Becoming a landlord for a short term

patchyX2

I'm looking into options for buying a new home without selling my current one. The main reason for this is reducing the chain length so I can quickly offer on anything that becomes available.

One of my options is to rent out my current house. I'm not mortgage free, so would need a BTL mortgage, but I'd have a decent chunk of deposit so this shouldn't be too much of a problem.

I wouldn't want to be a long term landlord. I'd want to sell as soon as I moved into my new place really, but I'd be willing to suck it up for a year or two if need be. 

How much upfront/one off costs would be involved in this? The house is in a good state of repair, had smoke alarms, is EPC rated C, etc. I'd likely use an agency to manage it.

I can imagine ERC fees on the BTL mortgage being a bit of a kicker. 

I guess what I'm asking is, is being a landlord a stupid idea unless you're in it for the long haul?! 

theoretica

Having the home rented would make it much less attractive to buyers, so you would probably find you wanted to get a tenant in, then get them out, then have the house empty while you sold it.  Would be much easier to skip the tenants entirely...  Have a talk to a good broker about what might be available.  Would a bridging loan cost much more than your idea?

ArbitraryRandom

PledgeX2 said:

I guess what I'm asking is, is being a landlord a stupid idea unless you're in it for the long haul?! 

I'd never call you stupid, but it's certainly not something I'd recommend. 

There's a decent chance you'd spend more than you'd make, even over 2 years - and that's assuming not a worse case scenario of someone moving in and refusing to pay rent while you spend 6+ months trying to evict them. 

patchyX2

theoretica said:

Having the home rented would make it much less attractive to buyers, so you would probably find you wanted to get a tenant in, then get them out, then have the house empty while you sold it.  Would be much easier to skip the tenants entirely...  Have a talk to a good broker about what might be available.  Would a bridging loan cost much more than your idea?

A bridging loan is another option I'm looking at. A bridging loan would be a better option IF I could sell the house quickly.

If I couldn't shift the house for several months, then I'd lose ££££'s each month going down the bridging route (and really be in the **** if I couldn't sell before the loan period ends), whereas my thought process is that going downhill then BTL route would mean breaking even each month.

Not turning a profit on the BTL route wouldn't be a problem, as like I say, that would be preferable to losing thousands in interest on a bridging loan.

I didn't consider the issue with having to evict then tenants prior to selling the house though. 

Stubod

...not a good idea IMHO!!

SDLT_Geek

PledgeX2 said:

I'm looking into options for buying a new home without selling my current one. The main reason for this is reducing the chain length so I can quickly offer on anything that becomes available.

One of my options is to rent out my current house. I'm not mortgage free, so would need a BTL mortgage, but I'd have a decent chunk of deposit so this shouldn't be too much of a problem.

I wouldn't want to be a long term landlord. I'd want to sell as soon as I moved into my new place really, but I'd be willing to suck it up for a year or two if need be. 

How much upfront/one off costs would be involved in this? The house is in a good state of repair, had smoke alarms, is EPC rated C, etc. I'd likely use an agency to manage it.

I can imagine ERC fees on the BTL mortgage being a bit of a kicker. 

I guess what I'm asking is, is being a landlord a stupid idea unless you're in it for the long haul?! 

Have you budgeted for the extra stamp duty?  If buying in England, that is an extra 3% stamp duty land tax.  The extra should be recoverable if you complete the sale within three years.

theoretica

SDLT_Geek said:

PledgeX2 said:

I'm looking into options for buying a new home without selling my current one. The main reason for this is reducing the chain length so I can quickly offer on anything that becomes available.

One of my options is to rent out my current house. I'm not mortgage free, so would need a BTL mortgage, but I'd have a decent chunk of deposit so this shouldn't be too much of a problem.

I wouldn't want to be a long term landlord. I'd want to sell as soon as I moved into my new place really, but I'd be willing to suck it up for a year or two if need be. 

How much upfront/one off costs would be involved in this? The house is in a good state of repair, had smoke alarms, is EPC rated C, etc. I'd likely use an agency to manage it.

I can imagine ERC fees on the BTL mortgage being a bit of a kicker. 

I guess what I'm asking is, is being a landlord a stupid idea unless you're in it for the long haul?! 

Have you budgeted for the extra stamp duty?  If buying in England, that is an extra 3% stamp duty land tax.  The extra should be recoverable if you complete the sale within three years.

Capital gains tax may be due too, if it is not your main home for more than 9 months.

housebuyer143

Be careful as you will need to pay the additional stamp duty on your new place and then claim it back within 3 years. 
This should be fine but what if you get tenants who you decide to keep there for a year and then they don't move out, then you could take many many months to evict and then you need to sell before the 3 years are up. It seems fine but there's is the deadline you must consider so I definitely wouldn't be giving anyone a 24 month contract.

You would need to do a let to buy mortgage also. Have you looked at how much rent you can get and how much loan you need? It's much less generous since the interest rates went up. What is the loan amount you need, how much rent can you get and are you higher or basic tax payer.

dwsjarcmcd

PledgeX2 said:

One of my options is to rent out my current house. I'm not mortgage free, so would need a BTL mortgage, but I'd have a decent chunk of deposit so this shouldn't be too much of a problem.

As well as the additional stamp duty, some of the arrangement fees on BTL mortgages are pretty tasty and non-recoverable.  I've seen them at as much as 3% of the loan and certainly most are in four figures (or rates are pretty hefty).  

warby68

Its probably more common to do it the other way round to be an attractive non chain buyer as in you sell your house first and then YOU become a tenant/lodger for a shortish period. 

Main risk is that the property market moves against you once you step off the ladder but if you know your areas and target properties you can make a judgement on this.

macman

Above comment is spot on. So much easier to move fast if you are a cash buyer, and so much more attractive to the vendor.