't have a whole list of them TBH but here are a few.

LL Gas safety annual check by corgi gas engineer - £50 or so
Good idea to get the electrics checked out PIR - £150 odd
Soft furnishings must be fireproofed - look for the relevent sticker
Deposits must be registered/placed via a tenancy deposit scheme
Tenant usually requires 24 hours notice if you intend to gain access to the property, unless it is an emergency (burst pipe etc).

It is a good idea to get a watertight Assured Shorthold agreement in place. All utilities and council tax are best placed in the tenant's name. At least this way if the tenant does a bunk you're not stuck with having to pay them for him.

Unless you are in a position to do this yourself, get yourself acquainted with a good handyman for repairs as they become necessary.

Redecorate when you move out.

Furnish it from Freecycle.org or auctions etc. Don't put anything in there that you value.

You can offset mortgage interest payments against the income you get for it, but only on a loan used to buy the property. The further advance for your new house may not count.

If you rent it furnished you can claim 10% wear and tear deduction off the rent for tax purposes. So if you receive £500pm rent, you deduct £50 and pay tax on the £450 remaining.

moneysavinmonkey

port7 wrote: »

I am viewing it as a long term investment for the future.

Thoughts anyone? Anyone done this before? Any things to avoid etc.

the general idea of investing is buy low sell high therefore I don't think right now is really the best time to get into property investing.

If renting is still a serious consideration you need to do a lot of research as there is masses of information you need to learn - you need to understand the tax implications and be up to date on your housing law. Your property needs to be making enough rent that when you factor in voids the mortgage, maintenance, tax, etc etc is covered... try landlordzone or nationallandlordsassociation.

when factoring in your mortgage payments don't forget to consider the extra you are having to pay each month for the mortgage on your own home by not selling up. It is a false economy to miss this out.

lynzpower

Secondly, BTLs work quite well. However you should think about whether you want to manage this property yourself or organise it through an agent. If you are going to be living some way from your new house, then a good agent is worth their weight in gold. However if you are just down the road then you may want to manage it yourself.

Beware blanket statements!!!

real1314

So, you're thinking of renting out a £180k house but you're not sure if the rent will cover the £120k mortgage you'll have on it.
You'll also be taking out a 91% LTV £300k mortgage to be met from your own income.

You need to reserach what sort of rent you could get for your current place, as the suggestion is that it's a no-go.
You might also find that lowering the LTV on the £300k could be a more worthwhile option as 0.25% off the rate would save £750 a year. If you could get that amount off for 85% LTV it would be a good return for an extra £20k on the deposit as it would save £1300 a year in interest at 6.5% & the £750 on the balance of the loan, giving an effective £2k saving for £20k outlay.

As for the BtL aspect, let's say you get £650 a month for the property (£7.8k pa), but you'll have costs of £50 gas cert, £250 insurance as a minimum, plus voids and miscellaneous costs of probably another £650pa, leaving under £7k income.
£120k at 6.5% will cost you £7.8k anyway in interest alone and you'll be forsaking any oncome from the £60k equity you could be using.

Unless you can get a rent of nearer £850 a month, it doesn't look viable.

Romani_Ite_Domum

Assuming the BTL will look after itself, you are looking at paying around £1100 more per month interest than you are now.

What are you currently doing with this money every month?

I would either sit tight and use this extra cash to get a deposit together or if you are desparate to move, rent out your current place and rent somewhere nice for a while and see what happens with the market. You should still pocket some extra cash to put away to buy in the future.

sukey13

Don't forget stamp duty on a 330K house will be £9900! You will also have solicitors conveyancing costs.

I am all for gearing and keeping as many properties as you can.

As long as you can afford it - go for it.

Get a letting agent round for a free valuation of your current property (in fact get three round). If the rent won't cover your remortgage then make sure you can cover the extra.

Get a good fixed interest only BTL mortgage.

Consider renting rooms to increase cash flow, but you'd need to comply with local council HMO guidelines, contact your local environmental helth officer for free advice.

See www.easyroommate.com and www.letalife.co.uk for people interested in rooms. Lineage in your local paper will easily get you families, etc. Remember to check people out with reference checks... www.rentchecks.com If their is gas you need a gas safety done.

Join your landlords association for good up to date legal advice e.g. the NLA (national landlord's association).

Generali

Have you considered buying shares in a building firm or buying into a REIT instead? It would be a lot less aggro.

carolt

Have you seen this story in today's Sunday Times?

http://business.timesonline.co.uk/tol/business/money/investment/article2799416.ece

Are you sure this is the best time to be getting into BTL? I assume you already have substantial investments in other assets, as presumably you would not wish to put all your eggs into one rather rickety basket.....