Renting out property with mortgage

Storkeyj

Hey,

Just looking for a little advice! So we have been trying to sell our property however the market isnt giving us the money we ideally need so we are thinking of renting it out for min a year, we are moving into my parents and saving money that way, and dont think we should sell for less now and just wait until the market strengthens as we do not need the equity yet as need to save more anyway to buy somewhere bigger and thinking renting it out and paying off mortgage and also saving all of our salaries instead of spending on Bill's then selling once the market is stronger.

Now renting seems very confusing! We have had 7 agents visit to give quotes and advise and every agent has advised it will achieve £850 per month. Our mortgage is £730. I'm trying to figure out all the fees and tax to make sure we are not making a mistake! All agents have been around the 10% fee for a full management of our property. Can anyone advise on any of the above and whether after the taxes and fees we would still come out with any money. Perhaps even just after the 10% fee and the tax and then we know what we have left to pay out for insurances etc

Thank you so much in advance and hope that all makes sense!!

Sofee3

You will need to register to become a landlord, you will need consent to let from your mortgage company and landlord insurance. Not sure about taxes.

foxy-stoat

Why have you seen 7 agents?

Doesn't sound like you will get enough rent to make it work, you may not even get a Consent to Let with your current lender.

Are you asking too much for your property or is your asking price similar to others on the market?

Not sure if prices are going to move a great deal in the next 12 months, up or down.

Storkeyj

Hey thanks! Yep all the above is sorted, just need to work out what the tax is likely to be and whether it will leave us enough for the rest of the fees associated with renting it out thank you!

Storkeyj

7 agents for rental to gage what all their fees and valuations were. I have spoken to mortgage company and they have advised its likely they will give consent to let.

The property is similar price to one which sold LY but we had one sale fall through at the same price as the one that sold last year in Janurary which is very very very annoying! Wouldnt be in this position if it had gone through!

We arent really looking to make money out of renting. It's just we dont want to under sell when we dont HAVE to sell it right now as font need the equity. And along as we are not losing alot of money through renting we will be happy.. it's still paying off our mortgage without us spending what we are now..

Cakeguts

How are you going to pay for repairs as well as tax and insurance and the mortgage on that rent? You could be making a loss each month especially if it turns out that your house that you bought to live in turns out to be not very suitable for letting.



Not every house that someone buys to live in will make a good rental property. Buyers will make more compromises than tenants will. If it turns out to not make a good rental it could be vacant for most of the time our you could get a lot of tenants that stop paying rent.

muhandis

From my experience renting out a property we initially bought as a home, some of the things to think about -

1. Can you avoid using agents? Will you be living close enough to self manage the property (you know it best having lived there)? I used OpenRent.

2. Does your lender charge a fee or extra interest for a consent to let? Our lender Nationwide added on 1% interest after 6 months on a consent to let. You also need to keep in mind that while on a CTL, most lenders will not allow you to switch products, and you would not be able to remortgage to another residential product. So at the end of a fix, you could well fall into the lender's SVR, upping your monthly mortgage payment significantly.

3. Your council will most likely need you to register as a landlord and pay a fee for that. It is also possible that you will need remedial work or inspections done before being given a license. All this varies a lot depending on the actual council.

4. Basic Landlord insurance costs me about £10 a month (after cashback) which can again go up based on what you want it to cover.

5. You will be taxed (rent less expenses less a portion of the interest costs) at whatever rate you pay on your income. Assuming you're a basic rate taxpayer, I would go with an assumption of 18% of annual rental income.

To sum it up, if you do get a tenant for £850/month it is highly unlikely that your net rental income would cover your mortgage of £730 if you are both employed and even if you managed it yourself. Additionally, this disregards any unplanned repair or maintenance costs that might crop up.

Hope that helps!

Storkeyj wrote: »

Hey,

Just looking for a little advice! So we have been trying to sell our property however the market isnt giving us the money we ideally need so we are thinking of renting it out for min a year, we are moving into my parents and saving money that way, and dont think we should sell for less now and just wait until the market strengthens as we do not need the equity yet as need to save more anyway to buy somewhere bigger and thinking renting it out and paying off mortgage and also saving all of our salaries instead of spending on Bill's then selling once the market is stronger.

Now renting seems very confusing! We have had 7 agents visit to give quotes and advise and every agent has advised it will achieve £850 per month. Our mortgage is £730. I'm trying to figure out all the fees and tax to make sure we are not making a mistake! All agents have been around the 10% fee for a full management of our property. Can anyone advise on any of the above and whether after the taxes and fees we would still come out with any money. Perhaps even just after the 10% fee and the tax and then we know what we have left to pay out for insurances etc

Thank you so much in advance and hope that all makes sense!!

Storkeyj

Hey thank you for all those pointers! My other half dosent work full time and dosent use any of tax allowance would this help atall?

How much work is there to not using management company? I work in quite a demanding role and so dont have much spare time on my hands plus this would be our first rental!

Storkeyj

Also the majority of the flats in the next building are rental approx. 10/14 and the most recent achieved the £850 mark.

We would have savings to use if the worst happened and repairs needed to be undertaken as we have no other Bill's or rent once we have rented our place out as will be living at parents.

muhandis

- If your other half has no other income and her name is on the property deeds, then yes her share of the rental income will be tax free up to her personal allowance.

- The second question is hard to answer as it depends on what kind of tenants you get, what condition your property is in, what kind of maintenance is regularly required, etc. I myself would only consider using a letting agent to manage a property if I lived very far from the property.

Just to be clear, I'm not trying to discourage/encourage you to let your property, just that you need to know what it might involve

Storkeyj wrote: »

Hey thank you for all those pointers! My other half dosent work full time and dosent use any of tax allowance would this help atall?

How much work is there to not using management company? I work in quite a demanding role and so dont have much spare time on my hands plus this would be our first rental!

Storkeyj

No that's fine just so tricky to work out whether it would work out too expensive and whether we could do all the work involved with renting without them managing it for us as we really dont know the laws etc