Need bigger house, keep existing and rent out or sell?

zagubov

When we moved from one borough to a neighbouring one, we rented out our old house while renting a new one in the new area, so we could check it would be a good move.

This was long enough ago that the bureaucracy was less, plus our tenants were great, but we found the extra hassle of being landlords while working was a major headache. I wouldn't recommend it then and I definitely wouldn't wish it on anyone now. It'll be more full-on than you expect!

Homersimpson

Thanks for all the replies, I've looked into being a landlord before (about 5 years ago) and I appreciate a lot has changed since then which I would need to brush up on if I went down this route. I understand that there are some complexities and the tennants have a lot more rights than the landlord and if you get a bad one it can be a nightmare.

In terms of the local market, when I looked at the start of this week there were two 2 bed bungalows for rent in the area, both at £800PCM, I looked on let agreed and there was also one which had recently let for £795PCM.

Looking again today one of the availble properties has also been let so it seems reasonable to assume that the property will rent out fairly eastily and for say at least £700 PCM.

Taking out a mortgage on a second property will cost around £800 PCM so when taking into account all the costs of renting out a property the question is where I want to spend a few thousand a year and in 25 years have another house (but accept some risk) or whether I sell it and just live mortgage free.

Gav75

Just an idea, but would it not be better to spend some of the £100k you have on extending your current bungalow to the size you need? Avoiding the stress of moving, and the added stress of being a landlord?

Socajam

Homersimpson wrote: »

Thanks for all the replies, I've looked into being a landlord before (about 5 years ago) and I appreciate a lot has changed since then which I would need to brush up on if I went down this route. I understand that there are some complexities and the tennants have a lot more rights than the landlord and if you get a bad one it can be a nightmare.

In terms of the local market, when I looked at the start of this week there were two 2 bed bungalows for rent in the area, both at £800PCM, I looked on let agreed and there was also one which had recently let for £795PCM.

Looking again today one of the availble properties has also been let so it seems reasonable to assume that the property will rent out fairly eastily and for say at least £700 PCM.

Taking out a mortgage on a second property will cost around £800 PCM so when taking into account all the costs of renting out a property the question is where I want to spend a few thousand a year and in 25 years have another house (but accept some risk) or whether I sell it and just live mortgage free.

If I can be a landlord from 3662 miles from the UK, I fail to see you not being one who lives there.
I have only had one bad tenant and that only lasted for 2 -3 months. I had to find the money to pay the mortgage and yes it was hard, but now I am mortgage free.
I have had a very good agent and no problem with having my money paid into my UK bank account, taxes paid to Inland Revenue etc.
Now I am repairing the property to be rented out again with the same agent.

markin

80K would get a nice loft conversion and back extension.

Homersimpson

Thanks for the responses, the bungalow won't take a loft converstion as the foundations arn't up to it (they are stepped brick and only go down about three courses). Also the roof is pyramid shaped and hence the size of a room would be tiny or would need a four sided dormer.

There is a large conservatory to the rear and we can't go backwards without removing it, as we only had it installed a couple of years ago at a cost of 20K were not keen to do this and also feel that the finished product will be rather disjointed (with a small garden) and disproportionatly expensive.

Cakeguts

Homersimpson wrote: »

Thanks for all the replies, I've looked into being a landlord before (about 5 years ago) and I appreciate a lot has changed since then which I would need to brush up on if I went down this route. I understand that there are some complexities and the tennants have a lot more rights than the landlord and if you get a bad one it can be a nightmare.

In terms of the local market, when I looked at the start of this week there were two 2 bed bungalows for rent in the area, both at £800PCM, I looked on let agreed and there was also one which had recently let for £795PCM.

Looking again today one of the availble properties has also been let so it seems reasonable to assume that the property will rent out fairly eastily and for say at least £700 PCM.

Taking out a mortgage on a second property will cost around £800 PCM so when taking into account all the costs of renting out a property the question is where I want to spend a few thousand a year and in 25 years have another house (but accept some risk) or whether I sell it and just live mortgage free.

You can't tell from the rental listings what the properties are let for because tenants make offers just as buyers do. So you could list a house at £700pcm and the best tenant could offer you £650pcm in which case you would take it because you would know you were getting reliable tenants. £650pcm continuously is better than £700 with lots of voids and tenants not paying. You might also need to factor in that if people only rent it for 6 months at a time there may be a void between each letting and you may have to keep painting it in those voids to get it up to standard for the next tenant.



The point is that the landlords who get the tenants that they want buy the houses for their particular rental market that they are aiming at. You can't do that so you are going to get someone who wants a house like the one you have got. It doesn't work so well if you do it this way round.



We have been letting property since 1990. We get long term tenants because we chose the properties for the part of the lettings market that we wanted to be in and that followed a lot of research.



Most tenants are not looking for 2 bed properties so that will make it more of a problem to start with. You need to know what 2 bed flats let for in your area because that is the kind of property that people who want two beds are going to go for. How well they let will tell you how well your house is going to let.

wine_night

A return of £700pcm - £795pcm on a £250k property isn't a great yield to be honest. As a PP pointed out the stamp duty on a second property of £300k would be huge. Also from that rental income you need to deduct agents' fees (budget minimum 10% for fully managed), ongoing repairs and maintenance, landlords' insurance, gas and electrical safety certificate and mortgage, utilities and council tax during any void periods. Agents' fees for inventories, deposit scheme and tenant set up fees could easily be £600 or more for each tenant changeover. Then there's your income tax to pay. There would be a shortfall between the rental income and the mortgage repayments on your main residence.

Is there a particular reason why you want to retain your existing property?

In your position, if I wanted a property to let out I would be tempted to sell your existing property, buy the £300k property mortgage free (as you propose) and then use the remaining £50k to purchase a cheaper buy to let property with a mortgage. You would get a better yield, pay less stamp duty and be able to offset the interest on your mortgage repayments against your taxable income.

You are in a strong financial position so you have options. You may even want to seek advice from an IFA.