Becoming a first time landlord

babyblade41

I done it for many years on a mixed portfolio , both industrial and residential . I'm glad I finished when I did without too many problems apart from one when a long term tenant turned rogue.

Apart from all the legislation that's needed you must also understand this is someones home so don't think you can just tip  them out when you feel you want to cash in or when finances take a hit.

You will have to decide on what sort of tenant you want , this will depend on area, price  etc . 

For me it wouldn't be worth it on a single property , to much of a hit if someone defaults on rent 

dimbo61

You may need to set up a limited company for your rental business.
How you set up the company, partners if married ( basic/higher rate tax payer ??) 
Using a broker to get the best BTL mortgage deals.
Deposit etc

Pennylane

I’ve rented out a small house for the past 12 years but am now on the verge of letting it for holidays as we live in a nice area popular with tourists.  We have done OK out of the property and have been fairly fortunate with tenants in that we never had any problem chasing rent money.  It has also gone up in value approx £59K in that time.  We have just redecorated throughout, had a new kitchen put in, updated the bathroom and had new flooring put down so we have done OK.  This is apparently going to be a bumper year for staycations (when we come out of lockdown) so we will try that for 12 months.  Hope you do well.  I didn’t use an agent by the way but I spent an entire weekend reading up about all I had to do and provide and followed it to the letter.  

Retireby40

macman said:

If your figures are correct, then your return  on capital, after deducting 30% for 'repairs or problems', is about 2.2%. If you allow something for void periods too, it's even lower. And your LA fees are unfeasibly low; at some point you are going to be paying 12-15%, not 9%.
For that return, I would simply have put my £115K into an S&S ISA to get a steady and conservative 3% growth.
The only real return you are ever going to make on that is when you sell it and get the uplift in value; which will of course incur a CGT bill with it.

My LA fees have always been 9%. They haven't increased in the 4 years i have rented to property. The property is in a small working class town. 

While your figure of around 2.2% would be accurate if I had to pay out 30% every year on repairs and stuff depending on the house you may not ever need to do that. I probably have paid closer to 20% maybe even less. But I always advise potential landlords to expect more towards worst case scenario than best. So that would maybe lift the over figure to closer to 3%.

Could I get a better return somewhere else? Its possible. But as things stand I have a reliable tenant (4 years, 0 problems). The house is in good condition in a well sought after area and I have the benefit that one of my friends actually lives about 3 doors up so they can keep an eye on it. Not that they need to as LA does that to a degree.

I get an acceptable return level ontop of potential increase in value. For me it works but that could change one day and I may decide to sell up and put the money into S&S if it is secure and provides long term rates above 2.5% or so.

noitsnotme

macman said:

And your LA fees are unfeasibly low; at some point you are going to be paying 12-15%, not 9%.

I pay 8% and that was haggled down from their standard 10%.  Small local outfit but extremely professional with many years of experience.  Can’t fault them.

AdrianC

Shandy953 said:
No need for the numbers in terms of monthly rent and house cost as rental yield provided shows what return I would be likely to get

And what is that "yield" figure predicated on?
How much allowance for bad debts, voids, damages, repairs, maintenance?

Not seen the house physically or met the tenants as at the moment

These are equally key.
Remember, if the tenants turn out to be utter slugs, you are stuck with them for at least a year and a half...

they are currently on AST

And everything around the inception of that tenancy is correct?
Nothing that'll turn out to void any future s21?

In terms of other investments when you say those two options are no where near the only options it makes it sound like there are hundreds of options where as realistically there are only savings, investments and income.

Savings and investments are different names for the same thing. Your money that should be generating income for you.

Income would be rental etc thats why a buy to let appeals as it is income and investment.

No, it is not.
You are buying somebody's residential lettings business from them.

Why are they getting out of the business?
Why are they selling an ongoing lettings business, rather than removing the tenants and selling the property with vacant possession, which would almost certainly give them more of a return?

Mahsroh

AdrianC said:

Why are they getting out of the business?
Why are they selling an ongoing lettings business, rather than removing the tenants and selling the property with vacant possession, which would almost certainly give them more of a return?

I think I can have a stab at answering this as i'm currently looking into doing exactly this. 

So i'm selling my rental property and initially will "attempt" to sell with the tenants insitu on the same basis. My reasoning for selling the house / "lettings business" is that my personal circumstances have changed and I wish to use the equity to help fund the purchase of my next residential property. Nothing to do with me making a loss / lack of income etc. I don't make huge amounts of money off it but it does operate at a profit. 

The reason that i've opted to try and sell with tenants insitu first is that a) I can continue to earn rent until completion and b) (perhaps more pertinent) the existing tenants can continue living there without having the upheaval of me kicking them out and having to move (though granted I accept i've got no control over this once it's sold so there is a risk that this will happen anyway). As Babyblade41 has said in this thread above, you need to remember that it's someones home you're dealing with so you can't (or at least shouldn't) just tip them out when you feel like it...and for the 10 years i've been a landlord this has always been my ethos and serving a (good) tenant notice would absolutely be a last resort. Obviously if my attempts to sell with a tenant insitu do not lead to any acceptable offers then my hand may be forced, but as i've said above, that's a last resort. 

In terms of getting more a return selling empty - i've spoken to 3 Estate Agents this week and every single one believes this wont affect the price significantly (especially when you factor in the continued rental income etc.) I appreciate this can vary massively depending on value and type of property and the area etc. but mine is a classic "investor / rental" property. Walking distance from a hospital, small property and if put on the market in the normal manner would probably attract 70% investors / landlords and 30% residential buyers / FTB market. I also know to take what EA's say with a pinch of salt too, but the benefit to investors is that there is a tenant insitu and they earn rent from day one. In terms of how that will actually translates to actual offers remains to be seen. It's likely to go on the market next week and the proof will be in the pudding. But we'll see. I will no doubt report back on here. 

Of course the above is just my personal reasons and the seller in the OP's case may have different motives, but I believe there are a multitude of genuine reasons why someone may take the approach the seller is taking. 

In terms of the OP and letting generally, once this house is sold I personally probably wouldn't do it again. But likewise I wouldn't categorically tell others not to. Just bear in mind I don't thinks it's as profitable as many people believe. And as it's your first one I would definitely pay the extra money and pay a letting agent to manage it BUT you also need to do your own research (which you clearly are) and not rely on the letting agent. I can tell you some horror stories of obligations that letting agents have failed to meet, or them going rogue and doing their own thing (including nearly failing to secure the deposit correctly had i not intervened, or issuing of a S21 notice and remarketing the property without my knowledge or consent!)... and we're talking about so called reputable NATIONAL companies here. So don't assume they know what they're doing, do your own research and keep an eye on them. 

Also, on a similar note to letting agents, for my first couple of tax returns I paid an accountant. After i'd done a couple with him I realised that it wasn't rocket science and continued filing them myself every year, and have done ever since. To give HMRC credit where it's due, their self assessment helpline I find genuinely helpful. If I need an answer to a question that I would previously have asked the accountant, they are actually very good at giving open advice (such as "is this an allowable expense?").

Crashy_Time

https://www.telegraph.co.uk/tax/income-tax/two-hidden-taxes-cut-landlords-incomes-33pc/

Retireby40

Crashy_Time said:

https://www.telegraph.co.uk/tax/income-tax/two-hidden-taxes-cut-landlords-incomes-33pc/

No point posting something that can't be read. Better of copying and pasting it.

Crashy_Time

https://www.yorkshiretimes.co.uk/article/Hidden-Tax-Traps-For-Younger-Generation-Jumping-Into-The-Investment-Property-Mar-