House rental help.

Swampy3k

Hi all, thanks for taking the time to read my post. 

I'm looking to earn some passive Income and rent out my home I currently live in. So heres a few details.

We live in Scotland, my 2 bed end terraced is in my sole name and has around 30k left on the mortgage. It is worth approx 105k. Unfortunately the house is getting too small as my wife and I have a 3yo and another due in 3 months. 

I earn 35k and my wife 42k pa. We have discussed selling the house to upgrade ourselves to a wee place in the country however we have discussed about remortgaging it to a BTL and taking out more equity to use as a deposit for our next home and rent this one out once we buy another. The problem is, I'm just not sure where to start.

I'm aware I need to register as a landlord in Scotland, get new insurances and the appropriate certificates for gas/leccie as well as obviously speak to my  bank about changing to a BTL and taking out more equity to name but a few things. Is there anyone out there who is more qualified and can offer advice on how to best start this journey. 

Many thanks if you've made it this far, I'll look forward to your feedback. 

theartfullodger

I've been a landlord in Scotland since 2000: MOST years I make money from my rentals, but not always (large bills, voids, tenants not paying etc etc etc..)

i.e passive income may turn out to be passive expenditure... 

Then there's the legislation changes for landlords (tenancy types, changes to how to evict) which have been unpopular with many Scottish landlords (not me, but I'm a bit of a special case..)  e.g. tenant can give notice to leave after just 28 days from moving in.... 

Fines for breaching landlord registration up to £50k. 

The Tory government have increased tax on landlords significantly to reduce landlord profits: (fine by me, but causing big problems for many landlords, some now running at a loss...)

Only become a landlord if you have both the financial AND emotional reserves to cope with such issues: e.g. tenant (or agent..) from-hell who doesn;t pay whilst you keep paying any mortgage, repairs, legal fees etc to try a evict.... for say 7-15 months.... with no income..  Then non-paying tenant 'phones you at 10:37pm Saturday night...

- toilet's leaking innit... - you reply "sorry to hear that my dear sir, I will have my staff attend Monday morning"

- nah, nah, it's making an 'orrible mess of the sitting room sofa & carpet... - reply "when did that start?"

- Thursday evening mate.... so that will be 5 days come Monday. 

(You've got to fix it or tribunal/court will decide you are harassing tenant, refusing or delaying any eviction).

... then there's all the other things that can and will go wrong... 

If you, wife, kids, are happy with that sort of "challenge" feel free and go ahead... 

An agent doesn't help really as your costs go up, but landlord remains liable for everything. Yes, there is rent guarantee insurance but it costs, then the conditions are very tricky, you might find yourself not covered, even though you paid.  

People paying 6 or 12 months rent up front? Well, yes, but that's a common tactic for those running brothels or cannabis farms..

 Slàinte mhath!

csgohan4

Tenant: Toilets leaking innit

LL: Lol

on a serious note OP, go through a full business case, overheads, potential profits and don't forget the time needed to manage it. See if it still makes financial sense. BTL is not for everyone

Amixo3032

I wouldn’t if I was you , what if you was stuck with rouge tenants who don’t pay for months apon end and leave you with arrears and £££‘S worth of damage 

stilllaffin

“Earn some passive income”
 
Bless.

Slithery

Amixo3032 said:

what if you was stuck with rouge tenants 

I'd swap them for pink ones.....

Amixo3032

Slithery said:

I'd swap them for pink ones.....

don’t forget blue ones... LOL

canaldumidi

Read the sticky for an idea of implications. It's aimed at Eng/Wales so the law in Scotland is different, but much of the same issues are relevant....

Post 7: New landlords (1):advice & information :see links in next post

Post 8: New landlords (2): Essential links for further information

Post 9: Letting agents: how should a landlord select or sack?

Bluebell1000

You will potentially be able to take up to 75% of the current house value as let to buy mortgage, and use that as a deposit on your new home. Would that give you enough to buy the kind of house you are looking for? Remember to factor in additional stamp duty - under whatever rules apply in Scotland. Also look at tax liability, if the income might push you into higher rate tax / losing child benefit.

Your new baby will likely be sleeping in your room for a year or two. Our boys at 7 and almost 10 still share a room, so you don't need to feel in a rush to move. Or could you extend your current place?

In your situation I'd probably suggest waiting a few years until maternity/paternity leave is done, and you've had time to see what the new budget is like (paying childcare for two is expensive!) then think about what you want to do.