Possible costs of being a landlord

MsPennySaver

Hi this is my first post and I am hoping for some advice from those who have let out a property. I do not really want to become a landlord but it might be my only viable option going forward.

So here are the facts

Old property
-I own a two bed property (finished paying the mortgage last year).
-I put this house up for sale in November but have only had a couple of viewings and no offers.
-I have reduced the price and it is marketed at a cheaper price then other sold properties. It is also 10% less than the home value report (we are in Scotland so a Single Survey was carried out to produce a Homebuyers report).
-House is in a good state of repair (as shown in homebuyers report with GCH and double glazing etc) but is in a cheaper area of town and the price reflects this.


New House
- I have just completed on my dream home. It’s a larger house for our family and we have moved in.
- we used all our savings to fund our deposit and 3% fee for buying a second home.
- New mortgage is 85% of property value and it’s currently a tracker mortgage. This was to allow us to repay a large chunk of the mortgage if (when) old house sells without ERC.
- The plan was to repay the majority of the mortgage with from sale of old house and then reduce our new mortgage to a five year fixed rate deal.


Now
So now after two months of no success selling the old house I am feeling very worried about the impending Brexit and worried that prices are going to continue to fall. We can afford to keep both houses for now but in six months time I will become liable for council tax in old property. So I am thinking maybe renting out the old house might be a better option.

Could anyone give advice on the costs of becoming a landlord? What insurances would I need to take out and how much (roughly) would I need to pay for agent fees? How much work does being a landlord involve? Any advice would be be appreciated as I dont know were to start. I am not hoping to get rich but if I could let it out to pay costs and to cover the extra interest I am paying on larger mortgage on new house then perhaps I would be best waiting a few years and then trying to sell again.

Hope this rambling makes sense. Thanks in advance.

need_an_answer

some good advice here
https://forums.moneysavingexpert.com/discussion/5180214/tenancies-in-eng-wales-guides-for-landlords-and-tenants

Comms69

MsPennySaver wrote: »

Hi this is my first post and I am hoping for some advice from those who have let out a property. I do not really want to become a landlord but it might be my only viable option going forward. - as opposed to selling?...

So here are the facts

Old property
-I own a two bed property (finished paying the mortgage last year). - where? what's the market?
-I put this house up for sale in November but have only had a couple of viewings and no offers. - winter isn't a good time to sell. It's only been on 8 weeks. if you want a quick sale lower the price
-I have reduced the price and it is marketed at a cheaper price then other sold properties. It is also 10% less than the home value report (we are in Scotland so a Single Survey was carried out to produce a Homebuyers report). - if you aren't desperate wait until spring; alternatively mortgage the property
-House is in a good state of repair (as shown in homebuyers report with GCH and double glazing etc) but is in a cheaper area of town and the price reflects this. - who would the would be tenants be? families - unlikely. so young professionals?


New House
- I have just completed on my dream home. It’s a larger house for our family and we have moved in.
- we used all our savings to fund our deposit and 3% fee for buying a second home.
- New mortgage is 85% of property value and it’s currently a tracker mortgage. This was to allow us to repay a large chunk of the mortgage if (when) old house sells without ERC.
- The plan was to repay the majority of the mortgage with from sale of old house and then reduce our new mortgage to a five year fixed rate deal.
- ideal plan - do that.

Now
So now after two months of no success selling the old house I am feeling very worried about the impending Brexit - why? and worried that prices are going to continue to fall. - they haven't even started to fall, and brexit will have no meaningful impact on house prices. There may be a small dip for a month or two, but ultimately people will need to buy and brexit is not attached to property prices in any meaningful way We can afford to keep both houses for now but in six months time I will become liable for council tax in old property. So I am thinking maybe renting out the old house might be a better option. - sure, that seems sensible

Could anyone give advice on the costs of becoming a landlord? - Scotland is different to England, so you will need to wait for Artful or Pixie to see this. But in terms of start up cost, it's minimal. You will need to register to be a landlord, carry out gas safety checks, possibly find an agent to market it. However if a few hundred pounds a month will cause you difficulty, then what happens if the tenant stops paying rent What insurances would I need to take out - that's a personal decision. Some might suggest rent guarantee insurance, some just house insurance and how much (roughly) would I need to pay for agent fees? - it varies. But I believe 12% is about right for fully managed. If it's a tenant find only anywhere from £200-600 would be ok (area depending) How much work does being a landlord involve? - depends on how proactive you are and how good your tenants are. It's NOT a sit back and watch the pennies roll in kind of business Any advice would be be appreciated as I dont know were to start. I am not hoping to get rich but if I could let it out to pay costs and to cover the extra interest I am paying on larger mortgage on new house then perhaps I would be best waiting a few years and then trying to sell again.

Hope this rambling makes sense. Thanks in advance.

The real cost is when you get it wrong and end up owing the tenant thousands

agrinnall

One word: auction.

need_an_answer

If I could add something else...


Should you decide to become a LL take the house off the market and don't consider selling it,theres nothing a tenant dislikes more than an uncertain future or one where they are entertaining prospective buyers.

Tenants invest a lot into moving and referencing and deserve more than just being a house sitter whilst you attempt to sell

Pixie5740

MsPennySaver wrote: »

Hi this is my first post and I am hoping for some advice from those who have let out a property. I do not really want to become a landlord but it might be my only viable option going forward.

So here are the facts

Old property
-I own a two bed property (finished paying the mortgage last year).
-I put this house up for sale in November but have only had a couple of viewings and no offers.
-I have reduced the price and it is marketed at a cheaper price then other sold properties. It is also 10% less than the home value report (we are in Scotland so a Single Survey was carried out to produce a Homebuyers report).
-House is in a good state of repair (as shown in homebuyers report with GCH and double glazing etc) but is in a cheaper area of town and the price reflects this.


New House
- I have just completed on my dream home. It’s a larger house for our family and we have moved in.
- we used all our savings to fund our deposit and 3% fee for buying a second home.
- New mortgage is 85% of property value and it’s currently a tracker mortgage. This was to allow us to repay a large chunk of the mortgage if (when) old house sells without ERC.
- The plan was to repay the majority of the mortgage with from sale of old house and then reduce our new mortgage to a five year fixed rate deal.


Now
So now after two months of no success selling the old house I am feeling very worried about the impending Brexit and worried that prices are going to continue to fall. We can afford to keep both houses for now but in six months time I will become liable for council tax in old property. So I am thinking maybe renting out the old house might be a better option.

Could anyone give advice on the costs of becoming a landlord? What insurances would I need to take out and how much (roughly) would I need to pay for agent fees? How much work does being a landlord involve? Any advice would be be appreciated as I dont know were to start. I am not hoping to get rich but if I could let it out to pay costs and to cover the extra interest I am paying on larger mortgage on new house then perhaps I would be best waiting a few years and then trying to sell again.

Hope this rambling makes sense. Thanks in advance.

I think you're being a bit premature if the property only went on the market in November. Things do tend to slow down over the festive period. Being a landlord is not a passive investment, even if you use a letting agency.

Here's a starter for 10... https://scotland.shelter.org.uk/get_advice/advice_topics/information_for_landlords

Letting agency fees depend on how much or how little you want the agency to do. A fully managed service could be 10% + VAT of the rent plus more for advertising and referencing. Phone around a few letting agents to get some quotes.

Pixie5740

need_an_answer wrote: »

some good advice here
https://forums.moneysavingexpert.com/discussion/5180214/tenancies-in-eng-wales-guides-for-landlords-and-tenants

That link is for Assured Shorthold Tenancies in England/Wales, the OP is in Scotland.

need_an_answer wrote: »

If I could add something else...


Should you decide to become a LL take the house off the market and don't consider selling it,theres nothing a tenant dislikes more than an uncertain future or one where they are entertaining prospective buyers.

Tenants invest a lot into moving and referencing and deserve more than just being a house sitter whilst you attempt to sell

it is illegal in Scotland for letting agents to charge tenants fees. Tenancies in Scotland are not Assured Shorthold Tenancies and the Buying and Selling process is completely different.

need_an_answer

I'm sorry I completely missed the fact that the OP was in Scotland.
apologies all....

xylophone

If you do not want to be a landlord, then you may need to consider reducing the price again for a quick sale.

https://www.citizensadvice.org.uk/scotland/housing/renting-a-home-s/information-for-private-landlords-s/

MsPennySaver

Wow thanks everyone for taking the time to give advise.

I have looked quickly at the information provided in the link from Need an Answer.

But I think perhaps I am just panicking and should try to hold my nerve for a couple of months and see if I get any buyer for my old house. This is my husbands prefered strategy too.

We are able to meet our monthly commitments but I just feel very insecure having such a large/long mortgage especially since it’s currently on a variable rate. I almost wish I hadn’t bought our new house but it is perfect for us and definatly affordable we just didn’t anticipate such a long period with no interest in our old house. And going from mortgage free to a 25 years mortgage is a big worry.

How long would you suggest I hold the current sale price (I reduced it at end of November as estate agent said it would generate more interest - it has not!). Should I wait till about April before reducing it further? This is actually our first time selling a house (old house was our first home) and I feel like I’ve made such a mess of it.

Thank again for your replies.

Crashy_Time

Drop the price until people are coming round to view it, or prepare to pay council tax and maintenance/running costs. If you really want to sell, sell, don`t get stuck being a landlord if that isn`t something you are really comfortable with.